Nov 30, 2011

Allowing Retail FDI in India: lies, lies and damn lies


At a time when Prime Minister Manmohan Singh is refusing to rollback the decision to open the retail sector to foreign direct investment saying it will benefit our country, the American President Obama thinks otherwise. In a tweet on Saturday (Nov 26), President Obama wrote: “support small businesses in your community by shopping at your favourite local store.”

While President Obama is talking of what is good for America, Manmohan Singh too is adamant on protecting American interests. It is primarily for this reason that Manmohan Singh’s assertion that retail FDI will benefit our country and ‘improve rural infrastructure, reduce wastage of agricultural produce and enable our farmers to get better prices for their crops’ is not borne on facts. In the midst of the rhetorical contests in the TV studios, the real facts have been sacrificed for the sake of political partisanship.

A lot has been said and written about the virtues of allowing FDI in retail into India. Let me make an attempt to answer some of the bigger claims that Commerce Minister Anand Sharma as well as the Prime Minister have repeatedly made. Frankly, their arguments seem to be driven more by political expediency rather than any economic understanding, and that is more worrying. It only shows how economic facts can be twisted, tailored and manipulated to justify the political agenda of the ruling party. There can be nothing more damaging for the future of a country.

First, the biggest argument in favour of multi-brand retail is that it will create 10 million jobs by the year 2010. There is no justification for this claim. In the United States, Wal-Mart dominates big retail. It has a turnover of US $ 400 billion, and employs 2.1 million people. Ironically, the Indian retail sector too has a turnover of US $ 400 billion, but has 12 million shops and employs 44 million people. It is the Indian retail which is a much-bigger employer, and any effort to allow retail FDI will only destroy millions of livelihoods.

Take the case of England. The two big retail giants are Tesco and Sainsbury. Both had committed to create 24,000 jobs between them, in the past two years. A British government enquiry found out that instead of creating any additional job, these two big retail companies had actually thrown out 850 people from existing jobs. The big retail units which failed to create jobs in their own countries cannot be expected to create additional employment in India.

Second, Anand Sharma says that retail FDI will provide 30 per cent more income to farmers. There can be no bigger lie than this. In the US, for instance, if Wal-Mart was able to enhance farm incomes there was no reason why the America government would dole out a massive subsidy of US $ 307 billion under the US Farm Bill 2008, which basically makes a budgetary subsidy provision for the next five years. Most of these subsidies are clubbed in the category of Green Box under the WTO. And as per an UNCTAD-India study, if the Green Box subsidies are withdrawn, American agriculture faces a collapse.

Agriculture in America is therefore sustained with agricultural subsidies. In OECD countries, a group comprising 30 riches countries, the situation is no different. A latest 2010 report states explicitly that farm subsidies rose by 22 per cent in 2009, up from 21 per cent in 2008. In just one year in 2009, these industrialised countries provided a subsidy of Rs 12.60 lakh crore to agriculture. Despite this, every minute one farmer quits agriculture in Europe. This is happening at a time when farmer’s incomes are dwindling. In France alone, farmer’s income has fallen by 39 per cent in 2009.

Third, big retail helps remove the middlemen and therefore provides a better price to farmers. Again, it is a flawed argument and is not borne on any evidence. Studies show that in America in the first half of 20th century, for every dollar worth of produce a farmer sold, 70 cents was his income. In 2005, farmer’s income had fallen to 4 per cent. This is despite the presence of Wal-mart and other big retailers in America.

In other words, the middlemen are not squeezed out as is the general understanding but in reality their number actually increases. A new battery of middlemen – quality controller, standardiser, certification agency, processor, packaging consultant etc – now operate under the same retail hub and have been walking away with farmer’s income. Moreover, due to the sheer size and buying power, big retail generally depresses producer prices. In England, Tesco for example paid 4 per cent less to producers. Low supermarket prices in Scotland have forced irate farmers to form a coalition called ‘Fair Deal Food’ to seek better price for their farm produce.

Fourth, retail FDI will source 30 per cent from the small and medium enterprises and therefore will benefit Indian manufacturers. This is an afterthought, especially after a section of the media highlighted the discrepancy. Even though Anand Sharma says 30 per cent products would be sources from within the country, the facts remains that under the WTO agreements, India cannot limit the big retail from outsourcing its products from anywhere in the world. This is against the WTO norms, wherein no member country can apply any investment restriction that is inconsistent with the provisions of Article III or Article XI of GATT 1994.

