India's stores on big-box
frontier By Kanya D'Almeida
WASHINGTON - India, home to more than 44
million small retailers, many of them
family-owned, small neighborhood stores, is a land
renowned for its various wallas - small
traders who produce, hawk, repair or deliver just
about anything you could want at any hour of the
day or night.
But a recent push by some of
the world's biggest multinational corporations
(MNCs) like the US's Walmart, Britain's Tesco and
France's Carrefour to enter India's US$450 billion
consumer market could signal the swan song of the
country's traditional and beloved small business
sector.
Earlier this year, intense public
opposition halted the Indian government's decision
to open the sluice gates to increased
foreign direct investment
(FDI) from single- and multi-brand retailers,
prompting a spate of heated debate about the
possible impacts of such a move on the economy.
The final decision to allow unchecked
investment in a hitherto protected sector has been
tabled, but the battle for small retailers is far
from over.
Formerly lucrative markets in
Western Europe and North America are drying up,
the spending capacity of their middle classes
exhausted by years of consumption from the very
businesses that are now banging at the gates of
fresh marketplaces in the global South.
As
one financial crisis after another crashes over
the developed world, MNCs are looking elsewhere:
in the townships of South Africa, along the banks
of the Amazon, in the favelas of Brazil and
now in India's urban centers, which are teeming
with over 169 million potential customers in just
53 cities.
History repeats
itself? When Walmart initially began its
campaign to penetrate the Indian market, its
website promised to provide the country's
"underserved" market with a wider range of goods
at lower prices, while increasing efficiency,
reducing waste and creating jobs.
But a
closer look at the "Walmart effect" in the
birthplace of the world's largest private employer
pulls back the veil on a less rosy reality.
"The proliferation of Walmart across the
US has led to the lowering of income of over a
million workers," Deidre Griswold, a former US
presidential candidate and editor of the Workers
World newspaper, told Inter Press Service (IPS).
"It has the world's biggest computer
[system] and the largest fleet of trucks, both of
which it touts as examples of its productivity.
But what is the use of increased productivity if
it's not coupled with more leisure time and better
salaries for workers?"
The average "sales
associate" at Walmart earned less than $250 a
week, an annual income that lies well below the
US's official poverty line for even small
families.
"Walmart reflects the central
problem with capitalism, where 'productivity' only
means bigger profits for capitalists and further
exploitation of workers. Most Walmart employees
are only hired on a part-time basis, making it
impossible for them to claim unemployment benefits
even though they barely earn enough to survive,"
Griswold said.
Furthermore, the lack of
formal employment contracts for a majority of
employees "effectively crushes workers' collective
bargaining power and destroys what is left of the
unions".
Walmart has also been proven to
decimate local economies. According to some
estimates, for every Walmart that opens, 100
stores in the area are forced out of business.
Ten years after Walmart arrived in Iowa in
1990, "The state lost 555 grocery stores, 298
hardware stores, 293 building supply stores, 161
variety stores, 158 women's apparel stores, 153
shoe stores, 116 drugstores, and 111 men's and
boys' apparel stores."
The Economic Policy
Institute (EPI) found that Walmart was responsible
for $27 billion of the US's $235 billion trade
deficit with China in 2006. The total deficit
accounted for 1.8 million lost jobs, of which
Walmart was singlehandedly responsible for about
200,000 as a result of its imports from China.
Roughly 133,000 of these were
manufacturing jobs, one of the few sectors that
provides benefits and offers decent pay to US
workers with less than a college education.
Each of the 4,022 stores Walmart operated
in the US resulted in 77 workers losing their
jobs, mainly because of the company's huge deficit
with China.
Its ability to impact so
heavily on international trade has effectively
made Walmart a nation unto itself - already its
yearly profits exceed the annual gross domestic
product of Norway, the world's 25th-largest
economy.
Critics contrast Walmart's
success with the overall deterioration of the
standard of living in the average US household, 17
million of which were food insecure in 2010, the
highest number recorded in the US according to the
World Hunger Organization's annual report.
India - even more vulnerable? If
a single corporation has the power to render
hundreds of thousands of workers jobless in the
one of the world's wealthiest countries, it is not
too difficult to imagine MNCs' impact on India,
already home to well over 400 million poor people
by the most conservative estimates.
According to Jayati Ghosh, an economist at
the premier Jawaharlal Nehru University in New
Delhi, every job Walmart offers in India will come
at the expense of 17 or 18 small traders and their
staff.
With joblessness already on the
rise (total employment growth dropped from 2.7%
between 2000-2005 to just 0.8% between 2005-2010,
according to the latest National Sample Survey),
many argue that India can ill afford to open its
doors to mammoth corporations.
A quick
assessment of employment patterns among three
leading MNCs debunks the Indian Ministry of
Commerce's promise to create four million jobs
through its relaxation on foreign direct
investment in three years.
Tesco boasts
upwards of 490,000 employees in 5,380 stores
worldwide; Carrefour has just over 471,000 workers
spread over 15,937 stores; Metro, with just 2131
stores, hires 283,000 people annually; and Walmart
operates 9,826 stores staffed by roughly two
million people.
"If four million jobs are
to be created in India, Walmart (which averages
219 employees per store) will need to open over
18,600 supermarkets in India," Ghosh said. "If the
average of the four retailers [above] are
considered, ie 117 employees per store, over
34,180 supermarkets have to open in three years,
or 644 supermarkets in each of the 53 cities."
In an apparent attempt to "protect" small
retailers, the Indian government stipulated that
companies entering the market should invest a
minimum of $100 million, thereby supposedly
ensuring that foreign businesses would not compete
with small local stores.
But given that
Walmart's annual revenue is almost $400 billion,
it could easily set up a network of small- and
medium-sized stores to meet the needs of a diverse
clientele and thus nudge domestic retailers out of
the picture.
Ghosh also stressed the risk
of Walmart buying out local private-sector
retailers in order to secure the necessary
monopoly with which to completely dictate terms in
a newly acquired market.
"This is how the
global retailers have expanded their operations in
many developing countries in Latin America and
Asia," Ghosh said.
For example, "Walmart
entered Mexico in 1991-92 with a 50-50 joint
venture with the local firm CIFRA. By 1997, it had
acquired majority stake in the venture and
increased its stake to 60% in 2000. By 2004,
Walmart alone accounted for over 25% of all retail
sales in Mexico and 43%of all sales by the big box
retailers."
If, like the average Indian
consumer, the government wants to protect the
diversity and history of its smaller traders, it
will have to sacrifice Walmart in order to
safeguard its wallas.
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