PJ James.
The Manmohan government’s decision to allow 51 percent FDI in multibrand brand retail trade where over 40 million people find their subsistence is one of the biggest ever neoliberal offensive against the country and its people. With this single move, under pressure from Obama administration,the Manmohan government has open up the Rs 30 lakh crore worth Indian retail market to the crisis-ridden retail MNCs and corporate companies. As the experience of neo-colonial countries like Indonesia and Thailand in Asia,and Argentina in Latin America, if not resisted and defeated this neoliberal move will completely devastate the millions with of traditional traders and peasants who will be made captives of corporate MNCs like Walmart in unholy alliance with Indian comprador s like Reliance. Hence CPI(ML) calls up on workers and toiling masses uniting with all like-minded forces of India to come to the streets resisting this traitorous move by the UPARally round and defeat FDI in Retail Trade
The Manmohan government’s decision to allow 51 percent FDI in multibrand brand retail trade where over 40 million people find their subsistence is one of the biggest ever neoliberal offensive against the country and its people. With this single move, under pressure from Obama administration,the Manmohan government has open up the Rs 30 lakh crore worth Indian retail market to the crisis-ridden retail MNCs and corporate companies. As the experience of neo-colonial countries like Indonesia and Thailand in Asia, and Argentina in Latin America, if not resisted and defeated this neoliberal move will completely devastate the millions with of traditional traders and peasants who will be made captives of corporate MNCs like Walmart in unholy alliance with Indian comprador s like Reliance. Hence CPI(ML) calls up on workers and toiling masses uniting with all like-minded forces of India to come to the streets resisting this traitorous move by the UPA government.
Introduction
The Manmohan government’s decision on September 14, 2012 to allow 51 percent FDI in multi-brand retail trade in India along with the increase of the FDI limit in single brand retail from 51 percent to 100 percent is certainly one of the biggest ever neoliberal, corporate offensives against the people of this country. Since the advent of neoliberalism and the inauguration of imperialist globalization policies along with the superimposition of Manmohan Singh as the finance minister in 1991, imperialist centres and MNCs have been exerting pressure on the Indian government to open up the vast and fast growing retail trade sector for FDI. In this regard, the incorporation of GATS (General Agreement on Trade in Services) as a provision in the 1995 WTO agreement which made obligatory on the part of neocolonial member countries to throw open their service sector including retail trade to global retail giants who are in search of ever-expanding markets was a strategic move by US and EU imperialist powers. The “market access” and “national treatment” clauses of WTO were intended to effectively prohibit governments from resorting to any kind of national protection or barriers against corporate prying open of retail markets among other things.
Again, after the ascendancy of Manmohan Singh as prime minister of the Congress led UPA government in 2004, this pressure from global retail giants such as Walmart, Tesco, Metro, Carrefour, and so on got an added vigor. But on account of strong opposition from broad sections of the people, the Manmohan government was forced to put on hold this decision which prompted imperialist credit rating agencies and corporate media to call him an “ineffectual bureaucrat.” It was in this context that the UPA government, once again laying bare its comprador character, took the extra-ordinary step of allowing global retail giants’ direct entry into India. As a result, keeping 51 percent of the ownership with them, MNCs like Walmart, Tesco, Metro, Carrefour, etc., will enter into “joint ventures” or collaboration agreements with their junior Indian compradors like Ambani, Tata, Birla, Goenka, Biyani, Bharti, etc., to gobble up the vast Indian retail market, the biggest in terms of absolute employment and fifth largest in terms of turnover in the world.
Character of Indian Retail Trade
To assess the impact of the entry of global retail giants into the $ 500 billion Indian retail market, a basic understanding of the nature of the country’s retail trade is indispensable. Contrary to the situation in imperialist and in several other neocolonial countries, only just 5 percent of the retail trade in India still belongs to what is called organized sector which operates as registered or licensed enterprises including supermarkets that come under the ambit of tax laws. Though organized retailing has recorded rapid growth (while all productive sectors are increasingly disorganized) under neoliberalism in recent years, among all the neocolonial countries, its low share in total trade is a typical Indian specificity.
For instance, organized retail trade in East Asia at present hovers around 40 percent, and in Latin America, it is about 35 percent. On the other hand, 95 percent of the retail outlets in India is still composed of the “unorganized” or “informal” sector where the vast army of the unemployed, underemployed or disguised unemployed and casually employed are located. Deindustrialization and stagnation in agriculture and the consequent decline in jobs in productive spheres on the one hand, and the rapid growth in trading and money spinning activities under neoliberalism on the other, have compelled people to depend on the informal and traditional retailing composed of local kirana shops, owner manned groceries, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc., for their sustenance. As a result, 15-16% of the country’s workforce or around 5 crores of people are directly employed in retail trade. Assuming a minimum of 4 dependents for each person working in retail, India’s population that depends on retail trade for livelihood comes to not less than 20 crores which is more or less equal to the total population of Brazil today. Thus retail trade in India being the largest employment provider after agriculture, any dislocation in this sector will lead to far reaching consequences.