Using the WTO provisions, multi-brand retail will flood the Indian market with cheaper Chinese manufactured goods thereby wiping out the domestic SME sector. At the same time, the ‘Indian Stamp’ on multi-brand retail that Anand Sharma claims will have at least 60 per cent investment on ‘back end’ systems is also not based on facts. As per the definition of ‘back-end’, anything that is not ‘front-end’ becomes ‘back-end’ and has to be self-certified. Which means even the expenses on the corporate headquarter becomes ‘back-end’ investment. In any case, 51 per cent FDI in cold storages etc is already provided and yet no investment has come. Let us be very clear, big retail is not coming to India to provide a network of food storage silos and cold chains.  

Fifth, more importantly, in an eye-opening study entitled “Wal-Mart and Poverty”, Pennsylvania State University in the United States has clearly brought 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. This is something that the government is not talking about but should ring an alarm bell for a country which is reeling in poverty, hunger and squalor. 

56 comments:

Indian said...

sir you r dead right, hope that politicos will understand this or they may understand but a fog of big money is subsiding it

Ashwini said...

Devendraji.. i cannot agree more on the arguments you have provided. I understand that one can only bring in comparisons from the countries which have multi brand retail format and on that count I find each aspect getting crucified easily. I would urge you to also to superimpose the existence of big players as a result of opening of Retail sector and gauge the possible behaviour and impact on the stakeholders including farmers, kirana stores and consumers.

Thanks a lot for your insights...

Amit Upadhyay said...

Sir,


I request u to also comment on what government is claiming about FDI will be helpful in increasing the value of rupee or it's useful when rupee is losing it's worth?

Vandit M said...

No links or references to support the facts. Lame post. Seems like reading assumptions or believes.

Do Or Die said...

Hey Mr. Vandit M aka mr @sshole, before asking for links kindly take a look at the authors profile. He has more relevant experience in the field than what your dad can even conceive.

Anonymous said...

Hey Mr. Vandit M, before asking for links kindly take a look at the authors profile. He has more relevant experience in the field than what your dad can even conceive.

Do or Die

JS said...

If you can get hold of a copy of a DVD by Robert Greenwald called 'WAL*MART the high cost of low price' it will tell you so much of what you need to know about this company. It includes interviews with current and former employees, owners of small businesses squeezed out by Walmart and reveals the terrible working conditions of people around the world where Walmart outsource much of their production.
Believe Devinder Sharma - he knows what the results will be for Indian citizens. Say NO to Walmart.

Yatin Dhareshwar said...

I have a contrarian view. The truth as they say lies somewhere in between.

The assumption here is that Walmart is going to move its model lock, stock and barrel. It is simply not possible for that model to be applied in the Indian context.

Hence any comparison and analysis that stems from that model would lead to misleading conclusions.

So, the numbers touted for jobs likely to be created are grossly exaggerated. That said, it is true that existing players in the market such as Big Bazaar, Reliance Fresh and others have indeed created new jobs. Further, with introduction of logistics and infrastructure, that too will create new jobs. As I have said, the truth is somewhere in between.

It is unlikely farmers may get more for their produce, but it is also true that improvements in cold chains will ensure more of their produce actually finding the market. This will surely benefit the nation as a whole and indirectly benefit the producers as well.

I agree that middle-men will not be eliminated. In my view they are never removed, just replaced. So on point #3, I fully agree.

On #4, why should we be afraid of competition? This should force our manufacturers towards move innovation and efficient ways to produce, and govt. can always provide incentive and tax benefits to protect their interests.

I also feel that the flip side has not been taken into account. Will this have no benefit at all for the Indian consumer?

For my detailed point of view, specifically related to impact on kiranas, and response to #5, would like to point you to my article http://ydessays.blogspot.com/2011/11/why-fdi-in-retail-is-good-for-india.html

Would like to conclude by stating that it is not rosy as some sections would make it appear, however, in my view the ultimate cost benefit analysis would suggest FDI in retail is a welcome move.

Anonymous said...

Mr. Amit

Yes. FDI will improve value of rupee.
FDI will allow $ to flow in india increasing forex.

Ash Okas said...

Well it is wallmart coming in India ok!

What about the reverse, are Indian cos entering world market?

Any one any idea?

