People's Democracy

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


No. 50

December 16, 2012




Not Conducive for Production, Job Creation or Technology


Below we reproduce a translation of the intervention made in Rajya Sabha by Sitaram Yechury, leader of the CPI(M) group in the house, during the discussion on permitting the foreign direct investment in multi-brand retail trade on December 7, 2012. Yechury spoke in Hindi in the house.


THE first thing that I want to make clear is that it is not a dispute concerning communalism and secularism; rather it is on an issue of economy. We had opposed the decision which the erstwhile BJP led NDA government had made on this issue, and we are opposed to it today as well.


The prime minister is himself sitting here and he had announced the intention to permit FDI in retail trade soon after the UPA government was formed and we were supporting it from outside. It was announced in the 2004-05 budget, we expressed our objections to it. On January 11, 2007, the Congress president too had written to the prime minister that the issue should be seriously pondered over. These were the reasons its implementation was deferred. Hence nobody has a right to doubt our constancy. We oppose this policy, no matter whosoever is in the government.


We are not opposed to foreign capital per se; it may come to this country to boost our economy, but on three conditions. First, there must be real increases in our productive capacities, and not just a change of ownership of the productive assets which is not going to benefit our country. Also, the incoming of foreign capital must create new job opportunities and, thirdly, there must be technological developments in the country.


These are the three conditions in which foreign capital would help us, but none of these conditions is met by inviting the FDI in retail trade. FDI in retail involves a commercial activity and does not add anything to the productive capacities in the economy.


Nor have we been told that FDI in retail would directly affect the job of more than four crore people --- this was the figure given by the Economic Census of 1998 --- and this means that the livelihood of 20 to 25 crore people would be jeopardised by this decision. This kind of commercial activity, this kind of foreign capital poses a threat to the life and future of so many people. We could have supported this decision if it had been in the interest of national economy and our people, but no, they are going to harm us only.


As for the bombastic claims the government has made about the FDI, I recall the huge advertisements the government had issued regarding the Indo-US nuclear deal in 2008. While it was then claimed that students or peasants would get enough power as a result of the deal, what has happened after four years since then is that the country is suffering 15 or 16 hours of power cuts everyday.


So let us just forget what the government said through ads. The leader of opposition was just telling about the government’s assurances last time, and I don’t want to repeat it. However, Mr Anand Sharma, the commerce minister, is correct in saying that no benefit would come out of a discussion, as we are going to oppose it in any case. But what happened to your promises about consensus building? A consensus could have been built if you had called for an all-party meeting; the prime minister has indeed adopted this approach on some issues; but you did not fulfil your promise.


One point you harp upon is that FDI in retail would create new jobs. But what is the truth in such a claim? There have been several studies about it in the world; what do they say? I just want to read out a report of the Committee of the US House of Representatives, submitted way back in 2004. I quote:


“Walmart’s success has meant downward pressure on wages and benefits, rampant violations of basic 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.”


This is the report of the US House of Representatives; and it is the same US companies that we are today trying to promote and want to bring in.


Let us take the example of Walmart. It is the number one corporate in the world today, with a record profit. It is the largest corporation, the largest commercial entity that the world history has ever known. Its profits today are US $36 billion a year. It works out to US $20,928 --- nearly US $21,000 a minute! You say that this sort of companies is going to come here. But, what the state of they employees? Out of 1.6 million employed by the Walmart, only 1.2 per cent are living above the poverty line. All the rest are below the poverty line in these countries. These are the figures that you have. Now you say that because of their coming there will be an increase in employment! What do the international studies show? I will refer to only one such study that was conducted by a UN agency. It says: “While 18 jobs were created by a street vendor, 10 by a traditional retailer, 8 by a shop vendor, a supermarket needed just 4 persons for the same volume of produce!” The supermarket employed 1.2 workers as against nearly 3 persons employed by a retail trader. Thus, there is not going to be an increase in employment; that is a myth. There is going to be a contraction of employment.


Secondly, you have talked about better prices for the farmers. The leader of opposition was saying that a milkman gets 68 per cent of the milk price but the experience of the Amul dairy cooperative is that the milkman gets 90 per cent. I would quote one of the studies about the international studies of cooperatives. It says that a cocoa farmer in Ghana gets only 3.9 per cent of the price of a typical milk chocolate while the retail profit margin is 34 per cent. A banana producer gets only 5 per cent of the final price while 34 per cent goes as profit to the retailer. Similarly, 54 per cent of the final price of a pair of jeans goes to the retailer while the manufacturing worker gets only 12 per cent. The manufacturing worker gets only 12 per cent and the sweetshops that these companies run get 54 per cent. Today Walmart has accepted the responsibility that its garments are being made in the same factory where a fire accident took place in Bangladesh and more than 110 people died.


