There need be no doubt in our minds that Government of India is in a tearing hurry to commit hara-kiri — it is on the verge of opening up the retail sector for foreign direct investment (FDI).
This step will throw out the self-employed — 51 per cent of our total workforce — leaving them to wither and decompose. Statisticians wishing to tone down the sheer scope and scale of this category may suggest that this is an omnibus term, that can include a doctor as well as one who polishes shoes.
But that is not the whole truth. The retail as a sector too is omnibus – the middleman who procures from the farmer, the transporter who on his mini-truck delivers perishables to the bazaars in urban peripheries, the local chakki/miller who grinds the grain and pulses, the neighbourhood shop owners with a team of salesmen who deliver grocery at one's doorstep. Omnibus, self-employed and in the supply chain!
There are no attempts made to support or fight for the Indian retailer in this battle for his survival. There has been a complete absence of skill development, networking, financial and institutional support. If anything, infrastructure and communication development are moving at a snail's pace ever since the UPA came to power in 2004.
It is difficult to believe that the government needs private investment for building cold chains and bulk storage. A rough estimate says that this may require approximately Rs 60,000 crore. It may be relevant here to recall that the State expenditure alone on the Commonwealth Games was nearly Rs 35,000 crore. It is not beyond the ability of our government to mop up the necessary resources for building infrastructure. The Indian Council for Research on International Economic Relations in its report submitted to the Parliament Standing Committee (Commerce) had observed, “ foreign retailers have pointed out that setting up of manufacturing base in India is difficult since the infrastructure is poor, labour laws are unfriendly...”
Little access to credit
Was there any scope for our traders to get more competitive and expand horizontally or vertically? It is reported that only 12 per cent of unorganised retailers have access to institutional credit. There is no denying that the large Indian retailers are improving their spread, but they are a drop in the ocean. About 98 per cent of retailing is unorganised and the unorganised sector makes up for 92 per cent of our entire workforce.
The recent Employment and Unemployment Survey of NSSO revealed that between 2005 and 2010, against the official claim of creating more than 50 million jobs, actually only two million jobs were created.
Against this backdrop, the government's step to expose the self-employed to ‘cannibalised competing retail business' is like throwing them to the wolves. We don't create enough jobs, but can we throw those who are on their own out of theirs too? There is no valour of the government in this hara-kiri. Rather, it is shrugging off its responsibility to strengthen the self-employed to face competition.
Undue haste
There is a certain undue haste in this process. In June 2009, the Parliamentary Standing Committee on FDI in Retail Sector clearly recommended, “…a blanket ban should be imposed on domestic corporate heavyweights and foreign retailers from entering into retail trade in grocery, fruits and vegetables, and restrictions should be entered for opening large malls by them for selling other consumer products.”
Has the situation really changed since then? Why wasn't this elaborate and comprehensive report prepared by our Parliamentarians put out for discussion?
Why was the note prepared by the Department of Industrial Policy and Promotion (DIPP) put for discussion instead? Appearing before the Parliamentary Committee, the DIPP had admitted that the total retail business in India is over Rs 12, 00,000 crore, a third of our GDP. After agriculture, it is the largest employer with over 22 million people engaged in it. Surely, the importance of this sector was understood and was being promoted through their discussion paper, but have they missed out that the 22 million have families too to feed?
The prevailing conditions are not even favouring large retailers. Responding to recent announcements of the Reserve Bank of India, Mr Kishore Biyani, CEO of Future Group, said the RBI is not creating a level playing field with its credit policy. He observed, “While international retailers have access to capital at much lower costs, domestic retailers are being stifled.”
The Government's haste is all the more intriguing as it comes at a time when the FDI flow to India has dropped by 31 per cent (UNCTAD). For this government which is growth-obsessed, it should be obvious that on its own, FDI in retail cannot boost the GDP.
FAO admission
The Food and Agriculture Organisation had in 2005 stated that in several countries supermarket chains exploit farmers. The Competition Commission in the United Kingdom as recently as 2010 admitted that despite several measures the exploitation of the farmers and shopkeepers could not be stopped. Interestingly, on a visit to India in July 2011, the British Member of Parliament, Mr David Amess, opposing FDI in retail commented: “Britain was a nation of small shopkeepers... all of that has changed and this is because of the supermarkets, led by Tesco. It is impossible for small shopkeepers, who have so much to offer, to compete with the prices of the supermarkets.” Mr Bob Russell, another British MP, felt, “the expansion of supermarkets in Britain has been to the serious detriment of small shops.”
It is important that India does not rush into making a decision on FDI in retail without fully understanding its implications. It is nobody's case that efficiency in distribution with better organised players should be foregone just for retaining the status quo . Caution hasto be exercised so that monopolies and oligopolies do not take over the competitive environment which prevails albeit with inadequate and less endowed players. For us, to hasten slowly would be a better option.
In India's federal environment, agriculture is a state subject. FDI in retail will set in private bulk purchase practices. States should be comprehensively consulted on its implications.
(The author is a spokesperson of the Bharatiya Janata Party. The views are personal.)