'When big man comes, small man goes'
Posted on: 26 Dec 2011
M P Veerendra Kumar
The proposed Foreign Direct Investment {FDI} in retail trade in India, on which the Centre has been has forced to hit the pause button, can only be seen as a reprieve. The proposed reforms would allow foreign capital have a 51 percent stake in Indian super markets and own single-brand retailers outright. Investors must bring in at least $100 million, half to be spent on infrastructure. Another stipulation is that 30 percent of the stock must be procured locally. Most significantly, these investments will only be initially in cities with more than a million in population. In other words, the small farmer whose interests are sought to be championed by the proponents of this reform will be turned into living raw material, churning out the produce of their labour for the palate of the urban consumer. Keen observers of the liberalisation climate in India, instead of viewing the stalled move of FDI in retail in isolation, have rightly located it in the matrix of the wider agenda set forth by the U S-India knowledge initiative in agriculture signed in 2005. It is quite unfortunate that many are unaware of this pact now, which also paved the way for many other liberalisation schemes, including the entry of genetically modified seeds. Interestingly, Wal-mart is also on the board of this initiative, which is determining Indian government policy.
Of a piece with this is the gradual attenuation of the Food Corporation of India {FCI}, the largest corporation in India and probably the largest supply chain management in Asia. It started after the Mckinsey & co report on the corporation's functioning, which was accepted by the Standing Committee on Food, Consumer Affairs and Public Distribution of the 14th Lok Sabha {the Indian Parliament}.
Similarly, the blueprint for the FDI in retail is the Confederation of Indian Industry – A.T. Kearney November 2006 report Retail in India: getting organized to drive growth. This slim 34-page document which proposed '…a comprehensive set of actionable recommendations… developed for the central government, state governments…' will have a debilitating impact on 40 million Indians making a living out of a sector which accounts for 39 percent of the country's GDP. To these global management consultancy firms India shining is the second most attractive retail destination among thirty emerging markets. Touted to become the world's 5th-largest consumer market by 2025, 62 percent of this consumption is projected to be urban, with the middle class burgeoning ten-fold from the present 50 million to 583 million.
By 2025 over 23 million Indians - more than the population of Australia now - will be among the country's wealthiest citizens. Thus, the sone ki chhidiya {bird of gold}, as merchants of the first millennium referred to India, is set to soar again. But the problem with this rosy vision is the clash with reality. In India 77 percent of the population subsist on less than re 20 per day, according to the late Arjun Sengupta who chaired the 'National Commission for Enterprises in the Unorganised Sector' during United Progressive Alliance1 government. Would these impoverished masses be happy to have a choice of Kesar mangoes from Junagadh, Anab-e-Shahi grapes of the Deccan and Coorgi oranges? Or do they more pertinently need nutritious grains and pulses made available at the cheapest price through a robust Public Distribution System? That the PDS is sought to be 'dismantled' and the umbrella organisation, Rozi Roti Adhikar has been mobilising public opinion against the government's move to replace it with cash transfers, should come as no surprise. The need for basic food availability through PDS becomes relevant in the light of the recent calorie-based poverty estimates released by Prof Nilakantha Rath, {President, Indian School of Political Economy, Pune} who also has the distinction of calculating poverty for the first time in the country.
His findings mesh with the scandalous decrease in per capita cereal and pulse consumption, noted on the basis of National Sample Survey data by our foremost agrarian economist, Prof Utsa Patnaik. Her revelation is that from 1993 to 2004, the per capita yearly grain consumption declined from 178 kg to 156 kg. To round off the bleak picture of Indian society, it is also worth remembering the ignominy of a country having a criminal 48% malnutrition rate among the under-5 population, higher than in Sub-Saharan Africa. The first move in the direction to open up retail was made by the late Murasoli Maran, Commerce & Industry minister during the National Democratic Alliance regime, with Vajpayee as the Prime Minister. On May 14, 2002, Maran submitted a note for the consideration of the Group of Ministers, proposing that the government allow 100 percent FDI in retail trade. Though the matter did not go beyond that level, the NDA vision document for the 2004 elections, hosted by the BJP on their site, had also advocated allowing 26 percent FDI in retail.
In a policy reversal in the 2009 election manifesto, the BJP argued against FDI in the sector. Now it is spearheading the political protests against the UPA's move to open the doors to foreign retailers. The crux of the issue seems to that they seem to be acting out of political expediency rather than humanitarian conviction. Similarly, as reported in India Today, issue dated July 23, 2007, headlined 'Red signal for retail', a CPI{M} member of the Kerala legislative assembly and another party man and Deputy Mayor inaugurated two fresh vegetable chains of 'Reliance retail' in Kochi. Hence, the intentions of many political parties opposing the move now raise doubts about their real agenda. Maran, of the DMK, had advanced the same arguments in favour of the move as those trotted out by this government. He claimed that an underdeveloped retail sector deprived consumers of price advantage, choice, variety and quality. Like the present government, the 2002 note had rubbished concerns that foreign retailers would swamp the market.
