NEW DELHI: The refusal by the Aam Aadmi Party ( AAP) to allow foreign retailers to set up shop in the national capital will block creation of new jobs, dash hopes for consumers and create policy uncertainty for global chains.

The move comes at a time when several global retailers led by Tesco are planning to enter the multi-brand retail sector, which has the potential to add strength to the tentative economic recovery underway.

The red flag for multi-brand retail will also mean a blow to the battle to tame high prices hurting the common man. Hopes of setting up modern warehouses to cut out massive wastage of fruits and vegetables will be put on the backburner and also delay revival in the real estate sector banking on global retailers.

“Myths like this (FDI in multi-brand retail leads to job losses) have been propagated by various political leaders,” said Arvind Singhal, chairman Technopak Advisors,┬ásaid Arvind Singhal, chairman Technopak Advisors, a consultancy firm.

“Some of them have drawn parallels to what happened in the US and the UK. But those are fundamentally different economies. Even now, the largest employer in both countries is the retail sector. And even in India, large format retailing has been present in the form of Big Bazaar and its likes. Did they cause loss of jobs? No,” he said.
Several studies have pointed out the benefits of allowing global retail chains in the multi-brand retail sector. The overall impact of modern retail on the economy is immense.
A report by the Boston Consulting Group and the Confederation of Indian Industry showed that nearly three to four million direct jobs will be created while another four to six million indirect jobs would be available in the logistics sector, contract labour in the distribution and repackaging centres, housekeeping and security staff in the stores. Government estimates show that nearly one crore jobs would be created in the sector.
For consumers, it would translate into savings of 5-10% of spending in specific categories, leading to an aggregate of $25-30 billion (Rs 1.6-1.95 lakh crore) or about 0.5% of the gross domestic product. For the government, it would mean additional revenues of $25-35 billion in various taxes, according to the report.

In the US, a study by Emek Basker of the University of Missouri found that for many items typically sold in drugstores, such as aspirin and shampoo, average prices decline following Walmart entry. “This decline is economically large – 1.5-3% in the short run and four times as much in the long run – and statistically significant,” the study said.
“Their study found that Walmart’s prices were 17-39% lower than competitors’ prices in the three “Walmart cities”, and that average prices at other grocery stores were 13% lower in the Walmart cities than in Sacramento,” it said.
The impact on farmer’s earnings would also be huge. In fact, the study points out that it would translate into 10-30% higher remunerations.
An inter-ministerial panel had said that reform in the sector would be an effective inflation-busting measure. The economy has been plagued by high food prices for the past three years and opening the sector would help set up massive supply chains, warehouses and cut out losses, which are estimated to be around 40%.