Retail health holds key to economic revival
Ever since the coronavirus Armageddon struck, most of the media and analysts’ attention has been focused on the migrant workers’ plight and the threatened collapse of the financial sector. In the process, enough attention has not been paid to a crucial sector which is central to the economy and people’s well-being — retail.
According to a survey by the Retailers Association of India, India’s 15 million retailers provide jobs to 40-50 million people, taking care of the livelihood of that many households, or over 200 million Indians. What is more, organised and unorganised retail together stretch right across the economic landscape — from the humblest one-man shop selling paan, cigarettes and gutka, to the unincorporated family-run local kirana store and the large corporate retail chains whose branches often work out of shopping malls.
A policy focused on the retail sector, which accounts for 40 per cent of the consumption expenditure and 10 per cent of the GDP, effectively addresses the entire economy so that you can say — take care of retail to take care of the economy.
When the lockdown came, the entire retail sector closed, along with the rest of the economy. Then, by stages, retailers selling essentials and grocery and, thereafter, standalone local and neighbourhood shops have been allowed to reopen. Shops in market complexes and malls still remain closed.
The major dilemma we face now is that the retail sector, which enables consumption, has been severely impaired by the lockdown, so that even when shops have been allowed to reopen, they may not be able to do so. Many of them may have run out of working capital to restock themselves and the shop assistant, his pay gone, may have gone back to his village and unable to return without a bit of money in his pocket.
This is where policy comes in. The centrality of a policy package to revive the retail sector can be embedded in our minds by remembering that without being able to buy grocery, none can survive and the grocery store cannot get back to business if it is in intensive care.
The first policy requirement is to give small retailers some cash to restock and pay arrears in salary, electricity bills and rent. For the slightly organised retailer, the government can work out a scheme with banks to lend on concessional terms to retailers who have at least a checking account. If he or she is a microfinance borrower, then that is another conduit.
But the big challenge is to help the unorganised retailer who has only a savings account, is below the GST radar and deals entirely in cash. He has to be able to get a consumption-cum-business loan to keep both his own pot boiling and restock his shop. This is an administrative challenge that has to be met, much like giving rations to a migrant worker who has left his ration card with his family.
Right at the top of the retail pyramid is the plight of the organised corporatised retailer whose branches cannot operate because shopping malls have been shut.
Malls have too much footfall and ensuring that visitors maintain safe distance can become difficult. But the management and the staff at malls are trained and can work out systems which regulate entry into the mall as also individual shops where shoppers are directed to maintain safe distances.
By looking at the problems of the retailer, we can address the supply side issues. But an even larger one is the demand side issue — a whole lot of people have simply run out of money to go to the grocery store and buy essentials. It is here that the issues affecting the retail sector dovetail with those affecting the entire economy. By taking care of demand for retail, we effectively take care of the demand for the entire economy. If the retailer finds few buyers queuing up at this shop, he will lose the urge to restock his shop.
As prominent social activists Nikhil Dey and Aruna Roy have suggested, all Indians need livelihood and income support. India needs a new deal: an open-ended, creative, expanded employment guarantee for both rural and urban workers, through an Employment Guarantee Act.
It will offer eight hours’ work at minimum wages (none can be turned away by the panchayat or the municipality, saying we have no money). It can also be a route to pay the elderly and children who are missing out on midday meals as schools have not yet opened. A key statistic to remember is that 94 per cent of the workers are in the informal sector.
As for the more organised retail sector, many employees have already had to take salary cuts and some asked to go. Even when they are asked to rejoin, it will take time for the full salary and benefits package to be restored.
The government needs to ask banks to ease rules to give a special revival package to organised retailers. Unless shops in malls become viable businesses, the demand for mall space will not pick up and the construction sector, a major employer, will continue to suffer.
Thus, reviving demand for retail will need a massive boost to government expenditure and force a relook at conventional wisdom on maintaining the fiscal deficit at reasonable levels. That will take care of the entire economy.
