People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 49

December 04, 2011



FDI in Retail Trade

Reverse Decision


AS we go to press, the logjam in parliament threatens to disrupt the proceedings of this winter session.  On the last occasion a whole session was wasted because of the government’s obduracy in not accepting the demand for a joint parliamentary committee to probe the 2G spectrum scam. Eventually, the government accepted the demand and constituted the JPC. If such wisdom had prevailed earlier, the whole session need not have been wasted. Such is the disdain and contempt of this Manmohan Singh government towards parliament and parliamentary democracy.


On this occasion, the government yet again brought the situation to such a pass by the decision of the union cabinet to permit foreign direct investment (FDI) in multi-brand retail sector, opening the way for international supermarket giants like Walmart, Carrefour and Tesco to open their shops in India. 


While the union cabinet does have the right to take executive decisions, it is unprecedented that such decisions are taken and announced when the parliament is in session.  This runs completely contrary to the spirit of parliamentary democracy and our constitutional scheme of things.  It is, therefore, not unreasonable that parliamentarians, cutting across political parties, have demanded that this decision ought to have been taken after the issue was discussed by both the Houses.  Once the decision has been taken, any discussion on this issue is simply infructuous. Unless, of course, the government is willing to reverse this decision and allow a meaningful discussion in the parliament to determine what decision India must take on this score. 


It is noteworthy that in the past it was the Congress Party that seriously objected to the government announcing policy decisions when the parliament was in session. In 1989, which even the media reports, the current home minister, moved a privilege motion against the then prime minister, V P Singh on the basis that the government announced the decision to establish a paramilitary force named National Rifles when the parliament was in session. Though the privilege motion was not admitted, the then speaker Rabi Rai ruled that the government decision was a breach of propriety. Later, in 1999, when Congress MP Santosh Mohan Deb moved a similar motion against PM Vajpayee, who announced resignation of cabinet ministers outside the House, when the parliament was in session, the then speaker GMC Balayogi gave a similar ruling.


Today, however, the Congress party has grossly violated this spirit of parliamentary democracy. Worse, the prime minister speaking at a function of the Youth Congress not only justified the government’s decision but went on to list the merits of such a decision. Amongst others, he mentioned that this will lead to an increase in employment, a reduction in prices and better remuneration for the farmers.


This sounds eerily similar to the propaganda that was built up to justify the entry of multinational Enron to produce electricity. It was hailed as a boon to India’s ailing energy sector and ushering in an era of energy security. Likewise, justifying the surrender to US imperialism the Indo-US nuclear deal was paraded as a boon for farmers who will receive uninterrupted electric supply and for children who could study at night without power-cuts. While Enron had to beat an ignomous exit from India, the nuclear deal has brought no benefit to the country or the people but has forced India to compromise on its independent foreign policy.


The opposition to allowing FDI in the retail sector began from the moment when such a proposal was first announced in the 2004-05 budget speech.  Given the firm opposition by the Left parties, whose support was crucial for the then UPA-1 government, this was shelved.


Opposing such a proposal, the Left parties, in a note to the then UPA-Left Coordination Committee in October 2005, highlighted the fact that retail trade, on the basis of a conservative estimate,  contributes around 11 per cent to India’s GDP and had then employed over 40 million people.  According to the Fourth Economic Census 1998, retail trade accounted for 42.5 per cent of the total non-agricultural own account enterprises in rural areas and 50.5 per cent in the urban areas.  This translates into 38.2 per cent in rural and 46.4 per cent in urban employment in such own account enterprises.  Therefore, crores of Indian people are today dependent upon retail trade for their livelihood. Undermining this by permitting the entry of multinational giants will only push millions into poverty and misery. This will only add to the woes of the `real India’ where over 80 crores of people eke out their survival on less than Rs 20 a day. 


Various studies have shown that the entry of supermarket giants would lead to a fall in prices and increase in employment is a myth. In fact, a report of a committee of the US House of Representatives as early as February 2004 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. The success of a business need not come at the expense of workers and their families. Such short-sighted profit-making strategies ultimately undermine our economy.”


Clearly, this decision smacks of a commitment made by prime minister Mahmohan Singh to president Obama whom he recently met at Bali. Given the serious global economic crisis and double dip recession, international finance capital is looking for new avenues for its profits. The Indian retail market is a very lucrative option for it. This decision will only permit profit-maximisation for international capital at the expense of the Indian people and Indian economy.


Further, that this decision will help arrest the significant fall in the value of the rupee by sending a positive signal to international financial capital and domestic capital to reverse its trend of moving towards the US dollar as its reserve currency, will remain at best an illusion. Such a trend is happening because of international developments like the severe crisis in the European Union threatening the very existence of Euro as its common currency and the severe economic depression in Japan that has lowered the value of the yen significantly. The government’s argument is therefore only a cover to justify the opening up of India’s retail sector for international capital to maximise its profits.


Various studies have shown that as far as the role of FDI driven supermarkets in containing food inflation is concerned, the evidence from Latin America (Mexico, Nicaragua, Argentina), Africa (Kenya, Madagascar), and Vietnam, Thailand shows that the supermarket prices for foods and vegetables and other basic food were higher than those in traditional markets.


That these giant chains will increase employment is belied by the experience of Vietnam. While 18 jobs were created by a street vendor, 10 by a traditional retailer and eight by a shop vendor, a supermarket needed just four persons for the same volume of produce handled. These supermarkets employed 1.2 workers per tonne of tomatoes compared to 2.9 persons employed in the traditional channel. This experience is, in fact, universal.


That the producer will get a better price because of these retail giants, is once again a myth. The CPI(M)’s note to UPA-1 mentioned a study that showed that a cocoa farmer from Ghana gets only 3.9 per cent of the price of a typical milk chocolate bar while the retail profit margin was around 34 per cent. A banana producer got around 5 per cent of the final price while 34 per cent went as profits for the retailer. Similarly, 54 per cent of the final price of a pair of jeans goes to the retailers while the manufacturing worker gets only 12 per cent.


The government today argues that its decision will be implemented only if the state governments agree. The state governments, thus, we are told are at liberty not to implement this decision. Does the Manmohan Singh government want the country to believe that outside of the states this decision will only be implemented in centrally administered union territories like Andaman and Nicobar and Lakshadweep!


Such merits of the case will have to be discussed in the parliament and this can only happen if the government first rescinds this decision and allows a meaningful discussion. This must be followed by a commitment by the government that it shall take a decision upholding the sense of the House.


Thus, whether this winter session can be salvaged, or, whether it would be allowed to be wasted depends crucially on the willingness of the government to accede to such a reasonable demand.  This winter session had, on its agenda, the passage of very important legislations including the Lokpal Bill.  It is learnt that the parliamentary standing committee examining the draft Lokpal Bill has completed its deliberations to recommend its suggestions to the parliament.  Whether this bill will see the light of the day in this session, as promised by the government and by a unanimous resolution of both the Houses to this effect will, thus, crucially depend upon the government’s response to reverse the decision of the union cabinet on permitting FDI in the retail sector. 


If this does not happen, then very serious and legitimate doubts about the intentions of the government arise. Such a disruption of this winter session would permit the government to conveniently avoid being both embarrassed and cornered on issues of price rise, corruption and black money apart from the contentious issues involved in the Lokpal Bill.  Recollect that during the last two decades, the Lokpal Bill was brought before the parliament on more than one occasion, but never saw the light of the day due to, amongst others, disagreement on whether the prime minister must be included in its ambit.  The disruption of parliamentary proceedings in this session can well allow such procrastination to continue denying the country an effective institution of Lokpal.  It is the government that is today responsible for disrupting the parliament.


The ball, thus, is in the government’s court.  If it is committed to the welfare of the aam admi, then it must break this logjam by reversing the cabinet decision on FDI, discuss the matter in the parliament and take a decision in accordance with the sense of the House. 


While this battle will continue in the parliament, the pressure must be mounted through popular struggles to pressurise the government to reverse this decision. The call by the traders associations for a hartal on December 1 was supported by various trade unions and political parties. Such protests must be further strengthened in order to prevent the wholesale sell out of India in the name of opening up its retail sector for the profits of foreign capital at the expense of the livelihood standards of our people who are already groaning under the severe assault of relentless price hike.


(November 30, 2011)