COVER STORY
Exposing the sleaze, lies and perfidy
By Gopal Agarwal
The Walmart has spent a whopping sum of $11 million dollar for lobbying its entry into India. The US-based Walmart Stores, one of the world’s top revenue grosser with over $400 billion of total annual sales and present in 15 countries, is lobbying hard with lawmakers here to help it expand into India, possibly through bilateral talks between the related authorities of the two countries. As per the lobbying disclosure reports filed by the company with the US Senate, Walmart has since then spent a staggering amount of over $11 million (more than Rs 52 crore) on issues related to India, as also other matters, in over two years now. In 2010 itself, the company spent $1.37 million (over Rs six crore) on lobbying in the first quarter.
This report gels well with the reaction from the US, supporting the UPA decision to allow FDI in retail. It also exposes the fair and unfair means employed by the MNC to expand its business.
There are also ethical issues involved in the way the government went about introducing the proposal to allow FDI in retail. The discussion paper by the Department of Industrial Policy and Promotion (DIPP) quotes extensively from working paper and policy paper – August 2011, of Indian Council for Research on International Economic Relation (ICRIER) whose chairperson is Dr Isher Judge Ahluwalia, wife of Dr Montek Singh Ahluwalia, Chairman Planning Commission.
This organisation has in its report recommended opening of this sector to FDI, basically focusing on the benefits to the consumer giving them preference of choice and playing down of its adverse impact on agriculture and small and medium sector manufacturing and unorganised retail. Though, this report also mentions in its opening remarks that unorganised retailers experience a decline in the sales and profit initially but says that the adverse impact weakens over time, the government has ignored this. Further, there are several documents and reports available in India and abroad which bring out the ill effects of FDI in this sector but these reports are not finding favours with the government.
If we go deeply into the matter, allowing 51 per cent foreign direct investment (FDI) in Multi Brand Retail in India is not a good move, because the companies that we are inviting are known to monopolise the market wherever they go. There are several reports from across the world to prove that the major companies, like Walmart and Carrefour, use a monopolistic approach to kill local markets. Indonesia and other countries are good examples of the result of such monopolistic policies.
India, with its weak manufacturing base and weak supply-side infrastructure, is not in a position to compete with many global brands. But at the same time, our country provides such a large market that all big names want a piece of the pie. The Indian retail market is estimated to be around $ 400 billion with more than 120 million retailers and employing over 400 million people. On the contrary, the US-based giant Walmart, a global leader in big retail, also has a turnover of US $400 billion and employs only 2.1 million people. Which one of these retail systems provides employment is crystal clear. If we think Walmart is here to create employment opportunities we must be living in a fool’s paradise. Simply put, they are investing in India to make money. Thus, the onus of protecting our market and promoting the locals lies with us.
When we can build our domestic infrastructure so well (a case in point is the metro rail system and golden quadrilateral project), why do we need outsiders to come here to build supply chain infrastructure, there is no big technology in involved. Even our standing committee of the parliamentary had rejected FDI in retail.
Besides, when foreign organisations enter the multi brand retail market in India, they will look to procure goods globally. Agriculture sector in US and Europe is highly subsidised even our pressure under WTO could not get us any results. It is the massive farm subsidy that supports agriculture in the US. If this subsidy, classified under Green Box for WTO calculations, is withdrawn (as analysed by UNCTAD-India), US agriculture collapses. A latest 2010 report by the Organisation for Economic Cooperation and Development (OECD), a group comprising the richest 30 countries in the world, states explicitly that farm subsidies rose by 22 per cent in 2009, up from 21 per cent in 2008. In just one year in 2009, these industrialised countries provided a subsidy of Rs 12.60 lakh crore to agriculture. Therefore how our agriculture sector will compete internationally. In India, it is markets that sustain the farmers and not subsidies. More than 60 per cent of our population is engaged in this sector they will lose heavily. Secondly our manufacturing sector has to cope with high interest rate, our real estate prices are sky rocketing in this context can they compete with Chinese manufacturing sector. These MNC’s will procure internationally then, they will flood our markets with foreign goods, and pocket fat profits, further weakening our hold on our own market. It is important to look within and improve the nation’s lot by focussing on agriculture and the manufacturing sector, rather than depending on others to come and help us out.
There is also the possibility that dealing with these foreign organisations may actually reduce our foreign exchange coffers, which may go in the negative. Domestic report in the manufacturing sectors points out that the net foreign exchange flow of existing multinational manufacturing sector (MNC) is negative at present. When the rupee is hovering at around 53 to a dollar which is strong at the time any inflow is beneficial to the international investor.
Inviting foreign direct investment is not simple issue; we need to look at the context of the entire move. FDI at this juncture does not fit the bill, as India has a number of domestic issues to tackle. We need to look deeper to understand how and when the investments can really prove fruitful for agriculture and the manufacturing sector. The political and economic conditions of our country in the current scenario also need to be taken into consideration.
Economics is a complex issue, which demands that a balance be struck between the positive and the negative and all decisions have to be taken in the present context. Unfortunately this bill gets weighed down by its shortcomings.
The government has launched a campaign to show us the merits of their move, but that’s not enough because it requires proof, which they are yet to provide. When they talk about quality assurance in terms of consumer satisfaction, they also need to project the cost-benefit analysis. For us, isolated product availability is not sufficient. At the end of it, people want to know how many products really benefit them
There are many more such questions, which have raised doubts in the minds of all. How many companies does India open its market to because if it is just the major ones, then it is surely going to kill the market by shutting all doors to competition? And it would be significant to point out that the Competition Commission of India is a new organisation which needs more teeth and experience to deal with complicated situations. That’s the context being spoken about.
(The author is Convener, Economic Cell, Bharatiya Janata Party)
