Protesting too much

Published: September 25, 2012
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The writer is a stage director, film-maker and journalist in Bangalore. He is a co-founder of the Suchitra Centre for Film and Drama

The writer is a stage director, film-maker and journalist in Bangalore. He is a co-founder of the Suchitra Centre for Film and Drama

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 25th, 2012.

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Reader Comments (13)

  • BlackJack
    Sep 25, 2012 - 1:24AM

    This could indeed mean massive indirect corporate control of farmlands, monoculture and even destruction of the Indian diversity of food and cuisines.
    You forgot deforestation, global warming, drying up of rivers, female infanticide, and dissolution of the Indian union. These steps by the govt are called reforms for a reason – they improve the distribution of wealth across the value chain where currently middlemen like your mandi friend extract disproportionate value – in most markets where Walmart and its friends are operational, this ratio is far less skewed. Tomorrow if poor farmers are able to sell their produce at a higher price (ITC e-choupal had kicked off this experiment) and we benefit from lower consumer prices in the store, I do not see much reason to shed tears for and antiquated system that just contributed to food grains rotting in govt warehouses. Further, secondary employment growth in terms of local sourcing, supply chain and logistics capability augmentation over the next couple of years, and infrastructure creation to link rural areas to far flung markets are ideal benefits that could also result from this investment.

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  • varuag
    Sep 25, 2012 - 4:04AM

    FDI in retail is a little bit of a pointless debate. It will ensure that certain mom-and-pop stores will close the shutters while the big-daddies like Walmart will employ a certain number of people. Will the net effect be positive or not is debatable. What is really needed is the reform of the APMC (Agricultural Produce Marketing Committee) Act. Kaushik Basu retired as Chief Economic Advisor and in every Economic Survey he stressed this point repeatedly to no avail. But none of the political parties want to lose their monopoly of the mandis where almost all economic decisions for the agricultural produce are taken. Along with control of mandis, there is the stranglehold of the arthiyas. Without somehow co-opting with the arthiyas as well as establishing relations with the mandis, the Walmarts of the world may find the Indian experience extremely demanding. Direct sourcing from farmers bypassing the traditional route is worth a try, but in a nation where average land-holding is pathetic, it may be even more challenging. The plans of Walmart to traverse the haze of Indian conditions will be exciting to watch……

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  • Joginder
    Sep 25, 2012 - 6:38AM

    Reliance already tried the Walmart approach by direct buying of agricultural produce and selling directly in their stores. They don’t seem to have clicked too well, despite the Ambanis having vast resources. A guy known to me sold his apples to Reliance some years ago. The prices they offered were good. Unfortunately they also graded the apples very strictly so only a fraction of his crop was taken, the very best. What was left was most of his crop for which he had to find a ready buyer – not easy when the fruits are already ripe, no arrangements for packing and forwarding, and known to be Reliance rejects. All the orchardists in that area now rely on the old methods, i.e. take an advance well before the crop is ready from the contractors, who in turn are bankrolled by the arhtiyas, and let the contractors do picking, grading, packing and forwarding. A few orchard owners who are in direct contact with the arhtiyas leave out the contractor.

    So if Walmart kills off the competition and then tries the same Reliance tricks, the farmers are not likely to have Goddess Lakshmi hammering on their front doors anytime soon.

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  • gp65
    Sep 25, 2012 - 7:35AM

    @BlackJack: The grains rot due to
    1. antiquated APMC laws which restrict who can buy grains , whether they can be transported interstate by private sector,
    2. whether the public sector which stores it has adequate capacity for doing so, the stupid law that requires grains to be stored in gunny bags (where rain will likely lead to rotting if stored in open) vs polythene bags,
    3. absence of centralised sales tax which discourages centralized storage and leads to a depot in each state which is inefficient
    4. The minimum support price mandated by government and its unwillingness to distibute surplus grains to the hungry at a price below the MSP.

    I agree with your implication that the author’s analysis is shallow. This is not the first OpED where this has been the case. Most of his OpEds appear to be based on drawing room discussions with his arty buddies and reflect a lack of primary or secondary research.

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  • Gary
    Sep 25, 2012 - 8:11AM

    @varuag: I can’t agree with you more! Can’t wait to see what companies like Walmart will do in India. I hope and think they can and will go to producers directly and kill the middlemen for various reasons….