The reality according to the U S Government Accountability Office is that over the past 25 years, farmers have received a decreasing share of the consumer food dollar. Companies in highly developed markets may be able to flex their muscle by raising retail food prices, while simultaneously depressing prices farmers receive for their produce. This leads to escalating profit margins to traders, with the majority share going to giant retailers. In Food Wars: the global battle for mouths, minds and markets, Dr Tim Lang, Professor of Food Policy, City University, London, exposes how Wal-mart beat down prices by 13% within a decade of entering the food trade. Iowa economist, Ken Stone, showed that in the decade from 1983, after the entry of Wal-mart, small Iowa towns lost 47 percent of their total retail sales. Stephan J. Goetz and Hema Swaminathan of the Department of Agricultural Economics and Rural Sociology of The Pennsylvania State University studied whether Wal-mart had a net harmful effect on communities, or whether its baneful presence was offset by the beneficial impact of lower prices. Analysing data from 1989 to 1999, they concluded:
'After carefully and comprehensively accounting for other local determinants of poverty, we find that Wal-Mart unequivocally raised family poverty rates in US counties during the 1990s.' A similar study by Anuradha Kalhan of Jai Hind College, Mumbai among a randomly chosen sample of small shops and hawkers within one kilometer radius of malls in Mumbai was published in the Economic and Political Weekly of June 2, 2007. 87 percent respondents reported a decline in sales, with 50 percent of the sample expecting serious trouble, and 92 percent said that their children would not continue with the business. Not surprising, considering that the philosophy of the founder of Wal-mart, Sam Walton, was that apart from making prices the fulcrum at every stage of his business, he paid everybody involved at every stage of the business as little as possible. He exerted maximum pressure on his suppliers, not just to not-raise their prices, but to lower them, every year. This means year after year small farmers will be browbeaten and compelled to supply their produce at diminishing returns, especially in a situation dominated by one single procurer. Precisely, that would be the ideal scenario for Wal-mart. But why should we be colluders in this grand design of Wal-mart's? Unless the world's largest retailer, with $419 billion in sales in 2010 has the clout to influence policy-makers of $470 billion Indian retail market. An allied danger pointed out by analysts is the cartelisation that the Wal-mart model forces on the food industry – the mega mergers of Kraft and Nabisco in 2000, and Kellog's purchase of Keebler in 2001. This is because only size can negotiate successfully with size.
The implication of the following recommendation from the A.T. Kearney prescription is cause for concern: 'The government should amend the Shops and Establishments Act to allow flexibility in working hours, including seven-day operation of stores. it should also simplify hiring/firing rules to promote at-will employment…' {p.26}. Thus, the implication is that even the policy on labour will be decided by corporates, and instead of ensuring the promised steady jobs, workers can be made to work for extended hours and can also be terminated at will. In the above context, let us not forget that Wal-mart is rabidly anti-union. As an union organiser says in Robert Greenwald's documentary Wal-mart: the high cost of low price it is 'one of the most anti, if not the most aggressively anti-union company in the entire history of the United States.' The instant union activity begins in a store, a freeze is declared on all pay rises.
More incomprehensible is the alleged institutional gender bias against of up to 1.5 million current and former Wal-mart women workers through denying them raises and promotions. This has caused the company to face the huge class-action lawsuit dismissed by the U.S. Supreme Court. Reuters reported on October 26, 2011, that these women have now regrouped to file a reformulated lawsuit alleging unfair treatment of its female workers in California.
Workers employed by their overseas vendors fare no better either. Robina Akther, is one of the 189,000 Bangladeshi seamstresses employed to sew pockets on the backs of women's trousers. She gets 13 cents an hour for a 14-hour day, with a target of 120 pairs an hour, with ten days off a year. 'If you made any mistakes or fell behind on your goal, they beat you,' she reveals in the Greenwald documentary. The documentary also tells how Wal-mart workers earn between $8 and $9 an hour. Though twice the minimum wage; it is still a sum so low that a large number of them qualify for free medical aid and equivalent relief programmes in a large number of American states. In other words, you could be working for Wal-mart and still be poor. Other documented abuses include extracting overtime without pay and forcing work after workers have clocked off. All these abuses are, obviously, linked to the question of keeping down wages, costs, prices. Little wonder then that even the Financial Times of London was moved to comment in an editorial titled 'Supermarkets sweep' on November 27, 2011:'The biggest challenge however could be knock-on effects if the Government manages to push the reform through. A consolidated retail sector would require consolidated agriculture to supply it. Such changes could cost millions of Indian their livelihoods.' This gives the lie to the propaganda that the entry of foreign capital will benefit small and marginal farmers.
The irony is that India has an exemplary model in the 'Anand' co-operative movement built by the legendary 'milkman of India' Dr. 'Amul' V Kurien, who recently celebrated his 90thbirthday. 250,000 farmers have committed suicide after seed giants like Monsanto entered the seed sector. A tragedy of even greater magnitude awaits Indians in the retail sector. One such threat could be the import of cheap Chinese goods. We know for a fact that imports from China to Wal-mart in the U S alone are worth $18 billion. 'Do you know why you can buy such a cheap toy?' a young Chinese woman factory worker asks in the documentary. 'That's because we work all day, every day and night.' The South African government and unions are concerned about Wal-mart's global supply network which, they argue, could lead to a flood of cheap imports, sparking job losses and squeezing local suppliers. This scenario should caution us. But above all, what will be most sorely missed would be the human touch. In small neighbourhood stores across India there exists a personal bond which extends beyond that of a mere buyer and seller. Customers can buy amounts of their choice, that too on credit.
Sometimes in lean times, the shopkeeper usually relaxes this credit period. Can we imagine this simple human gesture from a shopping mall or a supermarket? Associated press has this snapshot of Ashok Kokane, a representative of forty million Indians who make their living out of this sector, 'sitting amid his strawberries at Mumbai's Crawford Market, a handwritten ledger across his knees and a fan of dirty 10 rupee notes at his hand. 'When big man comes, small man goes.''
{the original in Malayalam, published on December 11 & 12, in the edit page of the Mathrubhumi. Author is a writer-politician, Chairman of the Press Trust of India and Chairman & Managing Director of the Mathrubhumi}
