"FDI in Retail: Will destroy second largest sector in India!"
India has a long history of traders and retailers. Retail trade in India contribute around 10-12% of the GDP. Retail trade in India employes around 4 crore people. In India unorganized retail sector accounts for 96%of the industry. Overall organized sector in India accounts about 8%. so million of people find job in unorganized sector and informal way of earning. So retail sector provides enormous option for large section of people. It employes second largest section of people after agriculture.
At initial stage retail giant's provide enormous gain for consumer and producers. In later part of MNC retailers they would force producers for there demand and price.Consumer get lower price products, retail sector becomes organized sector, but there would be enormous job loss. We have lots of examples around the globe after MNC retail giants occupied the local market.
WalMart (around 9,000 outlets,revenue $ 500 billion,2.2 million employees),Carrefour (around 2,000 outlets,revenue $ 125 billion, around 5 lakh employees),Tesco (around 6,400 outlets, revenue $ 60 billion, half million employees.),metro etc. They can provide low price for consumer but major drawbacks are low wage,poor working standard,loss of job,loss local market and small traders, Weakening economic,enormous development of private property etc.
Drawbacks of FDI in retail sector in India
The most important factor which is against allowing FDI in retail sector is that small traders will not able to compete with the big players and thus cease to exist. These traders don’t have the capital and expertise to compete with big retail chains. They will not be able to buy goods at a lower price from suppliers while big players who have a strong supply chain network across the world which gives them a high bargaining power to buy goods at the lowest price. The big chains also have a capacity to sustain losses for a longer period therefore able to undercut prices of goods which will lead to desertion of small traders.
It is assumed that initially foreign stores would keep the prices of their products low in order to attract their customers & eliminate their competitors. But with the time they would establish their monopoly in Indian markets & hence quality and price of products would be compromised. It would be like “Bringing back East India Company. “
Also in a country like India where millions of people are semi-skilled, it is the retail sector which offers them source of earning as one can easily open a small shop with a little capital. The government should understand that before approving any policy reform in the retail sector it must create jobs in other sectors which can accommodate these people.
“Only 1 employee is recruited in 400 yards of a Wall-Mart’s showroom”.So it is estimated that on an average only 1 will be able to get job in Multi-brand stores while at least 10 people would be losing their jobs due to FDI.If foreign stores are able to set up their monopoly,then even farmers would have no other option than selling their crops to Multi-brand stores at low prices. This would exploit farmers.
Some economist give the argument that poicies of Globalisation & Open Trade across the border initiated by Dr. Manmohan Singh during 1990s has not been so effective in controlling inflation & price rise . Moreover the problem of unemployment still persists in India.
Opening of Multi-brand stores , setting up of infrastructure , recruitment of staff & maintenance of quality of products during initial stages would force the foreign retailers to sell their products at higher price. So Government’s plea ,that Inflation would be controlled to a larger extent, does not convince majority of Indians.
Advocates of FDI in retail give China has an example, which witnessed enormous growth in retail sector after allowing FDI. But they don’t inform that China allowed a gradual increase in FDI in retail — it allowed an FDI of up to 26 per cent in 1992 and increased it to 49 per cent in 2002 and allowed 100 per cent in 2004. It is also not justifiable to compare India with China: China is a communist country where job market is regulated in contrast India is a democratic country where people have an option to start their own business. In China, manufacturing sector offers numerous employment opportunities but this is not the case with India.
Alternative steps to counter drawbacks of FDI
Change in Economic policies has become a necessity now. There must be a proper survey regarding actual position of demand and supply ration in India.
Although by allowing FDI in retail the biggest gainer will be the consumer who will get more choices at attractive prices, if this is achieved by rendering millions unemployed and denying them their livelihood, then such benefit are worthless. The government should realize that its prime responsibility is to create more jobs for unemployed people. It would make sense that any policy which leads to reduction in jobs should be put on hold until new sources of employment are created.
Instead of opening the sector for FDI in urgency, the government should invest in training of small retailers and traders to guide them on the subject of storing, grading, and refrigerating of perishable goods. Institutes like ITIs and NGOs can be very helpful for implementation of such schemes. Infrastructure of local mandis also need to be upgraded and all kind of facilities and training should be provided to the management of local mandis to reduce the wastage of goods and increase efficiency.
Proper Land Acquisition policies,socio-economic facilities to farmers,proper infrastructure for cold storage,transportation of grains should be on main agenda of Government.
Strengthening of Public Distribution System (PDS) would allow a proper chain of demand & supply.
Source: FDI Retail in India -CPM stand,wikipedia,Internet source,Bablu taughts.