Impact on Employment
While proposing FDI in retail, the Manmohan government has claimed that it will create additional 10 million jobs in 3 years. But what are the facts? In 2011, Walmart, the retail giant and the biggest MNC in the world having a turnover of 422 billion dollars provided employment only to 2.1 million people world wide. On the other hand, the Indian retail sector having a turn over of around 500 billion dollars provides direct employment to around 50 million people. It is estimated that with a given amount of capital investment, the Indian retail sector can provide 40 times more jobs than that by Walmart. In other words, with the entry of Walmart in India, every new employment in that company will displace 40 persons from traditional retailing. And even those jobs in Walmart stores will be on a “casual”, “hire and fire” basis. Recently, a large protest meeting of Walmart workers was organized in Los Angeles City Hall in America against the management policy of denying trade union and democratic rights to Walmart employees. This means that FDI in retail will also be associated with the dilution of even existing labour laws and elimination of trade union rights in India. Thus, Manmohan’s effort to make Indian retail trade more “organized” will have its ulterior motive of “disorganizing” Indian workforce too.
The experience of other countries which were forced to open up their retail sector to MNCs reveals the same gruesome reality. A best example is that of East Asian countries. In Vietnam, for instance, while traditional retailers require approximately 3 workers for handling a ton of tomato, Metro, the German retail giant requires on an average only 1.2 workers per ton. There, the work done by 18 workers in the local retail store could be done by just 4 persons in a supermarket run by Big C.
It was part of the “rescue package” instituted by IMF following the “Asian financial crisis” of 1997 engineered by global currency speculators like George Soros that retail MNCs like Carrefour from France and other imperialist countries entered Indonesia and elsewhere on a large scale. Consequently, between 2005 and 2009 alone, the turnover and employment in Indonesian traditional retail business dropped by 60 percent and 40 percent respectively. Attempts on the part of Indonesian government in 2007 and 2008 to bring legislative regulations to control the operations of retail MNCs were effectively thwarted by the latter using WTO provisions. Like Indonesia, Thailand whose retail sales turnover amounts to more than 100 billion dollars a year was also forced to open up for retail MNCs in 1997 as part of IMF conditionalities. In a span of four years from 1997 to 2001 traditional retail markets in Thailand reduced from 74 percent to 42 percent. The consequent unemployment situation though compelled Thai government to draft what is called “zoning laws” for regulating the location of MNC stores, it was never materialized due to threats from imperialist powers. The situation in Malaysia and Philippines where retail MNCs have established their monopolies is also not different.
The experience of Latin American countries such as Argentina, Mexico, Nicaragua, etc., and African countries such as Kenya with regard to FDI in retail is more or less the same. The prime cause behind the social and political turmoil in Argentina during the first decade of the 21st century was directly attributed to the vast labour displacement and devastation together with inflation created by unhindered FDI in retail trade. Confronted by people’s opposition, though comprador governments in these countries tried to bring in a “level playing field” for domestic unorganized and small retailers along with the MNCs, in general, such attempts became futile under WTO’s neoliberal regime. Therefore, to be clear, the argument by Manmohan and co. that FDI in retail trade will increase employment is a calculated lie only for hoodwinking the people.
Impact on Agriculture
The Manmohan government is always parroting on the would-be benefits from FDI in retail to the small farmers through better prices, and reduction in wastages of vegetables and fruits on account of efficient storage and infrastructural facilities. This argument is also not backed by facts. While Walmart-Bharti partnership and domestic compradors like Reliance and Spencer have come forward on a large scale with their supermarkets and malls all over the country over the past decade, it was also claimed that their back-end operations including the necessary infrastructures will immensely benefit farmers by ensuring guarantee to their produce and by reducing their marketing expenditures. However, till this day no infrastructures have been built nor any commitment was given to farmers by these companies who have already opened collection centres to procure goods. In fact, lowering the price at the last minute when the farmers come to the collection centre and indirect coercion of them for distress sales is the usual tactic adopted by these comprador companies. While peasants’ plight continues unabated, neither the central government nor the state governments in India have taken any step to eliminate such coercive tactics pursued by monopolies.
