A Stubborn New Delhi will Kill The Indian farmer

 A Stubborn New Delhi will Kill The Indian farmer

The Government appears to be determined to allow FDI in the retail sector. It is citing several reasons for this, based on a discussion paper of the Department of Industrial Policy and Promotion. This paper quotes extensively from working papers and policy papers of the Indian Council for Research on International Economic Relations, whose chair is Isher Judge Ahluwalia, spouse of Planning Commission Deputy Chair Montek Singh Ahluwalia.

The report has recommended opening of retail to FDI, basically focussing on the benefits to the consumer giving them preference of choice and playing down the adverse impact on agriculture, small and medium sector manufacturing and the unorganised retail. The report also men tions in its opening remarks that unorganised retailers could experience a decline in sales and profit initially but adds that the adverse impact weakens over time. The government has ignored this.

This report has cited four benefits from the opening of this sector: benefit to the consumer, better price to the farmer, benefit to the small scale manufacturer and positive impact on the foreign exchange inflow. But, on analysing, we find that these positives do not stand.

Further, there are several documents and reports available in India and other countries, which bring out the ill effects of FDI in retail, that do not find favour with the government. Even the standing committee on commerce, which went into details of the impact, had recommended against opening up to FDI in this sector.

It mentioned that retail sector in India is estimated to account for 10 per cent of the GDP. India is estimated to have around 15 million retail outlets. We have the highest retail outlet density in the world. This retail outlet is highly fragmented; only 4 per cent outlets are larger than 500 sq feet. Organised retail outlets are just 5 per cent of the market, whereas 95 per cent is unorganised.

Unorganised retail Unorganised retail is the second largest employer after agriculture, employing about 8 per cent of the workforce, around 40 million persons. With FDI, this unorganised retail would be adversely affected. To counter this adverse impact, the committee had in 2008 extensively recommended several reforms in the agriculture, manufacturing, unorganised retail, and cooperative sectors to improve their status. These reforms have not taken place, but the government has recommended FDI.

The move is a reflection of the government's stubborn nature. It also reflects how certain bodies are lobbying for their vested interests. For instance, an article in a financial daily said, "The 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 authori- ties 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 52 crore) on issues related to India, as also other matters, in over two years now. In 2010, company spent $1.37 million (over rs 6 crore) on lobbying in the first quarter'. There is no denying that new avenues of corruption are being opened up in the name of development through such a move. 

INDIA, WITH its weak I 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 employing over 400 million people. On the contrary, Walmart a global leader in big retail, has a turnover of $400 billion and employs only 2.1 million people.

We can see who provides employment. If we think Wal-Mart is here to create employment opportunities, we would 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.

Besides, when foreign organisations enter multibrand retail in India, they will look to procure goods globally. The agriculture sector in the US and Europe is highly subsidised, and this massive farm subsidy supports the sector. US agriculture would collapse if this subsidy, classified under Green Box for wro calculations, is withdrawn (as analysed by UNCTAD-India). 

A 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 2009, these industrialised countries provided a subsidy of 12.60 lakh crore to agriculture. So, how would our agriculture compete internationally?

In India, the markets sustain farmers and not subsidies. More than 60 per cent of our population is engaged in this sector and they will lose heavily. Also, our manufacturing sector has to cope with high interest rate and escalating real estate prices. Can they compete with Chinese manufacturing?

 Because of all this, the government's decision is not in the interest of our country and will only serve the purpose of the MNCS.

India's retail market is around $400 billion and employs 400 million. Wal-Mart has a turnover of $400 billion and employs 2.1 million

Gopal Krishna Agarwal is the National spokesperson of the Bharatiya Janata Party on economic affairs.