Dr Bhagwati Prakash Sharma
OPENING of foreign direct investment in retail trade in the country would prove to be the most disastrous decision of the UPA Government among all the decisions taken under the neo-liberal economic policies being pursued since July 1, 1991, in the name of reforms. It would prove fateful not only for the 1.34 crore retailers operating in the county, but would also badly ruin crores of farmers, several thousand small and medium industry owners, more than a million small transporters and scores of other businesses and occupations.
India has an annual trade turnover of Rs 22.5 lakh crore in retail and employs 4.5 crore people. There are more than 18 crore people who constitute the family of these 4.5 crore persons employed in retail ventures in the country. So, even if 50 per cent of the retail trade turnover in the country would be captured by foreign retail chains in next 10-15 years, it would play havoc with these 18 crore people constituting the families of 4.5 crore persons employed in 1.34 crore retail shops spread throughout the country.
Wherever large scale retail chains have been permitted in the world, they have grabbed a major share of the retail trade turnover in those countries, and small retailers have got displaced. In the US almost 80 per cent of the retail trade is controlled by large scale retail chains. In Europe 75 per cent of the retail trade has been captured by large scale chains which was controlled by small retailers before two decades.
In South-East Asia large-scale retail chains have entered late in 90s. Yet, they have captured 20-37 per cent of the retail trade turnovers in various countries. In India as well, foreign retail chains like Walmart, Metro AG of Germany, Tesco, and Carrefour, etc. would rapidly destablise lakhs of retailers and peddlers and other small businesses.
Today, any unemployed youth can endeavour to open a small shop of hoisery or kirana and earn his livelihood. But, the entry of large scale retail chains into the Indian market would pre-empt such small opportunities, available to earn a modest but respectful livelihood, besides, displacing millions of people engaged in retail trade in the country. This may drown unemployed youth in the ocean of pessimism or compell them to think of pursuing unlawful activities for survival. The prime minister claims to generate employment by inviting FDI in retail is no less than a hoax or a bitter lie.
Walmart is the largest retail chain from the US, having a trade turnover of $ 400 billion per annum which is equivalent to the annual retail trade of Rs 22.5 lakh crore in India employees nearly 21 lakh people worldwide. Thus, Walmart hires one employee, for more than Rs 1 crore of annual trade turnovers, while, India has an average record of employment of one person for every Rs 5 lakh of trade turnover. Therefore, even if just 50 per cent of retail trade turnover is captured by large scale retail chains, almost 2.25 crore people would be displaced by a fresh employment of just 10.5 lakh persons, thereby rendering almost 2.1 crore people jobless.
It is also a blatant lie being spread by the UPA Government that entry of foreign retail chains would help in promotion of small and medium industries. All foreign retail chains would be sourcing most of their products for retailing in India from China or other countries. Therefore, their entry into India would spell the death knell for majority of small, medium and even large-scale manufacturers. Government’s assertion of mandatory procurement of 30 per cent indigenous products is quite hollow as these foreign retail chains would again, provide shelf-space to the products of large MNCs namely Coke, Pepsi, Hindustan Unilever, Bata and like to fulfill this mandatory condition of procuring 30 per cent indigenously manufactured goods.
There is no substance in another baseless claim of the Government as well, that small kirana shops would not be replaced by large scale retail chains on account of their low operating costs or personal touch. The large-scale retail chains likely to own 100 plus shopping malls throughout the country, would buy in bulk, running into crores of rupees per annum, from each of the manufacturers. So, they would negotiate for credit periods of 60-90 days along with higher discounts, than what is availed by ordinary whole-salers and retailers. All these goods bought on credit would be sold on cash. Therefore, they would be cash-rich and their cash balances may exceed their inventories which they would get on credit. On investing this cash generated on cash sale of goods procured on credit, in banks and stock markets they would earn such huge profits from this investment income that they would be able to sell goods at less than their cost of procurement to drive out small retailers. This can be verified from their operating income and expenditure statements showing huge investment incomes.
Everywhere in the world, most of the goods are available much cheaper in large retail chains than the prices being changed by the small retailers.
In many cases, the price of a product at a large-scale retail chain shop, is found to be even less than the purchasing cost of a small retailer. Therefore, people prefer to buy from large-scale retail chain shops, leading to the closure of small kirana shops.
Farmers would also get strangulated, as there would be only 7 to 10 monopolistic buyers vis-à-vis 50 crore farmers. Out of their monopoly, the large-scale retail chains shops would compel the farmers to sell their products either very cheap or they would instead engage them for contract-farming at their terms. Thereby, the farmers would be reduced from a land owner to a share cropper for large-scale retail chains. For instance, an American company selling its wheat flour in India has hired 6,000 hectares of land of the farmers in Madhya Pradesh, to get cultivated wheat for its wheat flour brand on contract, and has put up a large flour mill of 300 tons capacity and thus acquired the entire supply chain from farm land to kitchen by virtue of the power of its wheat-flour brand-equity. Likewise, most retail chains, on entering into the country would engage the farmers for contract farming across large agro-climatic zones based upon their choice of crop required to be grown and eliminate the choice of the farmers to cultivate their crops of this preference.
Thus, foreign shopping malls procuring bulk crops, cultivated on contract for them by the farmers in different agro-climatic zones and distributing packaged products mostly imported from China, Euro American countries, South-East Asia or Japan would transport all these goods through their own captive fleet of transportation, either owned by them or engaged on fixed rent. This would lead to the elimination of a large number of small transporters.
Indeed, under the guise of reforms, the governments in power since 1991 have sold one sector after the other by opening it for FDI, in the same way Yudhisthira had given his assets in the gamble with Shakuni during the Mahabharata period. The growing deficit in the international trade of the country is being bridged by opening various sectors of economy to FDI. This has led to foreign ownership of nearly two-thirds of the manufacturing facilities of the country.
(The author is pro-vice chancellor of Pacific University, Udaipur and a national co-convener of Swadeshi Jagaran Manch).