As far as FDI issue is concerned, i would like to say that why $ going strong day by day?

Any one care?

Anonymous said...

http://en.wikipedia.org/wiki/Retailing_in_India

Please read this as well.

Gupta said...

This is all so true.. We all should say a BIG NO to these retail FDIs..

Li Bin said...

Sir,

Assuming that all your assumptions are correct, then you are effectively shutting the door for all big box retailers, Indian and Foreign, to open or expand in India. Vishal Retail or Big Bazaars dont follow a vastly different pattern to what a Walmart might do. And they eat into as many jobs as does any other big retailer. I am not saying lets open Walmarts everywhere, but I believe as a rapidly progressing society we will move faster towards big box retail. And consumers will prefer it cos it would be affordable and of better quality. Its just that I feel that a Walmart, Tesco or Target might provide a developed platform and medium for retail in India to make that jump. And as to the last point you make, very true - but I dont think its true cause and effect. Walmart is well known to target the lower income groups, so there will be more Walmarts where income is low. More affluential people tend to shop at a Costco or Target.

sanjay punjabi said...

Wonderful Devinder, kudos. If whatever you are saying is true, then we have got a storm brewing. I shudder anarchy following suit. Just as a devil's advocate, have there been any tangible positives of FDI in retail in other countries?

Devinder Sharma said...

This is not a scholarly article but a popular newspaper article. And it is not proper to provide source for every sentence you write.

I am also amazed that those who want sources to be given never question the facts when the Prime Minister/Anand Sharma/Business leaders/Banks make a statement. I have no problems with providing sources, but why do we accept blindly what other say. The answer is simple. Actually, we want to run down every thing that does not gel with our thinking.

Read this article about how supermarkets have wiped out small shops in UK. http://bit.ly/kFq3Kt

prasad said...

Devender Sharma is 100% correct. Congress is adamant in bringing FDI in retail sector for its own political expenditure. Congress used to get money through corporates. But after the scams are exposed their source of income got curtailed. If govt. wants to improve our economy why doesn't it work hard on bringing back the BLACK MONEY within the country. Entry of Walmart,Tesco will spoil Indian economy. The gap between rich and poor will widen more. The consumers of these multinational companies will be rich people so if Walmart sells at cheap rate the rich people will be benefited who go for shopping in cars. The govt. is telling lies and it is preparing for its death. People will reply during the coming elections what they really want.

Devinder Sharma said...

A British parliamentary committee had called for stopping the spread of big supermarket chains. http://bit.ly/vMlb8S

Anonymous said...

Devinderji and others...India is becoming a consumer centric company. When PVNR opened the economy way back in 90s...these were bound to happen. We have have gone way ahead and now getting conservative is of no use. My biggest frustration is that all the politicians do things without thinking and with no stats and estimates. Central Govt had enough time to product agriculture in this country..what have they done? nothing....If FDI in retails might have multifaceted effect...creating jobs in transportation, real estate, security etc...

Kashyap said...

Devendra Sharma ji,

Well written article...there re some people in india who see the world through the lens of the corrupt & sold media who never shows the ground relaities & problems faced by our farmers.

anil said...

@ annonimous, the grouth of this sector is 15% per annum approx. there are already 44 million work force engaged in this sector, this means chances of employement generation is quite high. if you consider only 5% growth in employement against 15% growth of whole sector, then 2.2 million jobs it will create in one year, that is more than the workforce of WALLMART worldwide(2.1 milion). Now you may argue that these 2.2 million people will get less than 10,000 per month(on average). I agree, but it will be much better than few people getting million per annum and rest are jobless. (Atleast for country like BHARAT, where 2/3 of population is young and have working hands,welcoming WALMARTS is suicidal)

Anonymous said...

Dude,
Why is your blog not talking about the impact to consumers?
Bcoz of presence of WalMart and chains in us,most. Of the items are cheap and allows consumer to eat better.
The customer service by these companies are exemplary.you cannot compare the service or quality with the local kirana store.
stop acting as cpi

Omya said...

I would like to know more. Would it be right to say, that in the current situation of economic slowdown, the government is trying to create a investment opportunity, which in return kick starts spending, and all this by not investing Indian money?

Indian said...

