the archaic mrp concept in india’s retail market

all of us know that maximum retail price (mrp), printed on packaged goods, is a legally enforceable system that allows all taxes to be factored in while deciding final price charged to customers. but does this bring any pluses to the end-user, or does it distort free and fair market mechanism is a question that seeks urgent answer.

to ensure that customers are not defrauded by retailers, the indian government, with good intentions, made amendments to law and mandated all manufacturers have mrp on their goods. had this mrp not been printed, retailers would have had an upper hand in deciding the last price of good. seemingly fair, this played a distorting role instead.

while different states charge dissimilar rate of taxes, the manufacturer takes into account the maximum rate charged by a particular state to decide mrp.

this practice leads to customer in a less tax levying state ending up at the losing side since retailer never brings down mrp substantially to reflect fair market price of the good.

not hard then it is to understand that all those discounts on mrp flaunted by retail chains are nothing but a legitimate handover to customers since retailers only lessen their profit margins a bit, which in turn appears a winning stroke to the buyer.

india is probably the only country with this mrp concept. it is high time that retail markets are allowed to decide market-driven prices so that customers benefit from actual demand, supply and price correlation.

give your verdict