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By Devinder Sharma A US study has established increasing poverty in states where Wal-Mart has expanded operations. But in India, not a single independent study has examined the impact of organised retail on 12 million small shopkeepers, 40 million hawkers and 200 million small farmers
Congress president Sonia Gandhi’s 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 failed to ruffle any feathers. Letter or no letter, the blitzkrieg within supermarket malls shows no signs of abating. Allaying fears of an expected slowdown after Gandhi’s leaked letter to the media, Commerce Minister Kamal Nath put the record 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 for ensuring the success of the organised retail boom! In her letter, Gandhi expressed her concern for the aam aadmi (common man): “I have received suggestions from many quarters about the desirability to first study the possible impact of transnational supermarkets on the 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 said makes economic sense, but for Prime Minister Manmohan Singh it is commerce that takes precedence over economics. We had always believed that the prime minister would back his statements with sound economic analysis. “Entry of foreign enterprises into the retail trade will not hurt our small shopkeepers but will create lot more employment,” he keeps reiterating. But the evidence is to the contrary. Organised retail occupies 92% of the retail business in the United States, and 70% in Britain. And this has come about at a heavy social, economic and environmental cost. Meanwhile, all kinds of figures are being tossed about (ostensibly by industry itself, or by its marketing consultants) to justify the entry of organised retail. One estimate points to a growth of US$ 21.5 billion in organised retail by 2010; another pegs it at $ 30 billion. A marketing and retail conclave, organised by Technopak Advisors, took the figures through the roof with estimates showing that modern retail would jump from the existing US$ 12 billion to US$ 75 billion by 2011, and as much as US$ 175 billion by 2016. It’s obvious that these statistics hide more than they reveal. 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, Pennsylvania State University in the United States, which measured the impact of Wal-Mart’s retail boom on prevailing poverty. Entitled ‘Wal-Mart and Poverty’, the comprehensive 2004 study clearly establishes that American states with a greater number of Wal-Mart stores in 1987 had higher rates of poverty in 1999 than states where fewer stores were set up. “Equally important, the counties (states) which built new Wal-Mart stores between 1987-1998 also had high poverty rates,” the report concludes. Interestingly, increased poverty from Wal-Mart operations came at a time when poverty rates nationally were otherwise on the decline. The study cites three major reasons for the increase in poverty in relation to the growth in Wal-Mart retail. And all three factors are relevant in the Indian context. First, poverty rates increased because workers displaced from small shops (what’s called ‘mom and pop stores’ in America) had no alternative livelihood. They were forced to work in Wal-Mart stores at relatively lower wages. Secondly, it destroyed local entrepreneurship thereby destroying the ability of local talent to earn a livelihood. And, finally, Wal-Mart actually transfers income from taxpayers and welfare programmes to its stockholders and consumers. In other words, the retail giant does not bear the full social and economic cost of its nation-wide operations. In the case of India, there has been no scientific and economic analysis to ascertain the ecological, economic and social costs to the nation of increased organised retail activity (especially loss of livelihoods for small retailers, hawkers and farmers). Worse, not a single empirical study by an independent institute examines the impact of organised retail on poverty-stricken India. Unfettered FDI in multi-brand retail will, therefore, further compound the appalling poverty that already exists (one-third of India lives in poverty). The negative impact on small retailers and farmers will be much more damaging than what is being projected. Agriculture too is witnessing foreign direct investment, in the form of technology. The Indo-US Knowledge Initiative in Agricultural Research, Education and Marketing, formally launched by visiting US President George Bush in Hyderabad on March 3, 2006, was, for all practical purposes, the soft launch of the second Green Revolution. This too is being put in place without first ascertaining the reasons behind the terrible agrarian crisis that is gripping the country. Two of the American multinationals, Monsanto and Wal-Mart, that are on the governing board of the Indo-US Knowledge Initiative, have already said they are not interested in research and development but in selling their products. Tailored to the objective of transferring the unwanted and risky technology of genetic engineering on plants and animals, which, incidentally, is not finding many takers worldwide, the US sees India as an easy dumping ground. Seen in the light of contract-farming, corporate agriculture, special economic zones, FDI in commodities and farm retail and the thrust on agri-business, it’s clear that the entire policy emphasis is to push farmers out of agriculture. We must ensure that agriculture is not sacrificed for the sake of industry. Agriculture continues to be India’s biggest employer, and all efforts should go towards ensuring that it is made economically viable and sustainable. This calls for a paradigm shift in economic and scientific policy planning. There is also 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 states allow organised retail to enter. The UPA government should be directed not to follow the autonomous route to facilitate expansion of the services sector. It is well known that under the WTO’s General Agreement on Trade in Services (GATS), retail giants are pushing for provisions that do not limit their expansion abilities. In a 2002 letter, Wal-Mart asked US trade negotiators to pressure countries to remove “any size limitations on individual stores” and “geographic limitations on store locations”. The UPA government is bending over backwards to appease the mega-retailers. Ms Gandhi’s letter would appear to be nothing more than a smoke screen for the powers-that-be. InfoChange News & Features, February 2007
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