Agree with you. I would have agreed with nonsense of PM, if I had not stayed in US, worked there for many years... If I would be the PM now and have to take a decision in favor of my country, I will definitely not allow FDI at this time, where there are hardly any laws in India to protect common man's interest, and where corruption prevails, politicians (law makers) are in market to be bought. These big corporations give a damn about the society and people. In US it still works to some extent because there are good enough laws to protect societies and many unions and law makers keep fighting the bullshit of these big corporations, but in India there is not even a proper minimum wage law which is applied in spirit. These corporations won't mind spending millions of dollars to buy politicians and get the laws all in favor of them, and then start to suck even last penny from even the below poverty line people here... Look at the healthcare sector in US it is completely hijacked by the big corporations... and the wallmarts in US are full of Chinese cheap and really bad quality items. I myself and many of my friends had stopped going to wallmart and instead preferred costco or local retailers who had good quality and a little more in price. The most of the money paid to the wallmart goes to the middle chain in the supply and not to the producers... its a fact, anyone can search a more on this on google and will find lot of authentic reports.
So how can wallmart entry in India would help India, when the local Indian corporations such as reliance and govt. owned firms are looting the country.
This is the time to introduce proper law in India such as Jan Lokpal. Govt. is trying to deviate the issue of lokpal by using FDI (from my sources who have good contact in congress)...

surendra said...

Absolutely true, I donot know what is the logic or motivation to push such a controversial idea? Who is the real beneficiary ? What about the "Lao Bai Xing"the common man?I hope we see the light at the end of the tunnel and this decision goes where it deserves to be , TRASHED.

Laila said...

Lets learn from the Mistakes made in the USA and make sure that we don't make the same for FDI. Instead of negating the whole Idea Lets regulate it. We Can give them Restrictions as they need us and not us needing them as much. With a Economic environment that is going into double dip in the next few months. Why does it have to be all or nothing a regulated compromise can be achieved where both parties can WIN.

Anonymous said...

Your article is a real eye-opener.You have rightly pointed out that the farmers have to depend on middlemen. In india, no farmer is big enough to supply to Wal-mart. In effect, the small farmer will be driven out by rich and bigger farmer with their money power, who will buy small farms and will do mechanical farming to produce more. So most of the farmers will have to sell their farm land and move away from agriculture.

Unknown said...

Couldn't agree more with Yatin Dhareshwar. We have to take a middle ground here.
All will claims of the govt would not come true, however things worth considering are:
- It would be great for indian consumers, in general.
- FDI would definitely bring in improvements in supply chain and reatailing best practices thereby making the industry more efficient in general. This has been seen in almost all sectors where FDI has been opened - telecom, airlines, banking etc.
- Unlike US, UK etc, Indian market is growing and there seems to be enough space for both big retailers and kirana stores to co-exist.

My take is the kirana stores are going nowhere for the foreseeable future. Unlike west, a large chunk of population in India buys groceries on a daily basis. No one is going to hypermarkets daily. Eventually, middle class will do monthly / fortnightly shopping from hypermarts and on-demand shopping at neighbourhood store. Kirana walas also have the options like collective bargaining etc.

To conclude FDI is not a bad idea per se, its how it is implemented and how SMEs interests are protected in the short & medium term, which is of paramount importance.

Devinder Sharma said...

Seeking a middle ground means you allow the camel to eat up the tent in the years to come !

Tsunami is a reality. Should we allow it to happen, and try to find a middle ground? The argument to allow FDI in retail is equally flawed, and in my understanding is a very clever strategy to invite Retail FDI to find its foot.

Devinder Sharma

Unknown said...

One more comment. I am surprised I haven't seen / read anywhere this:

What about the fact that with FDI coming in, the organized retail will grow. This would mean that larger tax collection for the government.

Yatin Dhareshwar said...

The internet, tablets and book readers such as Kindle are driving newspapers and book publishers out of business. Gmail and other electronic mail are driving postal office workers out of their jobs. These are just two areas that modern technology advances are driving people out of work. So how come, there are no protests? Is it because they are too small a group to organize themselves and create pressure groups? That they are so small in numbers that they do not constitute a vote bank? But is their job not a job and their livelihood not a concern for the rest of us? The march of commerce and technology cannot be stopped, it can be delayed, it can be controlled and manipulated but not stopped.

Instead of worrying about what Walmart and Tesco will do to us, this nation of 1 billion plus should be thinking of how we can use them to our advantage, NOT THE OTHER WAY AROUND.

And that mode of thinking is exactly the difference between the Chinese and we Indians.

