People's Democracy

PROVIDING a definition of the retails in 2004, the High Court of Delhi stated that retail means a customer could directly use the goods.

Retail sale can, in general, be divided into two categories --- organised and unorganised. The licensed retail sellers who are registered for personal retail sale and pay sales tax and income tax are called organised retail sellers. The unorganised retail sellers are those who sell goods by traditional methods at low prices, e.g. grocers, local cigarette shop owners, food hawkers etc.

Graham Bannack’s Dictionary of Economics defined foreign capital. It means buying a local company or starting a new project by foreigners; i.e. investment or starting of production by capital from abroad.

THE BIG

NAMES

The amount of retail sale in Indian market is now worth 28 billion dollars per annum, which is what makes the retail sale so attractive to foreigners. Some of the big sharks who are interested in entering this area in India are as in TABLE I alongside.

TABLE I

Seventeen such multinational retailers are now dominating the world. In 2004, 20 per cent of their total sales took place in 23 countries. Since the market in their own countries is contracting, they are eagerly looking forward to the markets abroad, especially the Indian market.

Of these, the WalmMart has 9600 stores in 26 countries --- 4400 in the USA and 5200 abroad. In the USA, 1.4 million people work for it and thus the WalMart is the biggest job generator after the American government. WalMart has 2.1 million workers all over the world, and it was placed at the first position in 2011 in the Fortune Magazine in terms of profit. The amount of its sales in the USA is 260 billion dollars while it is 109 billion dollars in other countries. About 8 billion people do their shopping from WalMart stores every year. In terms of total assets, WalMart is the 23rd largest company in the world, lagging behind only 22 countries.  This company, started in 1962 by Sam Walton in Arkansas, is a symbol of American capitalism. WalMart stores are the last margin of the company, but each of its arms is long. As Debasish Chakraborty pointed out in a Ganashakti article, every agent working for the WalMart is bound by a contract of not disclosing any information about the company.

The WalMart brings huge pressure upon the manufacturers and suppliers to make them reduce their prices. The pressure is so great that the manufacturers are gradually compelled to lower their profit down, till ultimately it becomes impossible for them to run business.

A survey was conducted in Mumbai in 2007 about the effects the recently established malls belonging to some Indian capitalists were having on small businessmen of the city. The survey was conducted in Lower Parel where shopping malls were established three years before the survey. The latter found out that 89 per cent of the small businessmen experienced a steady decline in sale. In Bulabd or Vandas, where the shopping malls were less than three years old, 93 per cent of the shops saw decreased sale. The sales decreased by 18 per cent in the first two years and 73 per cent in the third year. The hawkers sitting near the malls “hawkers consisted of mainly youth and women. The police, at the request of the mall authority, chase these hawkers often. The number of licensed hawkers is two hundred and fifty thousand in Mumbai. The unlicensed ones are innumerable (Anuradha Kalhan, EPW, June 2, 2007).

Some news channels say that the big companies sell goods at low prices which benefits the consumers and that we should go by the interest of the maximum, which means consumers. It is true that consumers are maximum in number, but do all of them buy things from shopping malls? The reality is otherwise. A central government report states that 77 per cent people cannot spend more than 20 rupees per day. These are the people who do not buy goods from supermarkets. In fact buyers coming to the shopping malls are in the main the middle and upper middle classes.

ATTRACTION OF

INDIAN MARKET

In India, 300 million citizens are high-income people spending only a small part of income on food and 52.57 per cent of their income on non-food items. These very 300 million people are a big attraction for the giant retailers.

Of most attraction to the retail sellers is the fact that the Indian consumers’ list of priority shopping is changing. Demand of goods other than food is increasing. Rural families used to spend 45 per cent of their income for non-food commodities in 2004-05. The number increased to 46.4 per cent in 2009-10. For urban families, the number increased from 57.5 per cent to 59.3 per cent (Tusharkanti Mohanti, Business Economics, October 16-31, 2011).

The NSS reports show an increasing trend of spending on clothes, drinks and facilities. The spending by a rural family on consumer goods increased by 64 per cent from 2004-05 to 2009-10. The number was 68 per cent for urban families.

Are the Indian consumers shunning the market in the current scenario of recession? Is any insecurity lessening their interest in shopping? Market surveyors do not agree. Extensive studies are there on the Indian consumers’ confidence, will to spend, sectors of interest etc. In the second half of 2011, India topped the list of consumer bases in the world. India gained 126 points. Philippines was the second with 116 points and Indonesia the third with 112 points. China with 105 points was far lower in ranking (source: Nielson Global Online Consumer Confidence Survey).

According to a report of BSI India, retail sale will double in the next four years --- from 395.96 billion to 785.12 billion dollars.

Besides, the statistics of sale of domestic goods showed a good trend. The private final consumption expenditure (PFCE), based on the second phase count of 2011, increased by 6.2 per cent over the previous year. The result was based on the consumer price index.

