S. Gurumurthy, all India joint convener, Swadeshi Jagaran Manch, has issued the following statement:
The United Progressive Alliance government’s proposed policy on foreign direct investment (FDI), which seeks to allow the backdoor entry of multinational giants like Wal-Mart into the retail sector in India, gravely prejudices national economic and social interests.
The Commerce Minister’s admission that the policy may enable global retail giants to get into multi-brand retail by investing in Indian companies shows how shamelessly the government is seeking to smuggle them into the crumbling indigenous retail sector. This policy subterfuge by a lame-duck government that does not have a clear majority in Parliament, just before the announcement of national elections, violates accepted democratic conventions and political norms. It is also in breach of the Common Minimum Programme that binds the UPA coalition.
Since retail trade is not just a business but a community undertaking in most parts of India, the move carries a high risk of causing social unrest. It is intriguing why this measure is being undertaken during a year the global capital flow is expected to be just 20 per cent of last year’s and the West particularly is short of capital and is printing currency and borrowing money from all including India to sustain themselves.
The unorganised retail trade in India represents the traditional, community-centric, low-cost and employment-intense retailing that includes, but is not limited to, kirana shops, owner-run general stores, paan-beedi shops, convenience stores, and hand-cart and pavement vending. In this model a whole family works in one shop and a whole community is engaged in the trade in a defined area.
It is collectively almost an unincorporated enterprise formed by relationship-based communities that are now increasingly regarded as social capital. It is this model that has enabled the Patel community from Gujarat to leverage their social capital to outmanoeuvre organised corporate motels in the U.S. and Canada and turn corporate motels into community “Potels.” Most advocates of corporate retailing and foreign retail firms in India seem to ignore the critical contribution of the present model of retail trade to the Indian economy and society.
First, as its very structure and its reach from the main metros to the remote hamlets testify, such multi-layer retailing is the most decentralised economic activity in India after agriculture. Second, it constitutes almost 98 per cent of the total trade with an estimated 12 million outlets. In contrast, organised trade accounts for just 2 per cent.
Third, it is the largest employment provider after agriculture, employing an estimated 40 million people. In contrast, the world’s largest retail chain, Wal-Mart, employs just five lakh persons. Fourth, being self-employed, most of them are engaged in the trade along with their families, and so the work and livelihood of some 120 million people depend on this sector.
Fifth, the retail trade in India is run by community-centric social capital, not unrelated individual traders. Sixth, consequently, it is an open-air community B-school for retailing that continuously generates, by sharing knowledge and experience through relations, huge community-based entrepreneurship.
Seventh, it contributes over 14 per cent of India’s GDP, while the share of all companies in the BSE 500 Index put together is some 4 per cent. Eighth, the unorganised retail segment has been growing at an average rate of over 8 per cent a year for the last eight years (1999-00 to 2006-07). This is second only to the construction trade that grew at the rate of some 10 per cent.
There is more. The retailing experience of the non-Western world has not been factored in by the policymakers. Japan has intensely protected its retailing, which is also family and community-led and social capital-driven. In contrast, countries such as China, Malaysia and Thailand, which opened their retail sector to FDI only in the recent past, have retracted and enacted new laws to check the prolific growth of foreign malls and hypermarkets to control their ill-effects on the economy and employment.
In sum, the new policy is an attempt to replace through corporate-led retail the social capital-led retail in India, while in the motel business in the U.S. the reverse has taken place with Patel social capital replacing the corporates. The present Indian retail model is an efficient delivery mechanism for rural India where the corporate mechanism too cannot reach except through the traditional model.
But if the social capital link to retail trade is unsettled, the entire distant and remote supply chain will suffer over a period, disturbing the social equilibrium and the organic social links that have evolved over the centuries. Before this ill-advised move fails (as it is bound to), it will lead to tectonic changes and cause tremors and tsunamis in the social capital-led retailing in India. It will displace millions of people from their places and jobs and undermine the generation of new entrepreneurship and disturb the social order.
Lastly, it mocks at the UPA’s slogan of “inclusive growth” as the proposed FDI policy tends to replace the OBC and minority communities in the retail trade by foreign retail giants.
The Swadeshi Jagaran Manch urges the government to withdraw, in the larger national interest, this pernicious policy announcement. If it does not, the SJM will fight this sinister measure tooth and nail and organise the communities that are engaged in the retail trade to resist it. The SJM will take this issue to the people and ask them to vote against the ruling parties if they persist with this measure.
SJM plan The SJM will approach the Opposition parties, including the BJP and its NDA constituents, and the CPI(M) and its third front partners, and ask them to give a commitment to the nation to overturn this policy if they get the needed authority from the people in the coming election. The SJM sees this as a test of the BJP’s commitment to nationalism and the CPI(M)’s loyalty to the common man.