The entry and unhindered operations of Walmart like global retail giants who have monopoly control over procurement, market and prices and who have the capacity to cut through the entire supply chain must be seen in this context. Several studies have already proved that the monopoly size, market dominance and buying power of MNCs can effectively depress prices for the farmers and artificially peg up prices to consumers in neocolonial countries. Once a monopoly situation is created, the foreign retailer will invariably pursue the predatory pricing policy of buying low and selling high. The bigger market share of supermarket companies always has a direct effect in reducing the prices paid to suppliers (farmers and domestic industries) and that charged from consumers.
In America itself, one of the slogans raised in the “occupy Wall Street” campaign was against the speculative pricing policy of Walmart that simultaneously fleeces producers and consumers. A study on the British retail giant Tesco also has revealed that the price paid by it to farmers is 4 percent below the average price paid by other small retailers to farmers. According to a recent report from USA, to compensate the declining bargaining power of American farmer vis-à-vis the monopsonistic power of Walmart and other retail giants, the US government has to give its farmers an annual subsidy of 20 billion dollars. The EU also has legal provision to pay out an even larger amount to its farmers, who, as in US, though have very large land holdings. This happens despite the fact that the peasants in these imperialist countries are mainly capitalist farmers who form around 2 percent of the population. It is in this context that we have to think of the horrific consequences of FDI in retail in India where 60 percent of the people still subsist on agriculture and where majority of the peasants are marginal or sub-marginal landholders. As per experience from other countries, Walmart and other retailers are not going to build new rural infrastructures or storage facilities as suggested by the proponents of FDI.
The condition on FDI in retail that 30 percent of the procurement should be from domestic farmers and small scale industries as now stipulated by the comprador Indian rulers is only of rhetorical significance and of no practical use in view of the time-tested global procurement tactics adopted by Walmart and others who are free to procure from the cheapest sources. For instance, it is often said that more than half of the goods sold by Walmart through its global outlets is procured from China, reportedly the cheapest source today. India being a signatory to the WTO agreement, the Manmohan government knows very well that as “local sourcing” is prohibited as per TRIMs (Trade Related Investment Measures) it can never enforce the condition of 30 percent local sourcing as long as it continues in WTO. Therefore, the entry of Walmart and others and their monopolizing of the Indian retail market with commodities procured from cheap global sources will further intensify the “deindustrialization” process and consequent joblessness already begun in the nineties as a concomitant of neoliberal globalization.
Impact on Prices
Common sense will not allow one to swallow the suggestion of Manmohan and his advisors that FDI in retail would reduce prices and dampen inflation. All the global retail giants are notorious for their predatory pricing policies. It is their usual monopoly practice to undercut the prices of products until the local and traditional retailers are destroyed and effectively priced out of the market. Once they succeed in this tactic, it is easy for them to charge any price consistent with their monopoly super profits. The experience of FDI in retail in Latin America and East Asia has amply proved that prices of most essential items and mass consumption goods such as food grains, vegetables and fruits will shoot up in direct proportion to the growth in retail MNCs’ control over procurement, stock and sale of these items. Even today, the prices of these items in supermarkets in India run by the comprador bourgeoisie such as Reliance are very much higher than those in informal or unorganized markets. The outcome is galloping prices and deterioration in the purchasing power of the broad masses of toiling people.
Of course, there is another dimension to the issue. The major cause for inflation and galloping prices under neoliberalism is the unbridled speculation by giant finance capitalists whose activities after completely divorced from production cut across futures trade, finance and other money spinning businesses. Their super profit arises from different forms of speculation including hoarding and monopoly pricing of essential items like food at the expense of both producers and consumers. The case of Reliance, the leading corporate retail giant in India is an example. It has built up its financial empire by wantonly engaging in speculation and futures trading and in the process sky-rocketing the prices of fuel and food. With the connivance of Manmohan government, today it has become one of the biggest food grain speculators in India. As a junior partner of MNCs, it is now planning to extend its financial empire further by collaborating with prospective global retailers as under the proposed rule the foreign investor invariably needs an Indian partner capable of providing 49 percent equity capital. And with the full-fledged entry of FDI in retail, to facilitate further speculation in food grains, Manmohan government may start withdrawing from food procurement itself.
Immediate Reasons behind the Move
While opening up the entire Indian retail sector to FDI, Manmohan Singh and his advisors justified it as a policy tool designed to serve a long list of objectives including lucrative prices for farmers, efficient handling of food stocks to reduce wastage during storage and transport and stable prices with low food price inflation for consumers. It was also claimed that FDI in retail will not decimate the traditional or the so called kirana stores in the country. All the comprador organizations or junior partners of MNCs (who are eagerly waiting for forming joint ventures with Walmart like global operators) in India such as CII, FICCI, Assocham, US-India Business Council (USIBC), the American Chamber of Commerce in India, the Retail Association of India (RAI) and Shopping Centers Association of India (a 44 member association of Indian multi-brand retailers and shopping malls) are upholding this view.
