When we think of growth and innovation we often think first of high-tech sectors but in the United States during the roaring 1990s it was retail productivity growth, led by Walmart, that drove the country. Retail productivity is important because the retail sector is huge and because retail productivity extends backwards to manufacturing and service productivity. Today, growth in India is slowing in part because the Indian government is no longer pushing reform, and the most notable failure is the failure to modernize India’s retail sector.
The Guardian: The beleaguered Indian government has been forced to suspend its decision to allow international supermarkets to invest in India‘s £300bn retail market in the face of political opposition.
…Allies of the increasingly vulnerable administration of Manmohan Singh, now in its second term, had refused to back the measure. Critics said the move, which theoretically does not need parliamentary approval, would put millions of shopkeepers across India out of business and threaten the livelihood of farmers.
Supporters argued that it would mean improvements of infrastructure and lower prices for consumers.
Analysts said the delay to the move was due to “political not ideological factors. There are local elections coming up and no one wants to risk the commercial traders’ votes…. The failure to implement what would have been the first major economic reform since Singh’s second term began in 2009 will reinforce the sense of drift surrounding the Indian government, compounding anxiety at a time when growth has slowed, inflation remains high and the value of the Indian rupee is dropping fast.
Stock prices of Indian retailers plunged in response to the news.
The political constraints here are enormous. Here is Marc Levinson author of The Box and more recently The Great A&P and the Struggle for Small Business in America, on some of the crazy anti-chain story policies in the United States:
President Franklin D. Roosevelt, who portrayed himself as the consumer’s friend, turned restrictions on chains into national policy. Under the National Industrial Recovery Act of 1933, one of Roosevelt’s programs to revive the economy, federally mandated codes were instituted that limited store hours, and regulated wages and prices — but the restrictions applied only to chains and large stores, not to mom-and-pop merchants. When those codes were invalidated by the Supreme Court, Congress enacted another law, the Robinson-Patman Act of 1936, intended to make most volume discounts illegal so that small shopkeepers could buy their goods for the same prices as giant chains.
In 1946, the government won criminal convictions against executives of the largest chain of all, the Great Atlantic & Pacific Tea Company (A&P), on the bizarre charge that they were violating antitrust law by selling groceries too cheaply. As late as 1953, the government was trying to break A&P apart by claiming that baking its own bread and canning its own vegetables gave the company an unfair advantage.