About six years ago, Kishore Biyani of the Future Group and I were discussing a presentation I had delivered at CII’s National Retail Summit, during which I had mentioned “Purushartha”. This millennia-old living philosophy takes a balanced view of life. Aspects related to consumption are two of its major components including Artha (wealth, commerce) and Kama (sensory pleasure). Dharma (righteousness in society and individual life) and Moksha (liberation) are the other two. My point was that most “traditionalists” and certainly policy-makers in the country have tended to view the retail sector negatively or dismissively.

Of course, at that time most businesses themselves hardly demonstrated any sense of balance, let alone any connection with the reality of India, whether in terms of the consumer’s needs, or in terms of the operating environment in the country. By and large the theme was: push explosive growth, margins be damned; promote “westernised” consumption aspirations, regardless of capability to fulfil those aspirations. Conversely, the four years after the global financial crisis in 2008 have been possibly the worst that the retail sector has faced in recent decades, whether in terms of total losses or the quantum of lost growth opportunity, and business sentiment has swung to the other extreme.

On its part the government has not done much to encourage the sector. After several policy flip-flops, approving investment proposals of some high-profile global brands is a positive signal to the outside world, but none of them so far have unlocked or grown the value of Indian retail businesses in any significant way. There is no doubt that foreign brands and retailers can and should be an integral part of India’s developing retail landscape, but they cannot be the prime drivers of the retail business in India or the saviours of its supply chain. That vision and energy needs to come from within, and the resultant growth will benefit all – Indian and international companies, consumers and the government.

From the ancient treatise Arthashastra, Professor Thomas Trautman quotes the concept of concept of “shad-bhaag” (the state having one-sixth share) as “entrepreneurial” because it has a sense of mutual interest, promoting production and the growth of everyone’s share. This spirit of co-ownership and entrepreneurial participation is largely missing in today’s governance. Direct and indirect taxation remains a complex net for all but the savviest evaders, not to mention all the other regulation and approvals that each business – large or small – needs to comply with.

Somehow the mandarins don’t seem to see that the retail business is a platform for the multi-fold growth of new enterprise, that it is a vehicle for urban renewal, and that it can help enormously in channelling the economy into visible taxable revenues. It also seems to escape them that the biggest drivers for this growth and change will typically be small entrepreneurial businesses, who themselves can only thrive in a simpler and non-adversarial regulatory environment.

The wishlist is not large, but needs some bold steps: enact policies that free up unproductive real estate to reduce costs, reduce regulatory hurdles, remove tax traps, reduce import duties. For instance, one estimate for illegal imports in watches is 75 per cent, where the beneficiaries are the smugglers and those who oil the wheels for them, not the consumer, not the brands or retailers, not the revenue department.

It is an important budget year politically due to impending elections but also economically due to the dismal GDP growth. The animal spirits that the Prime Minister has referred to in the recent past are more in the nature of a “bheegi billi” right now rather than a roaring tiger. The caged golden bird will not lay any golden eggs. Will the Finance Minister choose to crack the whip this year, or cut the chains? We watch with bated breath.

(An edited version of this piece was published as in Daily News & Analysis – DNA on 19 February 2012, under the title “Foreign brands can’t be prime drivers of retail”.)

(This piece appeared in ‘The Strategist’ supplement of the Business Standard newspaper, on 2 July 2012.)

Modern retail is equated with a more structured and systematised organisation, hence the term “organised retail”. This term is weighted with expectations of greater capability, better competitiveness and greater benefits for industry and society. However, if we take organised to mean better for the consumer then, often, our age-old corner shop and the local cloth-merchant-turned-fashion-retailer appear more organised and better at delivering more relevant products to us at lower prices with superior services than most of the new corporate chains.

Over the last two decades or so, there has been a steady transformation of the retail landscape and the consumer’s shopping attitudes. There are many more people with much more money in hand to spend at their discretion today than ever before. This has encouraged the growth of brands, Indian and international, as well as the emergence of modern retail chains and malls. The transformation is most visible in our largest cities, with some locations already having built a surplus of mall space. A generation is growing up in these cities that takes malls for granted, and that completely avoids the more traditional retail spaces.

There has certainly been a gold-rush, among companies, investors, real estate developers, even professionals looking to put the “next big thing” on their resumes. The true impact, however, is still very limited, very shallow for the country overall. In fact, in locations with high concentration of modern retail, the impact has even been negative in terms of poorly developed space, rising costs, and stressed infrastructure to the detriment of the local inhabitant.

The impact of this growth is little understood, much less guided or planned for the long term. There are loud voices both for and against corporatised modern retail, but there is very little balanced discussion. There are several laws binding or restricting retail activity, but very little policy enabling it, whether we look at modern retail or traditional, corporate or individual owner-driven stores.