However, our analysis shows that there is scant empirical evidence to back up these assertions. On the other hand, the immediate cause for the intensified pressure from finance capitalists on Manmohan Singh has been the ongoing world economic crisis and the unprecedented contraction of the consumer market in imperialist economies itself. For instance, over the past year, while the number of global billionaires and their total assets respectively rose from 793 to 1011 and $ 2.4 trillion to $ 3.6 trillion (an increase of 50 percent in a single year), mass consumption at a global level was reduced at least by 20 percent. It is in this context of shrinking world consumer market that retail giants like Walmart who are specialized in money-spinning organized retailing through supermarkets and malls have put their eye on India which has immense potential to emerge as a flourishing retail hub.
Very revealingly, as per the US Census Bureau, the young population in India is likely to constitute 53 per cent of the total population by 2020 — much higher than countries like the US, the UK, Germany, China, etc. This demographic scenario of India, according to neoliberal experts, is a driving force for organized retailing. And as organized retailers at present have a far lesser reach in India than in other countries, concerted moves are required to reap this inexhaustible source. AT Kearney, the well known international management consultancy and market analyst, recently has identified India as the second most attractive retail destination globally from among thirty countries. According to it, the retail trade in India is currently growing at a great pace and is expected to go up to US$ 833 billion in terms of turnover by the year 2013. It is further expected to reach US$ 1.3 trillion (I trillion = 1000 billion = one hundred thousand crores ) by the year 2018 provided the current trend of surging middle class incomes and aspirations continue amidst growing pauperization and destitution of the broad masses of Indian people.
It is in this context that international retail players such as Walmart, Carrefour, Metro, IKEA, TESCO, etc. through concerted moves have manipulated their Indian compradors and succeeded in the policy announcement permitting 51 percent FDI in retail. A Google search for “Bribing in Walmart” reveals around 14,00,000 results pertaining to this company. Being the biggest MNC in the world, it surpasses all others in terms of corruption and underhand deals for its global reach. The New York Times, the imperialist mouthpiece itself, had to report on several scandals involving Walmart, especially in Mexico. It has acquired a notoriety of its own in bribing host country political leaders and bureaucrats for zoning approvals and for violation of labour and environmental regulations, even after the grant of formal FDI approvals. The story of other retailers is also not different.
Therefore, under the comprador regime it would be naïve to believe that the foreign retailers’ reach in India will be confined to the 53 metropolitan cities having a population of one million and to 51 percent equity. In fact, as several state governments are opposed to FDI in multi-brand retail, spokespersons of the UPA government has gone to the extent of saying that the impact of this decision will be limited to only 18 cities in states where the chief ministers have welcomed this move. However, as the experience from other neocolonial countries show, after establishing their foothold, it is very easy for these retail MNCs to spread to other areas at an alarming pace totally erasing the unorganized retail sector. Joint ventures with local companies holding 49 percent of the ownership itself is more than sufficient for global retailers to establish their unbridled presence and brands throughout the country. Therefore, the argument by all the corporate lackeys that state governments are free to insulate their retail trade from FDI is a mere pipedream and is another fraud on the people.
On the Approach to FDI in Retail
For imperialist finance capital, FDI in retail is an inalienable component of neoliberalism or imperialist globalization and it is inseparable from FDI in other sectors. An analysis of the postwar trajectory of neocolonisation and internationalization of finance capital including its latest phase, neoliberalism amply reveals that FDI has been the most attractive route for the global expansion and penetration of MNCs into the agriculture, industry and service sectors of neocolonial countries. In accordance with the character of finance capital especially under neoliberalism and the specific trends in imperialist economy today, the so called service sector, a major component of which is retail trade, has grown to encompass around three-fourth of GDP in developed capitalist countries.
In spite of India’s very low per capita GDP and despite more than half of Indians still depending on agriculture for sustenance, on account of its growing integration with world economy through globalization, the same trend is replicated In India such that almost 60 percent of the country’s GDP is derived from service sector today. Invariably, a major component of this service sector is retail trade which, as estimated by imperialist centres, is expected to cross the one trillion dollar mark within a span of five years. That is why, along with finance, stocks, insurance, real estate, tourism, education, etc., the flourishing retail trade has become the most sought out destination for FDI.
