Small traders and small businesses are our local glue. They provide local leadership, reinforce patriarchy and conservative values. And they thrive at the expense of producers and consumers. But they will not have things all their way for much longer, perhaps.
New Delhi, Nov. 29: Farmers, a holy-cow constituency considered more valuable than small traders to the political class, have begun to ask uncomfortable questions to those opposing foreign direct investment (FDI) in retail.
Several farmer groups, some of them led by politicians with ties to the Congress, have asked why some parties are standing in the way of a measure that is expected to reduce the clout of middlemen and increase farm earnings.
If the latent mood reflected by farm lobbies gathers depth and sweep, the parties opposing FDI will have to choose between the small trader and the farmer. Almost all parties, including Mamata’s Trinamul Congress, arrayed against the retail reforms describe themselves as the best friends of farmers.
“Not only will FDI in retail eliminate four to five middlemen at different levels, it will also enable farmers to get quality inputs,” said Changal Reddy, the secretary-general of the Consortium of Indian Farmers Association (Cifa).
Few political parties will deny farmers are now being ripped off.
A CPM-affiliated farmer outfit betrayed that dilemma. “Agro business would no doubt flourish if FDI is allowed in retail. But there is a rider: it would not benefit the marginal farmers; they hardly produce anything. It would only benefit the big farmers,” said Biplab Majumdar, assistant secretary of the CPM-affiliated Pradeshik Krishak Sabha.
Another farmers’ body referred to another likely dividend from FDI.
“FDI is expected to roll out cool chains that will bring the market closer home, reduce the number of middlemen and enhance returns to farmers,” said Prakash Thakur, the chairman of the People for Environment Horticulture & Livelihood Himachal Pradesh.
“Highly perishable fruits like cherry, apricot, peaches and plums have a huge demand but are unable to tap the market fully because of lack of a cool chain and transport infrastructure. All this should see a boost with the opening up of retail for large investments through FDI,” he said.
Thakur has a point. Although India is the second-largest producer of fruits and vegetables at 200 million tonnes, its storage infrastructure is grossly inadequate. Of the 5,386 stand-alone cold storages, 80 per cent is used to keep potatoes.
The cabinet kept this in mind while taking the FDI decision. Each foreign investor will have to invest at least $50 million (Rs 250 crore) in back-end infrastructure that will include cold chains, refrigeration and transportation.
Today, they, and WalMart are winning. But distribution infrastructure wins, too. The national Government does not have the tax base to create infrastructure. Uniquely in the world, perhaps, the free market will be entrusted with that responsibility.
Retailers such as Carrefour, the world’s second-biggest, and Tesco, the U.K.’s largest supermarket chain, face infrastructure that lags China’s and Brazil’s. “There are still very frequent power outages in a number of cities and the roads need a hell of a lot of improvement in terms of operating an efficient supply chain,” said Bryan Roberts, director of retail research at Kantar Retail in London.
That means the global chains need to build trucking and distribution systems in India, where government estimates show 40 percent of fruit and vegetables rot before being sold because of a lack of cold-storage facilities and poor transport infrastructure.
India’s roads are of “very poor quality” and local trucks cover less than 400 kilometers (249 miles) a day, compared with the 700 to 800 kilometers covered by trucks in the developed world, Transport Corporation of India Ltd. said in a 2009 report. Vehicular speeds can be limited to under 15 kilometers an hour in business areas of some cities.
And therein lies the advantage for us.
Similarly, consumers — and they extend far beyond the metropolitan upper middle class and include small town and semi-rural India — are potential beneficiaries of greater choice and lower prices.
This is why, perhaps, the issue of FDI in retail may have paralysed Parliament but has not evoked the same outrage on the streets as the issue of corruption and price rise did in the recent past.
One other reason is that after 20 years of reform, many people no longer buy the Opposition’s argument that FDI will destroy India’s diversity and independence and jobs and spell a return to “neo-colonialism”.
In the 1990s, similar fears were evoked when McDonald’s and Kentucky Fried Chicken entered India. But neither could displace Indian street food — the pizza has coexisted with pao bhaji, the burger with the samosa.
The massive size and bewildering economic and cultural diversity of the Indian consuming class can, many believe, absorb Walmart and Tesco without displacing the vegetable seller who delivers home or the neighbourhood store which supplies on credit. Retail chains, thus, may provide many more jobs than they will displace, this section feels.
With growth stalling at home perhaps its a win-win for all concerned.
Developing countries still offer faster growth for companies like Wal-Mart, whose international sales grew 20% in the quarter ended Oct. 31, compared with 3.8 percent in the U.S., according to data compiled by Bloomberg.
Wal-Mart, which entered China in 1996, has in the past decade increased its stores in the world’s most populous nation to more than 350 from eight. Third-quarter sales grew 16 percent in China, with 6 percent growth for stores open more than a year, according to a Bloomberg transcript of its Nov. 15 earnings briefing.
“Their story in India is not short term,” said KPMG’s Ramanathan. “These companies will not be able to face their boards if they decide not to enter India.”
Walmart is not all bad, even for the community in its home.
Hurricane season is just around the corner, so Americans should know where to turn to if disaster strikes.
It's not the Federal Emergency Management Agency. A new study suggests Wal-Mart, Home Depot and Lowe's would be a lot more helpful.
The study, by Steven Horwitz, a professor of economics at St. Lawrence University in Canton, N.Y., stresses that successful disaster relief depends upon responders having detailed knowledge of a local area and the right incentives to act on that knowledge.
The study says Wal-Mart, Home Depot and Lowe's made use of their local knowledge about supply chains, infrastructure, decision makers and other resources to provide emergency supplies and reopen stores well before FEMA began its response. Local knowledge enabled the big-box stores to make plans ahead of the storm and then put them into effect immediately.
"Profit-seeking firms beat most of the government to the scene and provided more effectively the supplies needed for the immediate survival of a population cut off from life's most basic necessities," Horwitz wrote in the study, which was published by the Mercatus Center at George Mason University in Fairfax, Va. "Though numerous private-sector firms played important roles in the relief operations, Wal-Mart stood out."
Cavilers, remain, naturally, pointing us to a movie.