Why Retail Is Important


India’s continued rise on the global stage
depends on reform and advance in this sector

By Nick Schulz

What does a retailer in the West know that an Indian does not?” That was the pointed question asked last week by the Bharatiya Janata Party leader Jaswant Singh. The question was triggered by a report in this paper about a new government-sponsored study on the impact of organized retail chains on small shops.

Singh believes the answer is “nothing”. Alas, while Singh has asked the right question, he gives the wrong answer. The real answer is, “a lot”. Understanding how and why this is so will help Indian policymakers make the right choices when it comes to the future of Indian retail.

A few years ago the McKinsey Global Institute released a magnificent study of what determines why some countries grow rich and others don’t. The key: rising productivity over time.
Within countries, the McKinsey researchers observed startling variety in productivity rates across industries. For example, some countries might have high productivity in automobiles, but low productivity in construction. Others might be tops in electronics but laggards in transportation.

The study’s most striking conclusions were about the economic importance of the retail sector. William Lewis, the founding director of the institute, tells this tale in his book The Power of Productivity: Wealth, Poverty and the Threat to Global Stability. Productivity in the retail sector is critical for understanding the relative success rates of national economies.

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