ISSUE OF JOB

GENERATION

As for job generation, the NSS report of 2009-10 showed that it was declining in India in last five years since 2004-05. The still more significant was the decrease in labour force participation. This is the lowest since 1993-94. The Indian export industry has been damaged since 2008. Job generation is going down both in rural and urban areas, with only a mild recovery in construction and retail sale. More significantly, employment decreased in the last five years in non-agricultural sector, especially for the women. This force went into the retail trade sector. See TABLE II alongside.

TABLE II

Rate of Employment in India

                                                                                                                                       (Source: NSS Report 2009/10)

The NSS report that the number of workers in service sector is increasing; a large portion of them are involved in retail sale.

According to the NSS report, Indian service sector, which includes wholesale and retail trade, involves 44 million people, which is a significant part of the country’s workforce of 459 million.

Some people say that FDI in retail would be limited to urban areas only. But we do know that these cities have the maximum people involved in trade. Out of the 44 million people stated above, 26 million live or work in these cities. The decrease of employment in agriculture and other sectors drives more and more people to get involved in retail trade. Thus this is a central area of employment, though in very risky in terms of safety of job (C P Chandrasekhar in People’s Democracy, December 4). But the government of India’s line is also clear. It decided in 2006 that 51 per cent upper limit will be restricted to only one brand. Now it has decided to allow 100 per cent. It won’t be surprising if the giant retailers invaded even the smaller cities.

As for the commerce minister’s claim that foreign investors in retail would purchase 30 per cent of the goods manufactured by small and medium firms, a problem lies there. In actual fact, this rule is meaningless because these small and medium firms may not necessarily be Indian.

Another argument is that increased transportation of goods to retailers would mean more job generation. This is called backhand investment. But the reality behind these attractive words is clear from the American experience.

In the USA, Huffy bicycles were very popular for a long time. Huffy used to sell 20 models to WalMart and a year of massive sales saw every Huffy product purchased. At one stage, WalMart demanded 900,000 bicycles while the factory could produce only the half. In an unprecedented move, Huffy engaged its competitors in the manufacture of its models and even took the responsibility of supplying the competitors’ bicycles to WalMart. But this could not save Huffy. After 1999, the company did not make any bicycle in the US; it only imported those from Asia. Huffy became bankrupt in 2004, and now 95 per cent of the American bicycles are exported from China (Charles Fishman, The WalMart Effect). Thus the WalMart produced unemployment by the Huffy workers’ retrenchments.

REAL-LIFE

EXPERIENCES

As for the logic that lots of job generation will take place in the backend industries, a Canadian professor, Leonie Sandar Cork, working at the Columbia University, wrote the following:

“Seven years back WalMart asked permission to open a big store in my city, Vancouver. It started a debate among the progressive planners of the city. Will this be good or bad? The good side is that the store would provide cheap commodities for the people. On the other hand, they would evict the small businessmen. A research-based discussion took place at the California University in 2004 spring. That time WalMart grew to be a large company selling the third world commodities in the USA. The issue of the discussion was its effect on the local people and how the company deals with its employees.

“The first conclusion was that the suppliers to WalMart earn $8.5 dollars per hour, i.e. 14 thousand dollars per annum which is one thousand less than the poverty line. That is the income of more than half of the employees who are compelled to do that for selling goods at cheap prices.

“The second conclusion was that WalMart does not allow its employees to form a union. A big American union, Union of Food and Workers (UFCW), could not form a trade union in the WalMart stores. Each store manager brought out a notice stating that no union would be allowed, the manager is entitled to have an eye on the workers who were not allowed to talk with each either. The manager has a hot line with the Arakar head office. With the faintest trace of a union the company sends its own strike breakers to the workers. The next day the workers are compelled to take part in a meeting where anti-union decisions are taken. This is compulsory. Only once a union was formed at the butchers’ department in Texas. One week after the formation UFCW decided to join there. The department was then and there shut down and the workers retrenched.

“The third conclusion was the WalMart workers are constantly under surveillance in order to identify those wasting time by chatting.”

The European Union also expressed concern three years back. Many of the members of European Parliament are vocal against the misuse of powers by these retail giants, and asked the Director General of Competition to inspect how the reckless centralisation of supermarkets affects small businessmen, suppliers, workers and consumers.

In a declaration on February 19, 2008, these MEPs said that a handful of big retailers are dominating the EU markets, resulting in the transformation of retailers to door guards, controlling the farmers and suppliers. The big supermarkets are misusing their economic power, affecting the level of job generation, health and safety. The relation between retailers and suppliers is getting changed. Consumers are losing diversity of commodities and losing their cultural heritage. Some EU countries passed laws to curb the trend, but the big retailers are doing business across the margin. This makes an EU law essential.

The retail giants’ impact on Europe is clear from the lakhs of common people who recently hit the roads as a part of the Occupy Wall Street movement, protesting against the neo-liberal greed.

As a majority of Indian parliamentarians are opposed to it, the government in India felt forced to stall the process. But the threat remains. So the battle against the retail giants is to be fought in the streets.