Opening up of retail trade to foreign giant corporations

The Government of India is trying to mislead the toiling majority of people by claiming that capitalist monopolies in retail will help to control food prices. The real objective of the monopolies is not to provide essential items at affordable prices but to reap maximum profits at the expense of the producers. The real aim of the government is to enable this to happen. It does not want to accept its responsibility of ensuring that the livelihood of producers is secured, that food is available to people at prices they can afford through efficiently managed procurement and distribution and not allowing trade in essential items to be a profit making activity.

On 22 July 2011, a committee of secretaries of the central government approved the proposal to allow up to 51% foreign direct investment (FDI) in multi-brand retail.

So far the policy on foreign investment did not permit foreign monopoly retail giants like Wal Mart of America, Carrefour of France, Tesco of England and Metro of Germany to open retail stores in India.  The policy allowed 100% FDI in cash & carry and wholesale trading (which is business-to-business) and 51% in single-brand stores (such as Gucci or Apple). The proposal will now go for approval to the Cabinet Committee of Economic Affairs, headed by the Prime Minister. In our current system of governance, this major policy change, affecting the livelihood of crores of people, does not need the approval of even the Parliament.

This move has come against the backdrop of several contradictory forces that have played out in this business, which is what prompted the government to allow foreign monopolies in the retail sector to enter in phases.

There has been powerful pressure from foreign retail multinationals through their governments on the Indian government to open up the retail market for them because they see a huge opportunity for profit and growth. There has been strong, sustained and open opposition among the working people, traders and shopkeepers to the entry of Walmart and other foreign monopolies in retail trade. At this point, Indian capitalists are welcoming foreign chains, as they hope to get capital as well as to learn the business practices to make profit. This is based on the experience of Indian retail monopolies in recent years. Initially, they wanted the field to be protected from foreign competition, but now they have found that it is not easy to make profit in retail business. Reliance Retail is not profitable even after many years. Other big retail corporations like Subiksha and Vishal have gone bankrupt. Giant retail business needs massive amounts of capital and need to wait a long time to begin to make profit.

According to the latest proposals, foreign monopolies will be first allowed to set up their giant stores only in cities with population of more than 10 lac. They will be able to operate in 36 largest retail markets of the country immediately. While this may seem a restriction, in fact it is exactly what the foreign retail multinationals want as a start —to set up business in the largest towns of our country. The purpose of this gradualism is to restrict and divide the mass opposition.  Soon the whole country will be thrown open to them.

State governments have also been authorised to decide if such retail stores should be permitted in their state. Given the competition among state governments to attract FDI, it is expected that foreign monopolies and big Indian capitalists partnering them will soon be capturing the retail markets. Bharati Telecom group is the partner of WalMart and Tata group is the partner of Tesco.

The size of the Indian retail market, which has primarily been in the hands of traders and small shop keepers, is estimated to be $410 billion, nearly 30% of GDP and is seen as the next big area for loot by both foreign and Indian capitalists. They together and separately want to monopolize the entire cycle from production to distribution up to the retail level. The present share of organized retail, controlled by big companies is only around 5 percent but they hope to increase it to 20 percent in next ten years with the help of the proposed relaxation in the policy.

This development spells further disaster for the millions of producers in our country. Already, in the agricultural sector, there are several crops that are not covered by government procurement. In recent years, with the government washing its hands off Public Distribution of essential food grains and fuel, the insecurity of the producers has increased with declining procurement at guaranteed prices. Now with monopolies taking over the whole distribution chain, they will completely control what and how much the producers will grow and what they can sell it for. The producers whose livelihood is already under threat will be completely at the mercy of these monopolies, who have no concern for anything but maximising their profits. They will procure from anywhere in the world where the prices are the lowest or where they can drive the prices down through their monopoly power.

Retail monopolies, whether Indian or foreign, are also a threat to the livelihood of crores of people who are engaged in running small to medium level retail trade across the country. Retail trade in the country is one of the largest source of livelihood in the country after agriculture, with nearly 1.2 crore retail stores in the country. Whenever the government tried to relax the entry of big monopolies in trade, working people, shopkeepers, hawkers, vendors, etc. opposed the move tooth and nail.

In order to blunt the opposition of people, the ruling class has now come up with a new argument.

People of the country have been reeling under the pressure of high and constantly rising food prices for the last few years. Now the government is using the pressure and anger of people about high food prices to push through the new policy of FDI in retail trade. The government is arguing that the only way food prices can be brought down is by opening up retail trade to foreign monopolies. According to the proponents of FDI in retail, foreign retail monopolies will invest in setting up cold storages and warehouses, set up centres for collection of farm produce directly from farmers and give higher prices to farmers as they will by-pass middlemen. This will lead to reduction in food wasted today thereby make more food available in market and also motivate farmers to produce more food as they will earn more for what they produce.

It cannot be denied that economies of scale can bring about lower costs in distribution and hence lower retail prices. The huge difference between wholesale and retail prices can be reduced. However, the truth is that the retail monopolies, whether foreign or Indian will be driven by their aim of maximum profit and not by what is necessary to be produced or to be made available to the working masses at affordable prices. Whatever is saved from elimination of middle men is appropriated by the monopoly houses. If the government was really serious about resolving the issue of rising prices, then it would nationalise wholesale trade, restrict private retail trade to non-essential items. It would invest in warehouses for preserving the produce in good condition, cold chains to transport the same and a public distribution system to ensure that the working masses can access these essential items. It would also ensure that the savings that are realised would be used to ensure the security of livelihood of the producers.

The government had similarly used the economic crisis of 1991 to push through the New Economic Policy of globalization through liberalization and privatization. It is this policy which has pushed food prices to international levels while wages of working people have remained at local level. Lack of action on the part of the government to control food prices makes us suspect that it was deliberately done to create a crisis which could be used to push the retail agenda of big Indian and multi-national bourgeoisie.


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