Anonymous said...

Sir ,
I am a common man and what I understand is simple. Coming of another, EAST INDIA COMPANY…….Get ready. We may get another Father Of Nation.

Rgrds

Common Man

Anonymous said...

I think people like Mr Sharma are a perfect example of a weak minded and a meek Indian. These are the people who we exactly do not need in this country. People like him should be shot in public!

Anonymous said...

Excellent

Thanks

ajay

Ramesh Dubey said...

आदरणीय देवेंद्र जी रिटेल में एफडीआई की कड़वी हकीकत बयान करने के लिए हार्दिक धन्‍यवाद । महंगाई से लड़ने व किसानों को लाभकारी कीमत देने का यह मॉडल भले ही लुभावना लगता हो लेकिन जमीनी सच्‍चाई इसके उलट है । जहां-जहां इस मॉडल को लागू किया गया वहां-वहां किसानों और उपभोक्‍ताओं का शोषण बढ़ा है । उदाहरण के लिए अमेरिका में संगठित रिटेल के पहले अर्थात 1950 में उपभोक्‍ता से वसूले जा रहे प्रति डॉलर में से करीब 40 सेंट किसान को मिलते थे लेकिन इस समय यह राशि घटकर औसतन 19 सेंट रह गई है । दूध की 3.3 डॉलर प्रति गैलन की कीमत में से किसानों को डेढ़ डॉलर प्रति गैलन ही मिल रहा है । ताजा फल और सब्‍जियों के मामले में किसानों के हिस्‍से 17 से 18 फीसदी राशि आती है जबकि बेकरी उत्‍पादों के मामले में यह अनुपात महज आठ फीसदी ही है । अमेरिका में मात्र 22 लाख किसान हैं जबकि भारत में इनकी संख्‍या 12 करोड़ है । ऐसे में रिटेल कंपनियां किसानों की इतनी बड़ी संख्‍या से तालमेल नहीं रख पाएंगी और करोड़ों की पगार लेने वाले बड़े बिचौलियों को खड़ा करेंगी।
रमेश दुबे

new york stock exchange said...

stock exchange is one of the very difficult term who doesn't have knowledge on thhis. To conclude FDI is not a bad idea per se, its how it is implemented and how SMEs interests are protected in the short & medium term, which is of paramount importance. stock market investing

Kuntal said...

Devinderji,

Please realize the difference between US, UK and India. US/UK and India are on different point of growth path. Indian consumer is different from US/UK consumer. You are raising why we should not allow Retail FDI in India by giving numbers and studies from US/UK but fact is India is following its own path to growth and so those studies are not applicable.

Your arguments and many other reader's argument seems like that we should keep india as it. But if India would have remained as it is you would not be writing your article on blogspot and get feedback from so many people. Whenever there is any technological and other advancement some people lose jobs and some people gain. That is how the world progresses.

What is necessary is orchastrated path to progress by ensuring that transition causes as few problems as problems so there is no social unrest. Government needs to put proper policy and framework to ensure that investment envisaged in backend supply chain actually happens.

Instead of always finding problems and trying to stop the progress, please think about how to mitigate this problems so India can be what it deserves.

Devinder Sharma said...

I am permanently belong to the Mlihabad (the known for world class mango varieties like desehari , lengra, lucknow safeda, chausa and more than 3000 verieties . Padm Shree Kalimullah got Padmshree for invention in the field of mango research . Malihabad is situated west side of Lucknow city on Hardoi Road. In the time of summer which called “mango season” by local people in local language , more than one dozen companies came here for direct purchasing mangoes to the farmers . Mother Dairy, Reliance, R.K. etc. are the main players . But the attraction of farmers to these companies is no satisfactorily . Some major problems are following:-

1 There are three shapes and type of a variety Top class (200 or more than 200 gms. Weight ), Medium class(100 to 195 gms. ) & lower class(less than 100 gms. Weight ) produce in a mango farm. These companies purchase only Top class mangoes .After we sold the top class, the value of medium and lower class mangoes go down . But in the open market (mandi) we sell all of the type of mangoes. In the total profit in this matter the open market is better than these companies.

2. The relation and communication between farmers and companies is no good. Small and medium farmers are not in touch of their. Only high class farmers sells their goods to these companies.

3. The officers are these companies are toy of local market's sells agent and mango buyers and farmers are toy all of these.

