History Forum / General / General Topics / February 2007

On Feb 22, 2:47 pm, use...@mantra.com0E09F or www.mantra.com/jai (Dr.
Jai Maharaj) wrote:

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•  Devinder Sharma
•  Poverty
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FDI IN RETAIL
Big box retail will boost poverty
The Prime Minister, citing no credible evidence, says small
shopkeepers will not be hurt by the entry of large foreign retailiers
into the country. His party president, on the other hand, is asking
him to go slow on this front. Will this lead to a different course in
the government's thinking, or is this simply a smoke-screen, asks
Devinder Sharma.

16 February 2007 - It is being projected as a false alarm. Congress
president Sonia Gandhi's latest letter to Prime Minister Manmohan
Singh asking him not to hurry with the opening up of the retail sector
to foreign direct investment (FDI) has not ruffled any feathers.
Letter or no letter, the blitzkrieg of supermarkets and malls shows no
sign of subsiding. Allaying any fears of a slowdown after Sonia
Gandhi's leaked letter to the media, Commerce Minister Kamal Nath put
it straight: "The Prime Minister's Office had asked for details on the
FDI policy on retail and we have sent our comments, so what is the
fuss about?"

Surely, he knows what the fuss is all about. At stake is the
livelihood security of 12 million small shopkeepers, 40 million
hawkers and at least 200 million (of the 600 million) small farmers, a
small sacrifice to be made for ensuring success of the organised
retail boom. Mrs Gandhi's letter is apparently an expression of
concern for the aam aadmi: "I have received suggestions from many
quarters about the desirability to first study the possible impact of
transnational supermarkets on livelihood security of those engaged in
small-scale operations ... I thought I would convey this to you so
that you may consider having the relevant issues properly examined
before further decisions are taken." What she says makes economic
sense, but for the PM, it is commerce that now takes precedence over
economics.

We voters had always thought Manmohan Singh, being a professional
economist, would back his positions with sound economic analysis and
proof. But there is surely only disappointment on that front. "The
entry of foreign enterprises into the retail trade will not hurt our
small shopkeepers but will create lot more employment," he has said
time and again, but the international evidence is to the contrary.
Organised retail occupies 92 per cent of the retail business in the
United States, and 70 per cent in Britain. And this has come at a
heavy social, economic and environmental cost, and big retailers have
added to poverty.

We voters had always thought Manmohan Singh, being a professional
economist, would back his positions with sound economic analysis and
proof. But there is surely only disappointment on that front.

Meanwhile, all kinds of figures are being tossed out by the retail
industry and its marketing consultants to justify the entry of
organised retail. One estimate points to a potential growth of US
$21.5 billion in organised retail by 2010; another pegs it at $30
billion. The Marketing and Retail Conclave organised by Technopak
Advisors has taken this further, showing modern retail jumping from
the existing US $12 billion to US $75 billion by 2011, and as much as
US $175 billion by 2016. If wishes were horses, the marketing
consultancy firms could certainly take millions of people for a ride.

Mrs Gandhi is evidently not impressed with these statistics, and
rightly so, for they hide more than they reveal. She is asking for a
detailed study before the government lays out a red carpet for 'big
box' retail chains. Lessons need to be drawn from a recent study done
by Stephen J Goetz and Hema Swaminathan of the Department of
Agricultural Economics and Rural Sociology, at Pennsylvania State
University in the United States. The authors measured the impact of
Wal-Mart's massive retail boom on poverty in various American states.

Entitled Wal-Mart and Poverty, the comprehensive 2004 study clearly
brings out that those American states that had more Wal-Mart stores in
1987, had higher poverty rates by 1999 than the states where fewer
stores were set up. "Equally important, the counties (districts) which
built new Wal-Mart stores between 1987-1998 also had high poverty
rates," the report concludes. Interestingly, increased poverty growth
from Wal-Mart operations comes at a time when poverty rates nationally
were otherwise in decline.

Lest this be dismissed as mere coincidence, the study cites three
major reasons for the growth in poverty in relation to the growth in
Wal-Mart retail. First, poverty rates increased because workers
displaced from small shops (known as 'mom and pop stores' in America)
had no alternative. They were forced to work in Wal-Mart stores at
relatively lower wages. Second, big box retail destroyed local
entrepreneurship, thereby destroying the ability of local talent in
many areas to earn an independent livelihood. And finally, say the
researchers, Wal-Mart actually transfers income from taxpayers and
welfare programmes to its stockholders and consumers. In other words,
the retail giant is not bearing the full social and economic cost of
its nation-wide operations.

continue reading article ...

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All these three factors are much more relevant in the Indian context.
In India, no scientific and economic analysis has been done to
ascertain the ecological, economic and social costs the nation will
have to pay, especially the loss in livelihoods of small retailers,
hawkers and the farmers. Still worse, not even one empirical study
from an independent institute examines the impact of organised retail
on already poverty-stricken India.

