With people aver the high price level of essential commodities, it has made difficult for the Centre to take any further steps to open the retail sector to foreign investors. The changed political situation has even forced the Industry Ministry to take a close look at the adverse impact of organized retailing on small retailers and farmers. The Government has already circulated the report of the Indian Council for Research on International Economic Relations (ICRIER) in its website for eliciting a debate among the stakeholders and the views have been specifically invited from small traders and farmers.

With food prices recording steep rises in the retail market and the farmers still not getting their due remunerative prices for the products, the Government and the ruling party are worried about the adverse impact of organized retailing on small businesses and farmers. The issue is very crucial for the present Congress government because the top party leaders are taking up the cause for the common man as its electoral plan before the general elections in 2009.

Generally, the Industry Ministry is in accord with some of the major recommendations of the ICRIER. But the feedback from the last Congress Working Committee meeting and the general mood of the Congress rank and file do not favor taking up of the ICRIER recommendations on a priority basis. There is a view in the Party that the recommendations are on the lines of the thinking of big organized retailers. And there is a deliberate attempt to justify the expansion of organized retailing at the cost of the unorganized sector.

ICRIER study has found that unorganized retailers in the vicinity of organized retailers experienced a decline in their business and profit in the initial years after the entry of large organized retailers and the consequent adverse impact on sales and profit weakens over time. The study also found no evidence of a decline in overall employment in the unorganized sector as a result of the entry of organized retailers. Further the rate of closure of unorganized retail shops in gross terms is found to be 4.2 per cent per annum which is much lower than the international rate of closure of small businesses.

The small retailer’s organizations contest these findings. These organizations say note small businesses will have to be folded up owing to the onslaught of organized retailers. They point out that the rate of closure on account of competition from organized retail is much more than the 1.7 per cent per annum. The unorganized retailer’s inability to make use of the bank credit facilities to a great extent affects their expansion programme. They certainly want to remain in business, but it is becoming difficult owing to the competition from organized retailers.

Small retailers organizations have carried out their own study to show that the organized retailing including the entry of foreign companies will adversely affect the small retailers. The views are to be sent to the ICRIER. They are getting support from the left mass organizations, but the future of small retailers does depend on the policies, the government implement for the retail sector.