Protesting too much

Opposition parties have been riling public support against FDI, high diesel prices just to weaken Singh's government.

Protests lose their edge when the slogans are adopted by political parties and the ruling establishment itself. Most of India’s schools, offices and commerce shut down for Bharat Bandh on September 20 to protest the Manmohan Singh government’s plunge into new economic reforms — mainly, the decision to allow majority foreign investment in multi-brand retail — with opposition parties sponsoring it in the states they control.

The real threat to the government is not from the protests in the streets but from a possible test of its majority in parliament, now that Mamata Banerjee’s Trinamool Congress has pulled out of the ruling coalition. The Manmohan Singh government had put off its plans for allowing foreign direct investment (FDI) in retail last December, after a similar Bharat Bandh was organised. Political parties in the opposition, including the BJP and of the Left, have opposed the free operation of retail giants like Walmart on grounds that it would ruin small farmers and retailers. It is a moot point whether they indeed believe what they profess.

“Here’s the wonderful thing about the FDI-in-retail debate: never have struggling Indian farmers found so many champions. They’ve been crawling out of the woodwork,” wrote journalist P Sainath, sarcastically, in the The Hindu last December. The protests against FDI in retail have not found any resonance with the farmers themselves, who continue to take their own lives due to poverty and helplessness. The union government, too, has been claiming that many chief ministers of opposition-ruled states have secretly welcomed the entry of big retail corporations.

Many economists, too, back the new reforms, claiming that corporations such as Walmart will buy from the producers directly and eliminate middlemen, reduce prices for customers by operating with high volumes and low margins and introduce advanced inventory and supply chain management practices. This is the standard US pitch too and the government has always been sensitive to American sensibilities.

Manmohan Singh may as well go through this last shot at glory, in order to salvage some of the prestige he has lost over the last two years of scams and shameful waffling. The protests in the streets may not really convert into the fall of the government, as the opposition has combined causes, protesting against the hike in diesel prices, too. The government could roll back the diesel prices to some extent and get the opposition to let the FDI proposals slide in.

The causes are not similar. The diesel price hike is a quantitative issue. But FDI in multi-brand retail is more than that. It will probably change the way Indian agriculture operates, according to my friend, a mandi (wholesale) merchant in Bangalore. “I was worried when Metro Cash and Carry opened in Bangalore, but that has not made much of an impact. But Walmart will kill my business,” he said.

The global retailers could affect other Indian sectors, too, but the food-to-market process is likely to be hugely disrupted if Walmart succeeds in understanding and adapting to India. As my mandi friend confesses, farmers are paid advances by merchants and commission agents purely going by the given word, auctions are fixed by a caucus and food grains and vegetables are sold to the end consumer at double or more. There are no written contracts, no signed bills and almost never any taxes to pay. All this is set to change. Farmers and small producers are obliged to the process in many ways. The mandi merchants contribute to their wedding expenses, children’s school fees and even foot the bill when they fall sick. They, ultimately, profit from it, unfairly.

Similarly, Walmart and other retailers, too, will look to open stores in over 50 Indian cities, not to push the Indian government’s agenda to improve the lives of the farmers or provide jobs to young Indians, but to get a share of the $300 billion retail market. This could indeed mean massive indirect corporate control of farmlands, monoculture and even destruction of the Indian diversity of food and cuisines. Even if Walmart fails, it would have done enough to disrupt the existing traditional, almost feudal, farm-to-market process and create the operative space for Indian multi-brand retailers, who right now are on the margins of the market.

Published in The Express Tribune, September 25^th, 2012.