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  • SKChadha
    Sep 25, 2012 - 8:11AM

    The basic issue is of management of retail business as also storage & distribution of perishable items? It is to be seen whether present local managers (Aadhtiyas, Dalals etc) are more efficient or international players? The international players can survive and beat local traders only if they develop efficient procurement, transportation and storage facilities.

    In the past we have seen most of the big retailers are unable to compete and generate profitable business and many chains have shut their doors. Let us try the new ones also.

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  • mr. righty rightist
    Sep 25, 2012 - 8:49AM

    I wonder what is the need for FDI in retail! I am not an economist, so my understanding based on simple common sense. However, in profound matters, one has to raise above common sense to understand.

    So, my question remains, what is the need? Don’t we have enough Indian retail chains? Don’t we have enough small shops? Don’t we have street side vendors?

    Who is this FDI going to directly benifit? I must ask, if the government has taken BRIBES from foriegn retail chains to allow them in India!!

    It may not harm the farmers much. But it is definitely going to harm the small shop owners and street vendors. Emergence of big retail shops in India has already harmed the small time businessmen.

    Nearby my place in North Bangalore, there is a big retail shop, which does not employ more than 10 people. Before this shop opened, there used to be 30-40 street vendors in the surrounding areas. Today, the number has been reduced to 20. This changed happened over the last 5 years. I wonder if there can be another unknown reason for this!!!

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  • Lala Gee
    Sep 25, 2012 - 9:20AM

    Big fish always feeds on small fish. Some small fish has to be consumed by these whales to survive, be it farmers, middlemen, arthiyas, or small shops.

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  • Gary
    Sep 25, 2012 - 10:14AM

    @Joginder: I hear what you say, but don’t think Walmart success is purely due to operation effectiveness. Think organization success depends on both operation effectiveness and strategy, and strategy management seems to be the key in Walmart success. Walmart, Target, Woolworth (Woolco) and K-Mart all had similar models sort off( I say sort off since Walmart business model is still a mystery). Target has been functioning successfully, courtesy Wal-Mart, but other two failed in their operations and filed bankruptcy. Again, I don’t know how Walmart will do in India, but would not write them off b’cos Reliance didn’t succeed..

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  • ethicalman
    Sep 25, 2012 - 11:41AM

    In China the biggest retailers are now Chinese firms..Walmart, Carrefour etc.. were allowed to enter China in 2004 onwards..and China compared to India hardly have private entrepreneurs ..so imagine how we’l’l beat all the forieign retailers.. and it’s good if the farmers will get rid of the middlemen..and don’t worry they won’t ever monopolise our farmers..they’re more clever then we think…

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  • Vinayak
    Sep 25, 2012 - 5:44PM

    @mr. righty rightist:
    FDI in retail is good because, competition with foreign retailers will ensure that Indian customers get quality goods at lesser price. So it benefits the Indian customer. It will mean that Indian retailers will have to improve their standards. Those who will not able to compete will go out of business. This is survival of fittest at work.

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  • Indian Catholic
    Sep 25, 2012 - 8:47PM

    @mr. righty rightist: FDI in retail is good is because we desperately need a cold chain.

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  • Venkat
    Oct 12, 2012 - 6:13PM

    FDI is not good for INDIA. Be it any sector! Why do you willfully give your core business to companies? be it indian or foreign. Coming to the part of FDI in retail: time and again statistics/common sense have shown that, it benefits only the giant companies and none. One big superstore or a small super store is more than enough to kill local merchants on a par of 20 minimum. A good example into Britain shows you how hard it is to run a convenience store for these chain stores cropping up in every corner. FDI in retail is going to mess up the balance of food prices. Indian government can no longer fix the grain prices as the companies will influence a lot in the market and can manipulate, to their necessities. This way every one involved in farmer to consumer chain is effected apart from the big corporations. Coming to industrial sectors, situation is the same. India is a very big country with large consumer base. We need no help for money, as basic transactions related to consumption when monitored and taxed would benefit the nation. All in all, we Indians only need to worry about: Corruption, deforestation, ground water resources, social and economical inequalities and a safer place. We have everything, yet we don’t realize to utilize them to the fullest while being careful.

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