KOLKATA/NEW DELHI - Thousands of
shopkeepers in Sir Stuart Hogg Market in Kolkata,
the business hub of eastern India’s biggest city,
are all talking about one thing: what they will do
when multinational companies invade their ancient
marketplace.
Also known as the New Market,
this shopping center was opened in 1874 when
Kolkata was still the capital of British India,
and has since been a haven for local vendors and
traditional retailers.
Now its streets are
abuzz with questions about the impact of Prime
Minister Manmohan Singh’s recent decision to pass
reforms that will allow 51%
of foreign direct investment (FDI) in multi-brand
retail, effectively opening India's many doors to
giant supermarket chains and other multinational
retailers.
Singh's government says its
decision to allow investment in the country's
retail, aviation and broadcast sectors is a bid to
revive growth and confidence in Asia's
third-largest economy.
But local retailers
feel it will pave the way for big brands like
Walmart, Tesco and Carrefour to exploit the huge
Indian consumer market, estimated at roughly
US$500 billion.
"I am absolutely against
it [the reforms] - it will kill us," said
Rajkumar, a retailer in south Kolkata's Dhakuria
whose cramped shop boasts every stationery product
imaginable. "When a Spencer's supermarket [a
leading retail chain in India] came up in our
neighborhood South City Mall some years ago it
definitely hit our retail shops since we have no
sprawling space to allow customers to cart
purchases in trolleys and shop in style. Now FDI
in retail will be a final blow," he said.
Opposition The announcement last
month sparked a strong backlash from the ruling
coalition's second-biggest constituent, the
Trinamool Congress, which announced withdrawal of
support for the Singh government over the issue
and ordered all its central ministers to resign.
The Confederation of All India Traders
(CAIT) is also extremely concerned. According to
Anil Sharma, CAIT's FDI research committee
convenor, a few retailers might prosper as result
of the reforms but many others will perish.
"The government must clarify how [the
reforms] will impact traders, farmers, small and
medium-sized enterprises and consumers," Sharma
told IPS. "There should be a regulatory authority
with enough teeth to ensure that small traders do
not suffer and that [adequate] cold storage
facilities and warehouses are constructed to ramp
up the infrastructure."
According to
Sharma, the government's prediction that FDI in
retail will create around 10 million jobs in three
years, with four million jobs created directly and
the rest in backend logistics, is "highly
imaginative".
"If four million jobs are to
be created in India in three years, even Walmart,
which has the largest average number of employees
per store, will need to open over 18,600
supermarkets in India, which means 644 retail
stores in each of the 53 metropolitan cities where
they are permitted to operate.
"Global
experiences of organized retail have clearly shown
that instead of creating employment, very large
retail corporations actually reduce employment,"
he said.
One of India's leading
economists, Jayati Ghosh, agrees.
"Walmart's global operation is capital
intensive. They will completely transform the
supply chain and it will be no good for jobs,"
Ghosh, a professor at the New Delhi-based
Jawaharlal Nehru University, told IPS.
"There will be a negative impact on the
employment scene, since the majority of the 40
million people employed in retail trade in India
are self-employed, and they will not be able to
compete with large supermarkets. One Walmart can
displace about 1,400 small shops that create 5,000
jobs," she said
"What we can demand from
the government now is the creation of
infrastructure to store post-harvest produce.
There should be more cold storage facilities and
warehouses."
The deputy chairman of
India's Planning Commission, Montek Singh
Ahluwalia, a strong advocate of the reforms, said
in an interview with the CNN IBN channel on
September 24, "We are running a very inefficient
retailing system in which the farmer gets very
little and the consumer pays too much.
"If
you want the modernization of the retail sector,
you want upward pressure in the quality of
employment. Modern retail produces better-quality
jobs. If the labor growth is going down to 1% or
so and gross domestic product is growing at 8-9%,
jobs will be created in many different sectors."
Various big industrial players also
support the move.
According to Rajkumar N
Dhoot, president of the Associated Chamber of
Commerce and Industry of India, the decision to
allow FDI in multi-brand retail will also improve
India's image in the eyes of foreign investors.
"Today, we live in a globalized
environment. We all know how precarious the global
economy is and how our own exports, both goods and
services, are being hit in the western markets,"
he said in reference to the need for increased
FDI.
Even some local shopkeepers in New
Market seem unfazed by the imminent arrival of
massive competitors.
"I do not think a
Walmart can completely kill us," Subir Saha, who
runs a crockery and utensil shop in New Market,
told IPS. "When the shopping malls came up in the
city (they) did affect our business, but we
survived it and are still here."
Farhad
Ali, a garment-store owner, echoed his sentiment:
"People come to us for many reasons, from low
price tags to unique collections," he told IPS.
But experts claim the belief that huge
retailers will not destroy the local market is
optimistic.
According to Ghosh, "In the
beginning, the situation will be better for some
job-seekers and consumers. But this will be part
of a strategy by these companies to establish
themselves in the market. Once it is done, they
will start doing the unpleasant things," she said,
citing examples of Thailand and Malaysia, whose
local retailers and farmers were hit hard by the
entry of multinational retailers into the domestic
market.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