As Manmohan government has completely succumbed to the imperialist demand for opening up retail trade among other things , various sections of Indian political spectrum ranging from the UPA constituents like Trinamool Congress and opposition BJP to the so called Left Front led by CPI(M) has come out against this new wave of “pro-investor reforms.” Obviously, their resentment is not due to any fundamental difference with the neoliberal policies as all of them were implementing the very same policies in varying degrees whenever and wherever they are in power. On the other hand, the opposition of these parties emanates from their fear of an electoral backlash resulting from the people’s fury against the sell-out of their livelihood sources to transnational mega-retailers. Without linking FDI in retail with the larger question of imperialist globalization and neoliberal policies, and with no alternative to neoliberalism, all of them are trying to exploit the popular anger over the fears of widespread devastation and social dislocation arising from the entry of retail MNCs.
After all, what this so called opposition parties ignore is the basic character of the Indian state itself. The whole question including that of FDI in retail is inseparably linked up with the character of the Indian state which is constitutionally and legally incapable of protecting the interests of the country and its people against the neoliberal offensive by global finance capital. On the other hand, while MNCs and finance capitalists are effectively utilizing neocolonial-neoliberal instruments like WTO to bring about the required institutional and legal set up in neocolonial countries like India in alliance with the comprador regimes there for ensuring the entry of FDI in retail and other sectors, all the imperialist states are at the same time have erected necessary legal and institutional protection and safeguards to prevent their own retail trade, agriculture and domestic industries from being swallowed up by predatory capital.
For instance, as already noted, there are specific legal provisions in USA and EU for protecting farmers and small businesses from foreign monopolistic competition. Japan, whose retail turnover is estimated to be more than $ 1500 billion has given extensive powers to local authorities since 1973 under the so called “large stores law” to strictly regulate retail monopolies. When the American retail MNCs tried to enter the Japanese market in a big way, in 2007 the government passed three municipal laws—the City Planning Law, the Large-scale Retail Location Law and the City Centre Revitalization Act—to control the expansion of foreign retail giants in the interest of Japanese economy. No doubt, this has led to growing inter-imperialist contradictions between Japan and USA.
Or, take the case of China which has transformed into an imperialist power contending with the US and other imperialist powers for world market. Indian proponents of FDI in retail often cite the experience of China as an argument for opening up the retail sector to mega retailers. There are two aspects to be pointed out in this regard. Firstly, unlike the comprador Indian state or other East Asian and Latin American countries, as an imperialist power, China has so many impenetrable “invisible barriers” which effectively limit and control foreign entry. As such the two decades of Walmart and Carrefour operations in China could not establish any monopolistic control till this day. For instance, though Walmart with around 350 stores procures more than 50 percent of the goods required for its global retailing from cheap Chinese sources, it only has about 5 percent retail market share of that country. The biggest retail chains in China are all run by Chinese monopoly groups such as the Bailian group. Secondly, China is also undergoing all the negative consequences including the massive displacement of millions of people from traditional retailing due to the monopolization of retail trade by corporate retail giants from China itself.
However, the Chinese situation where the state monopoly regime is effectively protecting the Chinese capitalist interests, and the Indian situation where the comprador regime is acting as a junior partner of imperialism and selling out the country’s interests to imperialist finance capital are two fundamentally different contexts. In India, as the hitherto experience shows, the move to allow FDI in retail will enable the alliance between retail MNCs and Indian compradors to monopolize the entire retail trade, agricultural procurement and supply chains including goods traffic in India. If not resisted and defeated, this neoliberal move will completely devastate the millions of traditional traders while peasants and small producers in the country will be made captives of corporate MNCs.
Build up Resistance with a Political Orientation
Therefore, in a neocolonial country like India where the Manmohan regime is protecting the interests of foreign capital and ruling as per the diktats from imperialist centres, slogans like piecemeal regulation or limit on retail FDI is quite meaningless. The right slogan should be total prohibition of FDI and kicking out the retail MNCs from India. The CPI (ML) is of the view that all the corporate players including comprador sections like Reliance should be thrown out of both retail and wholesale trade which should be brought under public regulatory framework. Local bodies should be empowered to take appropriate action in this regard in their jurisdiction with the perspective on the broader interests of working people in the country. In view of the dimension of the problem, a people’s movement should be built up at the all India level for resisting and defeating this traitorous move by Manmohan government depending on the concrete situation in each region of the country. Progressive democratic forces should come forward to take up this task by uniting with all like-minded forces all over India. Such a political initiative is integrally linked up with the struggle for democratic, peoples’ development as opposed to the present imperialist dictated neoliberal policies imposed from above.
-min.png)