No respect for safety standards, no respect for anything, only profit maximisation, and yet you say that there will be better prices for farmers! This is the international experience. This is the experience that we have had and this is the experience we have heard others talking about --- monopoly and monopsony. Since we have heard this argument, I am not going to repeat it --- that with a single buyer and a single seller, chances of prices rising are much more than what you have in a big multifaceted market in the retail trade. Therefore the entire argument that there will be better prices for farmers is just a myth.     


They also say the prices will come down for the consumers’ benefit. I would refer to a study conducted in all the countries of Latin America --- in Mexico, Nicaragua, Argentina, etc --- and in Kenya, Madagascar, Vietnam, Thailand etc. It says the prices of your food items and vegetables in Walmart and in supermarkets are higher than in traditional markets. Now if you allow these companies to come here on the plea that farmers will get better prices and consumers will have to pay less, it does not simply tally with the global experience.


The fourth thing you are saying is that people’s incomes will rise as these supermarkets give better prices and better wages. This was said on earlier occasions too. But the US Select Committee report, which I am quoting here, says that wages actually get depressed. If the average wages rise by 2.9 per cent, there is a rise of only 1.2 per cent in the Walmart. This comes from a study by the US Senate.


Thus, workers are not going to get more jobs but less; farmers are not going to get higher but lower prices; consumers are not going to pay less but more; and the employees are not going to get better wages. All these contentions have proved wrong.


There is one more point. The assurance is that wastage would get reduced. This is being said on the basis of inflated figures of wastage. But who is going to create the infrastructure for us? Our government is not able to do it. We are unable to create the cold storage facilities. But will foreign companies come to create all this? You say you have left it for the states to decide. But if the states allow a retail chain to operate, which chain they would get to create the cold storages? Whom are you misleading? Secondly, if there is a change of regime in a state, can the decision be reversed? What guarantees you have? Whom are you inviting amid this uncertainty? You cannot have storage or backend facilities unless you have a chain. All this needs an infrastructure which we are yet to create. As we don’t have power, nor roads, where will the backend infrastructure come from and who will bring it? This too is an illusion. Thus the fact is that all the five points about the FDI in retail trade, and its supposed benefits for the country and its economy, are hollow and we believe that the result would be just the opposite.


That is why we urge the government to rethink on the issue. We had opposed the proposal in 2004 and the government did not move about it since then; so you have to tell the nation why you are so eager to allow FDI in retail now. They say our trade deficit, the excess of imports over exports, has gone up to 70 billion dollars. The government says there are only two ways to reduce this difference --- by allowing foreign capital or by contracting loans from outside. However, as our fiscal deficit has grown so high that we cannot contract foreign loans, the only option left for us is to allow foreign capital. But which kind of foreign capital would come here to bridge this 70 billion dollars deficit?


The truth is that the profits of foreign capital would definitely go up here, and the Walmart is the biggest profit-making company in the world, but what will be its cost for us? As I said, prices for consumers would go up, unemployment would go up, but neither farmers nor consumers would benefit. The policy of the government is thus directly to the benefit of foreign capital, and that too at a time when a severe economic recession is going on in the world and consequently the avenues of profit-making for these companies are getting narrowed. But why the people of our country must be so much burdened for the sake of these companies?


This situation requires that the government must have a rethinking and ponder over what was said eight years ago. We had opposed the proposal at that time, and you people had deferred it after seriously thinking over it. The Congress president too had written a letter to the prime minister on January 11, 2007, in this regard. The need today is that the government must desist from any such step as is not in favour of our people and our economy. As for us, we will continue to oppose this move, as we stand by the people, in favour of our national economy.


Our last point is about the fiscal deficit that is being quoted as a justification for allowing FDI in retail trade. Last year you announced a tax concession of 5,28,000 crore rupees, and the fiscal deficit went up to 6.9 per cent of the GDP. You said you should have given a tax concession of only 5,22,000 crore rupees, but you have given more. It means that you had given Rs 6,000 crore more than what you wanted to give as concession. Yet the growth in the manufacturing sector went down from 6.7 per cent in July 2011 to 0.1 per cent in July 2012! This means the growth rate is going down, no matter how much you give as concession. Our industries are not growing because the purchasing power in the hands of the people is shrinking. You cannot contain the fiscal deficit unless you raise the people’s purchasing power. This requires investment in and creation of infrastructure, jobs for the people, construction of roads and wells and the like. This is what the country needs today. This would raise the people’s purchasing power, boost the economy, reduce the deficits and make the country progress.


Today, as I said long ago, we have two types of India in our country --- a Shining India and a Suffering India. When people said they had got bored with it, we said okay, we have an IPL India and a BPL India. Now we say we have an India and a Bharat. But, whatever the terminology, the fact is that disparities are growing and the burdens on the common people are growing. It is in view of all these facts that we urge the government to desist from allowing FDI in retail trade, and we also appeal to the other parties to view this question not as one of communalism versus secularism, but decide their stand on the basis of what is in the country’s interest.