Here are some major issues that we need to tackle, at the policy level and within retail businesses:

• Regulatory frameworks: For the most part, our laws are obstructive rather than productive or directional. The multiplicity of authorities that a retail business must deal with doesn’t help either including various central ministries, state-level ministries, and myriad municipal departments, local utilities and other authorities.

• Space and Infrastructure: Retail is mostly an afterthought, either as a small fraction of poorly developed space within an urban development, or as massive glitzy shopping malls that have no correlation to their surroundings. Either there is not enough good space, or too much without adequate support services. A retail centre needs to be a positive part of the local ecosystem in every way, rather than an unwanted cancerous growth.

• Integration with the local economy: We all intuitively know that shopping is an intensely local and personal activity. Yet, in the race to gain efficiencies of scale, modern retail managers take national or international template-based approach. Decisions are made centrally, products shipped by distant suppliers and the labour force is also often drawn from outside. There is little local relevance left and hardly any contribution to generating healthy economic activity in the store’s vicinity.

• Diversity of choice and competition: We need to think through how the economic balance of power is handled between retailers and their suppliers, to maintain healthy diversity for the sake of the consumer. The evolution of modern retail business models can shrink rather than increasing the consumer’s choice. Strategic sourcing, partnering and collaboration are buzzwords that drive increasingly narrow supply-development, and retail-side consolidation means fewer channels to the consumer. For wider impact across the economy a diverse and vibrant design, development and manufacturing base is needed that can effectively compete within itself and externally.

We need to drastically rethink the role of retail in our society if we want India’s urban centres to be healthier, dynamic and sustainable in every possible way. Retail is the one economic activity that touches the daily life of virtually everyone – modernising it is an imperative. Modern retail should not mean space more expensive than that in rich economies, for a handful of companies selling brands to an elite fraction of India’s population. We shouldn’t treat it as the exclusive party to which only large companies are invited, whether Indian or foreign. For a true movement from “unorganised” to “organised retail” we need to have brands and product offerings that meet the needs and budgets of the real Indian middle class and below, delivered in an affordable and inclusive way, in cities that thrive with retail at their heart as part of the social and economic infrastructure.

Perhaps we even need a National Mission to holistically think through how we can improve the quality of the entire retail ecosystem! This may is the only way to create a true retail revolution in India and use it as an engine for wider economic and social growth.

During India ‘s misplaced years post-Independence, business and commercial activity was treated as a ‘necessary evil’. Businessmen were labelled as rapacious, self-interested people who needed to be kept under strict control. And shopkeepers were possibly among the lowest on the social ladder according to the economic and governance pundits.

In the last 20 or so years, fortunately, that tide has turned significantly – the role of business in economic and social growth is publicly acknowledged. Inspiring leaders such as Narayana Murthy of Infosys, Sunil Bharti Mittal of Bharti, and Ratan Tata of Tata Group offer aspirational models for a new generation of Indians.

Yet, retail, for all the zillions of column centimetres and hours of airtime that it gets, is still seen as a slightly dubious activity.

For most planners on the government side, it has been and remains an afterthought. Often, a few poorly developed square feet are allocated when a new community or urban development is being planned. On the other end, a number of massive glitzy shopping malls are being set up by real estate developers that have no correlation to their surroundings and catchment.

To my mind, retail developments need to be seen as part of urban infrastructure and also, more importantly, as part of the social fabric of a town or city. Government at all levels, especially state, district and municipal level, need to understand that the presence of successful retail developments in their population centres are an indication of the social and economic health of their localities.

A well-planned retail centre not only creates income for the local population and the local government, but also provides a very important socio-cultural platform for interaction between the different segments of a community. The presence of successful brands and retailers acts as an attractive beacon for other businesses, small or large.

Internationally several examples exist – especially in Europe – where after decades of suburban growth, town planners are focussing on re-developing ‘inner cities’ with a mix of large and small retailers, in environments that are shopper-friendly in every way. They are rethinking public transport connectivity, planning in pedestrian-only walkways, greening and sheltering, effective lighting, open spaces, and cultural centres. And yet, this mix would be incomplete without food and shopping.

Government bodies also need to realise that it is not productive to simply hand off large chunks of land to private developers to put up concrete-steel-and-glass blocks in the form of shopping centres. One should be able to look back 30-40 years hence, and say that the development added something positive and organic to the urban landscape in that town or city and was truly beneficial to the local population.

Visionary shopping malls like the Kapaliçarsi (“Covered Market” or Grand Bazaar) of Istanbul that was established in 1461, are obviously few and far between. Bluewater near London in the United Kingdom , and inner city developments on continental Europe offer more contemporary examples. However, India ‘s own traditional markets, at least until a few decades ago, also offer points of reference and inspiration.

I believe a rethink of the role of retail is highly overdue. If urban planners in the government and private developers can work together to plan and create more complete and ‘organic’ retail centres for the future, India ‘s urban centres will be far healthier and dynamic places to live in.