It seems the government of India run by UPA led by Sh.Manmohan Singh is listening to Wal Mart, other big retail companies and United States of America authorities more than common masses of this country. Recently, Mr. Kaushik Basu, advisor to finance minister- GOI, has spoken about the recommendations of IMG on inflation.


If one carefully follows the recommendations, it becomes clear where from the command has come. It is completely cut and paste from the reports prepared independently long back by the hired consultants of Wal Mart, other big retail corporate, IMF and American establishment. There is no difference in the recommendations given by IMG from the suggestions emanated from American establishment whose business interests are evident.


Prime Minister, Finance minister and few others related to such departments which are managing economy have given statements at periodic intervals that the inflation will be reined in soon but they have completely failed in taming the same. People all over the country, especially the poor who are in very big number are made to suffer on account of this dismal performance from the government. Now to the shocking of all, they have come with the suggestion that by introducing foreign players with foreign capital in to the retail trade can effectively control the inflation. It is clear demonstration of bankruptcy- lack of ideas and understanding, and abdication of its primary responsibility of managing the economy on the sound footing to the benefit of all.


Retail trade in India is a family driven business and many a times community centric undertaking in most parts of the country. The unorganized retail trade represents the traditional, low-cost and employment-intense retailing that includes, wide variety of enterprises like kirana shops, proprietor run general stores, street corner paan/beedi shops, convenience stores, hand cart and vending on pavements. Here, whole family including young conducts retail trade and a whole community is engaged in the trade in a defined area. It is collective and an unincorporated enterprise formed by communities entirely on the basis of trust generated through relations now increasingly termed as social capital. IMG in its eagerness to push through the foreign companies in to Indian market, it has completely ignored the critical contribution of the present retail trade to the Indian economy and society.


This multi-layer retailing from top metros to tiny villages is the most decentralized economic activity in India after agriculture and it constitutes almost 98% of total trade with an estimated 12 million outlets. The organized trade accounts for just 2%. After agriculture, it is the largest employment provider, employing nearly 40 millions. Whereas, the largest retail giant Wal Mart employs only 5 lakh persons. Global retail giants are highly capital intensive and generate less employment. Retail trade in India contributes to over 14% of India’s GDP, while the share of all companies in the BSE 500 index put together is some 4%! This segment has been growing at an average of over 8% per year for the last 8 years [1999-00 to 2006-07] which is second only to the construction trade that grew at some 10%.


If the FDI is allowed, 12 million small shopkeepers, 40 million hawkers will be adversely affected. Whatever may be the arguments in favour of FDI by the apologists like’ TNC will generate more employment’ is not qualified by the empirical data.


Presently, India allows 51 per cent FDI in retail for single-brand retailing and100 per cent FDI is permitted under the automatic route in wholesale cash-and-carry trading, including business-to-business trade and export trading. Also, up to 100 per cent FDI is permitted with prior government approval in the trading of items sourced from the small-scale sector and also for test marketing.
The parliamentary committee, after interactions with policymaking bodies, trade and government organizations and trade representatives had submitted its report in June 2009. Wherein, it has explained the possible threats and also suggested following few steps to create a level playing field before thinking of opening of this sector to foreign capital


• Allowing FDI in single-brand retailing and only cash-and-carry wholesale retailing is not adhered to strictly, and the companies through the back door in violation of policies resort to multi-brand retailing and consumer retailing.
• Big retail chains, by offering cheap prices initially, would wipe out competition, thereby destroying small retailers, and then they would dictate prices. The same would be the fate of farmers who will be forced to sell produce at cheap rates as a result of the existence of a monopolistic situation.
• A regulatory framework and enforcement mechanism should be put in place to ensure that small retailers are not forced out by unfair means by the big players.
• The government should establish a national retail commission to study the problems facing this sector.
• There should be a retail regulatory authority before this sector is opened up.
• The government should take appropriate steps to provide credit facilities to small retailers to empower them to face the competition.
• A model central trade law should be put in place after consulting the State governments to regulate the sector as a whole.


Any disturbance in the present model with out preparing the grounds as suggested by Standing committee of Parliament will have devastating impact on the overall employment and economy. There are studies conducted by experts, which say “The agriculture sector in India is already overburdened as it employs nearly 60 per cent of the total workforce, so it cannot absorb any more. The manufacturing sector, which absorbs only 21 per cent of the workforce, cannot accommodate more because there has been no capacity addition to it in recent years, so services sector is the only alternative and in this sector too, retail is the biggest employment provider,” the study says. They are already under heavy stress due to non-availability of capital including working capital from formal banking institutions. Heavy dependence on moneylenders for capital needs is creating a non-level playing field with the big domestic organized retailers.


Argument of World Class Supply Chain, Warehousing and Storage Infrastructure: Misplaced

It is unfortunate that to legitimize the entry of the multinationals in Retail Sector, the department is taking the shield of lack of storage facilities for agriculture produce. The government could have created this storage capacity either on its own or encourage private sector to create this by providing subsidies, fiscal concessions or other incentives. The paper circulated by government department gives an argument that creation of this infrastructure requires an investment of rupees 7687 crores, therefore we need FDI in retail sector. The money required to create this infrastructure would be infused by TNC is the belief of the present establishments. This argument is hardly convincing. In a country where the size of annual budget is more than 11 lakh crores, for this small investment of merely 7687 crores we cannot legitimize the death warrant for small retailers, especially when they are not at fault.

The argument given in the report that in the new format existing retailers could be rehabilitated is ridiculous, as everybody knows that the existing small retailers cannot be employed in the malls in any respectable manner. The government will be considered insensitive to problems of poor retailers like rehri, patri, khomcha and small shopkeepers if it opens up retail sector for multi brand retailing by foreigners.


Indian retail market: on sale

Indian retail market estimated to be more than $400 billion and which is growing propelled by the ever-increasing savings from the middle class. This is a precious asset of our economy. Instead of protecting and effectively utilizing the same to promote Indian entrepreneurship and effectively leveraging in the future negotiations in the process of emerging as an important player in international politics, the government is putting for sale. The decentralized retail market is best serving the consumers and producers again small people of this country. If big players are allowed to operate, over the years consolidation of market in the hands of few will become the reality. Once it happens, then they will dictate terms for both consumers and small producers including farmers. Today the channel cost unlike in other countries of the west is least and very efficiently managed by resource conscious retailers of India. The argument that the farmer would be getting better price is with out any ground and forwarded with dubious intention. Very same argument was given in the context of commodity trading which has not worked.


(Press statement issued by Sh.P. Muralidhar Rao, National Secretary, BJP in Thiruvananthapuram on 21st June 2011)