4. If the harvest is not so good or destroyed by any reason, then what will be the condition of farmers? These companies not interested in this. But the Local markets sells agent supports to the farmers in odd circumstances too. Keep remind the agents are not a well wisher of farmers. They give us support for next seasons as debt. But the farmers understanding are in favor of these agents.

5. When the rate of open market goes down then company officers buy the goods to the open markets agents and mango transporters.

Your sincerely Banjara Ganwar

reader said...

Sorry to say, but this post is completely based on circumstantial evidence.

Comparisons are made to countries with different dynamics of economy than that of India or for that matter developing countries.

The basic reason for agricultural subsidies in western countries (which were implemented in the 1920s) is not researched.

A controversial and criticized paper "Walmart and Poverty" is cited which showed statistics that were faulty.

The first point taken up shows a basic flaw in statistics: There was no analysis of the potential growth rate of the Indian economy without retail and with retail FDI and subsequent employment opportunities.

Such articles create biases in an ordinary person who is not privy to all information and spark controversies that are counter- productive to the implementation of what could be a policy for inclusive development.

Pradeep Baisakh said...

Very very informative piece-brings out so many facts which everyone should know-and know about the politics behind the FDI retail.

Just like that... said...

I sincere appreciate your rationally strong opinion, but i would beg to differ. And surely differ a lot. To begin with comparing US and India is not an apple to apple comparison. The countries are not only at different stages of development cycle but also vastly different in terms of business opertion models as well. First and formost, INternational retailer will not be able to kill the existing kiranas. There is enough space and market for them all to survive. Similar discusison was on in 2006 when FDI of 51% was discussed in single brand retailing. Besides we all understand the enarinng of any kirana employee and a similar worker in a structured retail outlet. I strongly support the FDI movement and the drive towards it...Lets not be koop mandooks..

Anonymous said...

1. Why not allow FDI in logistics, cold storage, etc.?

2. Also India should promote cooperative movement. It is beneficial to all stakeholders.

Manish P Sharma said...

The first thing which foreign retailers will do is, they will buy at higher price from our farmers. That means farmers will be more than happy to give them their produce(though 25% will be bought by govt). this means killing local competition there itself. Once they have done this foreign retailer will sell at low margin for initial years in Indian market, ensuring they have booted out all the competitors from market and established monopoly. Once they have estd monopoly...now they can buy at higher price n sell with higher margins. This have been wal-marts entry strategy across the world. So its better if govt reduce the fdi from 51% to 24/26%. we are lagging behind in operations, we can mimic the technology, but to handle them we need expertise so by allowing fdi to lim extend we can gain expertise in cold-chains and distribution network.

Anonymous said...

Sharmaji,
I hope that you had seen the new Indian express 5th Dec 2011 column entitled Market economy? Or, market society? where Mr.Gurumurthy discussed the phenomenon of sharing and trading in the rural India.. By comparing ‘marketing masses’ with ‘mass market giants’ Mr. Murthy brought out the human aspect of marketing.
While he talking about retail market intervention by FDI Mr. Murthy, could have also discussed market intervention by Indian business giants. The modus operandii of these mass marketers is to reach out to the farmer or producer and buy his products in time, can reduce wastage to a great extend. They not only support farmer with funds to grow crops and provide know how, but also pay him cash promptly or supply him consumer goods on credit,

In good Marketing iit is important to optimize of resources at. each stage ie. production, processing, packing, warehousing, transport & communication, retailing, sale etc. Success depends on Planning, infrastructure development and information Communication technology (ICT).
A scientific study integrates information on production and marketing with factors like money flow, climate and calamities.

Free market may help strengthen the survival skill of the entrepreneurs in organised sector, provide a wider choice to the consumers, reduce monopoly and even bring down the price. In the organised sector there is tussle between FDI’s (Foreign Direct Investors) and FII’s (Financial Institutions of India). But unorganised sector, specially where the small holder is involved, need a regulated market where producer can sell at will and is not exploited.

In India it will be more pertinent to call unorganized sector as un-recognised sectors as these are traditionally organised and had stood the test of time. Whether the community approves or not the middleman has a vital role in rural food market.

India’s small holder knows how to manage their production relevant to his locality and environment prevalent around him. The real force multiplier for them is market information. The busines giants base their operations on micro-economic study of the region, conducted by IIM’s research projects or study done on their own. But there is always the fear of monopoly and elimination of the small time trader. If govt. is serious they too can adopt such tested method to assure , justice.