If unfettered FDI in multi-brand retail further compounded the
appalling poverty that already exists, the negative impact on small
retailers and farmers would be acutely more damaging than what is
being projected. If Mrs Gandhi means business, and expects her
concerns to be taken seriously, she must ensure that livelihoods of
millions - especially those in agriculture which is rapidly becoming
restructured for organised retail - cannot be sacrificed for the sake
of a few. At the same time there is an urgent need to bring in
adequate legal provisions (as in Japan) to ensure that extensive
public hearings and economic, traffic, environmental and other impact
assessments are done before the government permits organised retail to
set in.

Moreover, the UPA government should be directed not to follow the
autonomous route to facilitate the expansion of the services sector;
this would only provide an unwarranted escape clause for political
leaders. It is well-known that under the General Agreement on Trade in
Services (GATS) of the World Trade Organisation, retail giants are
pushing for provisions that would be politically untenable in India,
but may be passed of as 'necessary' under international agreements. In
a 2002 letter, for example, Wal-Mart had asked US trade negotiators to
pressure countries to remove "any size limitations on individual
stores" and "geographic limitations on store locations."

With the government appearing to bend over backwards to accommodate
FDI in retail, Mrs Gandhi's letter steers a different course. The
question is, is this a smoke-screen? ⊕

Devinder Sharma
16 Feb 2007

Devinder Sharma is a food and trade policy analyst. He also chairs the
New Delhi-based Forum for Biotechnology & Food Security. Among his
recent works include two books GATT to WTO: Seeds of Despair and In
the Famine Trap.

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Comments (1)

Posted by Devi,
Thank you Devinderji, for drawing attention to this issue which is
kind of slipping by. The situation now seems to be that the aam admi
is attacked on so many fronts that he doesnt know what to retailiate
to(I am sure thats a strategy in itself of the powers that be)!

The figures of Wal-mart in US are mirrored by Tesco figures in Britain
and Monbiot discusses the impact of box-retailers on his website in
detail. They have devastated towns, cities and rural areas and small
local groups in US are fighting to regain some kind of foot hold in re-
creating a local economy. These stores are the epitome of a monoscape
with no room for local flavor or local enterprise. We in India trying
to destroy that very thing which the West is struggling to recreate
These shops are nothing better than modern day sweat shops who pass on
their burden to the state and citizen.

It truly truly appalls me that we refuse to look at the downsides of
all these developments and learn something from them, instead insist
on repeating the mistakes of the first world, which for a poor over-
populated nation like India will prove to be very very expensive. We
are already seeing it in farmer suicides and unprecedented levels of
migration from rural to urban areas.

Our wonderful urban middle class consumers who think that these
retailers are going to be the mecca of shopping will soon realise
something else: the picture is not pretty at all, even for the darling
urban middle class consumer.
Today in mid-west US you would have to get into a car and drive a
couple of miles at least, if you (god forbid) run out of milk on an
evening there are no small shops, nothing accessible at walking
distance. Once you are in after parking 300 metres away, you have to
go through the rigamoarole of picking a basket and walking to the
farthest corner of the store which is where essentials are stacked
(based on brilliant marketing strategy of making every customer walk
the length of the store) and then join the interminable queue manned
by a person earning poverty wages, who is least interested in dealing
with you, (of course you can circumvent that thru the store 's
brilliant strategy of 'do it yourself' and check yourself out, this is
how stores outsource their work to the customers and keep their
operations tight) and then back, get into the car, park the car, get
back home and by then the tea that you wanted (a good one hour back)
in the first place will also have to be accompanied by an aspirin (god
forbid u need to get that one from a drug store). These box stores are
a consumer's worst nightmare and have led to interesting statistics
where Americans spend more time shopping than with their children.

...and I am Sid Harth

hinduism is a very old civilization from time immemorial. however, hinduism
is dharma, not religion.
chinese civilization is old too, but its dharma was derailed by communism.
so there is a short break in the continutity. however, it is only a matter
of time before buddhism returns when communism must give way to a new order.
just be sure you guys in beautiful china keep kirastanism and mummudism
away. rest will fall in place. and help india do the same. lucky future.

the  Hindu  civilization was  interrupted  by the  Muslems  coming in
from Persia and  from Afghanistan ,

that is  why  India is not the longest  continuous  civilization in
the  world.

Muslems  used  different  scriptures in India,
whereas  the  Mongols  in China  still  continued to use  Chinese
scriptures  inside  China  during the  Mongol  Empire,
this same was  true  with the  Manchu Empire inside  CHINA >

.

.

On Feb 22, 4:47 pm, use...@mantra.com0E09F or www.mantra.com/jai (Dr.
Jai Maharaj) wrote: