People's Democracy

Unitedly Resist FDI in Retail

The Polit Bureau of the Communist Party of India (Marxist) issued the following statement on November 25, 2011.

THE CPI(M) strongly opposes the cabinet decision to allow FDI in multi-brand retail. It will destroy the livelihoods of crores of small retailers and lead to monopolisation of the retail sector by the MNCs. Coming in the backdrop of persistent high inflation, growing joblessness and agrarian distress, this decision shows the utterly callous and anti-people character of the UPA government. The government seems to be more eager to meet the demands of the US and other western governments and serve the interests of the MNCs like Walmart, Tesco and Carrefour, rather than protect those of its own people.

The conditions imposed by the government are insignificant and will not provide any effective safeguard to any section. The investment floor of Rs 520 crore (100 million USD) is insignificant for giant retailers like the Walmart, Tesco, Carrefour etc, which are multibillion dollar companies. The restriction of foreign retail outlets to cities of over 10 lakh population is also meaningless because those are precisely the places where the MNCs want to go, to tap the lucrative segment of the market. The big cities are also where small retailers are mostly concentrated.  

India has the highest shopping density in the world, with 11 shops per 1000 persons. There are over 1.2 crore shops in India employing over 4 crore persons. 95 per cent of these shops are run by self-employed persons in less than 500 sq ft area. These small shopkeepers in the urban areas are going to be hit the hardest with the entry of the MNC retailers. International experience shows that supermarkets everywhere invariably displace small retailers. Small retail has been virtually wiped out in the developed countries like the US and Europe. South East Asian countries had to also impose stringent zoning and licensing regulations in order to restrict the growth of supermarkets, after small retailers were getting displaced.

The condition for making at least 50 per cent of the investment in ‘backend’ infrastructure is being cited to argue that this would lead to more cold chains and other logistics, benefiting the farmers. International experience has, however, shown that procurement by MNC retailers do not benefit the small farmers. Over time, they receive depressed prices and find it difficult to meet the arbitrary quality standards. Allowing procurement by MNCs is basically an attempt by the Government to whittle down its own procurement responsibilities. This will have an adverse impact on food security.

The small manufacturers will also get squeezed. Predatory pricing by the MNCs will eliminate competition and establish their control over the supply of a range of commodities, including essentials like food. The domestic market will get flooded with goods procured from foreign countries. The claim that this will bring down retail prices for consumers is utterly bogus. Great monopoly power and storage capacity for the big corporates will rather promote hoarding and profiteering.

Over the last several years the MNCs involved in cash and carry trade in India, which had been permitted earlier by the government, have routinely violated the prohibition of directly selling to consumers, but the government did nothing to stop them. Similarly, the so-called regulatory measures based on a system of self-regulation will also be inconsequential, especially since there is no mechanism to ensure the enforcement of the conditions.

The MNC retailers and foreign governments have been pressurising the centre for opening up this sector since long. It was the opposition from the Left parties which had prevented the UPA-1 government from taking this move. The UPA-2 government has now fully succumbed to those pressures from vested interests.

The CPI(M) calls upon all sections of the people and political parties to jointly oppose this move. The Polit Bureau of the CPI(M) calls upon all its party units to organise protests against this anti-people step and defend the crores of small retailers and their families, whose livelihood is under threat.