The “grameen bank” of Bengla Desh or Kudumba shree of Kerala are pro-active market management in unorganized sector. National Dairy development Board (NDDB) through operation flood successfully organised logistic support, product handling, processing and sale through a chain of outlets. They provided specialised support to dairy owners on demand. But despite this, 80-85% of milk market continues in unorganised (unrecognised) sector. Producers’ co-operatives that succeeded in Gujarat are not uniformly successful elsewhere.
Many of our admiinistrators may not think with the society. Prof Rogers a visiting professor at Univ. Reading and Surrey made the following observation about our extension experts.

`the training …. is based on knowledge transfer systems which is authoritative expecting farmers to accept what they say/ advice, because they… are specialists. They try to control the learning process, than encouraging farmers to control themselves. When they find their authority challenged, they tend to insist by speaking more loudly and assertively or by referring to authorities that stand behind them.’ [PARTICIPATORY TRAINING’ A. Rogers, Dir. Education for Development and]

Dr Murthy termed our plans as “top down”, as planners make us feel that they are the ‘ultimate in planning development’

Yours truly
Rama kumar

Abhi said...

Sir, I think there are flaws in your arguments too. I am not completely supporting 51% FDI here but I am trying counter your arguments where I feel your logic is falling apart.

First: Regarding the job creation, WAL-MART is the wordls largest employer after Indian Railway, If you don't consider chinese giants. And it may be true that wal-mart or sainsbury is not creating extra jobs in US or UK but they have created a huge employment base already. This means, if we allow wal-mart in India at this point of time, it will create lot of jobs initially and this is for sure.Creating jobs is different from creating extra jobs. My point is wal-mart is not creating jobs is US owing to the fact that e-consummers are growing exponetially in countries like US and it has a bearing on retail chains as a whole. I don't think you can bring this point to support your argument.

Second: I feel you are just creating an opnion by a question for which you didn't answer. Why is the subsidy for farmers may have many different answers. And it is completely based on American economy. If we consider India any common man know how the business of agri products are done. There is a chain of 7 links on an average, for reaching any agri product from farmer to the plates of consumers. Every one has their own margin ann by common sense we can say that farmers will get more price if this links are cut down.

Third: In this arguments also you are not stating any facts which support your stand.You are just leaving for a benefit of doubt. There may be many other factors like huge increase in production due to high technological advancement may be a reason low price in Scotland or US. Mega retailers may be the reason for atleast getting 4% price on their output.There is a huge curtural economic and technological change from early 20th century to 21st century. There are 2 world wars and economic ideas have drastically changed. Even if we ignore that, farmers in India are not getting fair price and by investment in retail with proper policying, farmers are definitley benefactors.

Fourth: I really could not comment on this. But to my knowledge multi brand retailer will have a bad impact.

Fifth: Again you are not proving that wallmart has caused poverty. You are simply stating the coincedence. I am not denying or afforing the fact that wal-mart increased poverty. I am just stating there is not logical base for the argument that wal-mart increased poverty. And again US is different from India.

There is as mush as 40% wastage in perishable goods India. Indian Agricultural market is full of middlemen who don't have proper storage facilities and they are covering up the loss of goods lost with increased comission. This scenario will change if there is a proper organisational retailing which can be realized by supermarkets. In this both consumers and farmers will be happy. There will a slow down in zooming inflation, which is good for both you and me.

Pankaj said...

Well, what writer is saying about indian retail employment there are 14 ml shops and 44 mil employees; but all of them will not be affected by FDI as they will be opening retails in 53 cities only .. not in rural areas..here is another fact they don't want only people to be worked on sales floor but there will be jobs in Logistic, IT, infrastructure, finance and so on,,,

Saptadeep said...

