By Justice Rajindar Sachar (retd)
17 December, 2011
The Tribune, India
The Tribune, India
Govt’s claim is questionable
If the combined Opposition had sat down for weeks to find an issue to embarrass the UPA government and make it a laughing stock before the whole country, they could not have thought of a better issue than the free gift presented to it initially by the government by insisting that it had decided irrevocably to allow the entry of multi-brand retail super stores like Walmart and then within a few days, with a whimper, withdrawing the proposal.
As it is, even initially this decision defied logic in view of the Punjab and UP elections and known strong views against it of the BJP and the Left. Many states had all the time opposed the entry of Walmart which would affect the lives of millions in the country.
Retail business in India is estimated to be of the order of $ 400 billion, but the share of the corporate sector is only 5 per cent. There are 50 million retailers in India, including hawkers and pavement sellers. This comes to one retailer serving eight Indians. In China, it is one for 100 Chinese. Food is 63 per cent of the retail trade, according to information given by FICCI.
The claim by the government that Walmart intrusion will not result in the closure of small retailers is a deliberate mis-statement. A study done by IOWA State University, US, has shown that in the first decade after Walmart arrived in IOWA the state lost 555 grocery stores, 298 hardware stores, 293 building supply stores, 161 variety stores, 158 women apparels stores and 153 shoe stores, 116 drug stores and 111 men and boys apparels stores. Why would it be different in India with a lesser capacity for resilience by small traders.
The fact is that during 15 years of Walmart entering the market, 31 super market chains sought bankruptcy. Of the 1.6 million employees of Walmart, only 1.2 per cent make a living above the poverty level. The Bureau of Labour Statistics, US, is on record with its conclusion that Walmart’s prices are not lower.
In Thailand, supermarkets led to a 14 per cent reduction in the share of ‘mom and pop’ stores within four years of FDI permission. In India, 33-60 per cent of the traditional fruit and vegetable retailers reported a 15-30 per cent decline in footfalls, a 10-30 per cent fall in sales and a 20-30 per cent decline in incomes across Bangalore, Ahmedabad and Chandigarh, the largest impact being in Bangalore, which is one of the most supermarket-penetrated cities in India.
The average size of the Walmart stores in the US is about 10,800 sq feet employing only 225 people. In that view, is not the government’s claim of an increase in employment unbelievable? The government’s attempt is to soften the blow by emphasising that Walmart is being allowed only 51 per cent in investment up to $100 million. Prima facie, the argument may seem attractive. But is the Walmart management so stupid that when its present turnover of retail is $ 400 billion it would settle for such a small gain? No, obviously, Walmart is proceeding on the maxim of the camel being allowed to put its head inside a tent and the occupant finding thereafter that he is being driven out of it by the camel occupying the whole of the tent space. One may substitute Walmart for the camel to understand the danger to our millions of retailers.
The tongue-in-cheek argument by the government that allowing Walmart to set up its business in India would lead to a fall in prices and an increase in employment is unproven. A 2004 report of a committee of the US House of Representatives concluded that “Walmart’s success has meant downward pressures on wages and benefits, rampant violations of basic workers’ rights and threats to the standard of living in communities across the country.” By what logic does the government say that in India the effect will be the opposite? The only explanation could be that it is a deliberate mis-statement to help multinationals.
Similar anti-consumer effects have happened by the working of another supermarket enterprise, Tesco of Britain.
A study carried out by Sunday Times shows that Tesco has almost total control of the food market of 108 of Britain’s coastal areas — 7.4 per cent of the country. The super stores like Walmart and Tesco have a compulsion to move out of England and the US because their markets are saturated. These companies are looking for countries with a larger population and low supermarket presence, according to David Hogues, Professor of Agri-Business at the Centre for Food Chain Research at Imperial College, London. They have got nowhere else to go and their home markets are already full. Similarly, a professor of Michigan State University has pointed out that retail revolution causes serious risks for developing country farmers who traditionally supply to the local street market.
In Thailand, Tesco controls more than half the Thai market. Though Tesco, when it moved into Thailand, promised to employ local people but it is openly being accused of indulging in unfair trading practices. The claim that these supermarket dealers will buy local products is belied because in a case filed against Tesco in July 2002 the court found it charging slotting fees to carry manufacturers’ products, charging entry fee of suppliers. In Bangkok, grocery stores’ sales declined by more than half since Tesco opened a store only four years ago.
In Malaysia, seeing the damage done by Tesco since January 2004, a freeze on the building of any new supermarket was imposed in three major cities and this when Tesco had only gone to Malaysia in 2002.
It is worth noting that 92 per cent of everything Walmart sells comes from Chinese-owned companies. The Indian market is already flooded with Chinese goods which are capturing the market with cheap offers, and traders are already crying foul because of the deplorable labour practices adopted by China. Can, in all fairness, the Indian government still persist in keeping the retail market open to foreign enterprises and thus endangering the earnings and occupations of millions of our countrymen and women?
The writer is a former Chief Justice of the High Court of Delhi