I disagree with few points put up
1. If organised retail was an issue, then why Indian organised retail is allowed to flourish without any competition? Why should end consumers be devoid of choices.
2. FDI cap being put to 51%, will need these foreign investors an Indian arm, which will benefit home grown business.
3. An organised retail sector will be a big boost for tax collection & lower defecit. We are anyways doling farm subsidies, atleast it will increase revenue collection.
4. With organised retail, we can have farming & distribution sector reforms. We can create better regulation than just avoiding the growth prospect. Even industrial revolution had put scores out of jobs, so should be avoid industrial development too?
5. The tonnes of food produce wasted can have better utilisation, which we are unable to provide today. Moreover, the quality of the produce too can be regulated.
6. Any industry requires skilled manpower, so while it will cut off unskilled concepts of mandi, skilled jobs will be created in various sectors. As such govt can take this as an oppurtunity between creating skilled labour across d nation.
7. When FDI was allowed in banking, fashion, we had similar thoughts. If today we wear ADIDAS or park funds in RBS, its because the local industry was devoid of competition to improve itself. Today SBI is more proffesional than ever & so is Indian fashion industry.
I can continue for ever on this, but I strongly feel, we should not avoid development only because we presume we cannot regulate it.

Druv said...

Walmart Manipulation in India

WalMart has taken its monstrosity to a whole new level by buying out the politicians and using our Tax money to Establish UID system to tap into the information of all the people of India.

This system would have given them access into the lives of all the people of India so they can feed off their lives to sustain themselves for a long time.

This monster has to be put down soon!

SME News said...

The opening up the retail sector to foreign investment will be beneficial for creating millions of jobs in India and also boost its trade relations with the US. This statement has come on the sidelines of the World Economic Forum’s annual meeting from Mr Timothy Roemer.

Mr Timothy Roemer, who resigned as US Ambassador to India last year, is now an International Advisory Council Member of leading American public affairs firm APCO Worldwide.

The five-day meeting, which had concluded yesterday, witnessed a number of global economic leaders requesting India to go ahead with economic reforms, consisting of FDI in retail. After facing strong political opposition, India had placed the decision of permitting foreign direct investment in the multi-brand retail business on hold.

Retail training said...

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SME News said...

Although the proposed foreign direct investment (FDI) in retail sector announced by the government has been welcomed by the small and medium enterprises’ (SME) fraternity, but it still remains a matter of concern for a sizeable section of SMEs. The small businessmen are in dilemma and hold contrastive opinions on FDI in retail sector and possible contribution in poverty alleviation i.e., employment generation.

Durga Warangal said...

Those who appreciate FDI blindly wish for a better infrastruture and copy the western world dumbly. India is different and real development of India will be being self reliant and with the fertility of land, agriculture sector should rise up than any other industry. Why cant India be a global hub for all food products, not just mango/rice? These companies can invest as FDI in such sectors which will benefits every Indian.
Proud to be an Indian and strive for its excellence..
-Durga

Walmart India said...

Walmart India is spreading its dark reign in this country by every means of manipulation they have at their disposal. They have hacked my blog when i only wrote 5 blogs against them. This has shown me that they will do any thing to hide their evil, and destroy our lives for their personal profit. The people are awakning to the evil mind that runs the show from behind, and these monsters will not last forever. They will face the wraith of justice, and it will be a swift end for them.

Country Research Report said...

Retailing in Indian market is one of the pillars of its market (economy) & financial records for 14 to 15 percent of its GDP. The Indian retail industry market is estimated to be US$ 450 billion dollars and one of the top five store markets on the globe by economic value. India is one of the quickest growing retail industries on the globe, with 1.2 billion peoples.

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Aninda Kundu said...

Hi,
Thank you for your post. I found it informative. I would like to make a couple of pointers.

a. Indian industry is labor intensive. You cannot imagine the extent to which supply chain is automated in the USA. Big retail is going to create many jobs, because cost of labour will trump automation cost. we also stand to benefit from the opportunity cost, of modernization as and when we reach that point on the belll curve.

b. My observation has been : As a rule of thumb, 12 million shops employ 12 million shop owners and the other employees work with little or no benefits. They cannot easily access education, healthcare or housing. Gainful employment perhaps is better poised to change that? Will it not also provide more uniform direct and indirect taxation?

c. I am concerned about competing with chinese goods in the market. But I feel that competition also nurtures growth. A protectionist economy only defers the problem. I am no economist though.

That's my two cents. Thank you.

Anonymous said...


Great Information. Defiantly, FDI will improve value of rupee. Its just that I feel that a Walmart, focus on might provide a designed foundation and method for retail store in Indian to make that leap. Main Government had enough time to product farming in this nation. If FDI in sells might have complex effect, creating tasks in transport, property, security etc. In India, hardly any regulations to secure common person's interest and where corruption prevails, political figures are in market to be purchased.

Ross Taylor