Economic Highlights

New Delhi, 21 July 2011

FDI In Retail Sector

LEAD TO UNEMPLOYMENT

By Shivaji Sarkar

A country bursting with a rising number of unemployed people will soon have to grapple with more unemployment. Thanks to the Union Government decision to allow multi-brand retail from April 2012.

Initially it wants to allow 49 per cent stake by foreign investors which would gradually increase to 100 per cent in a few years. Notwithstanding, even less than 49 per cent FDI would do the same what 100 per cent FDI would. Undeniably, the decision is a victory of multi-national corporations (MNCs), who have been lobbying hard to enter this partially restricted area. As single-brand retailing has been open to FDI for the past several years.

Importantly, our policy makers’ logic that FDI in multi-brand retail would provide more jobs is based on untenable arguments. Already, large shopping malls and chains are playing havoc with retail entrepreneurs. Thousands of small shops, snack jaunts, desi mithai sellers have closed down their establishments owing to high inflationary pressure and inability to compete with the large shopping giants.

True, official statistics do not show them as unemployed though in reality it has rendered entire families without a livelihood. The premise that everybody in this country would be on a payroll of a company or MNC is based on poor understanding of the Indian situation.

It does not realise that an average Indian whether in business or in farming has entrepreneurial streaks and does not want to become an employee or “servant” of someone else. Thus, the FDI concept of weaning away those depended on the farm sector and small businesses to become a “servant”, over 80 crore people, of another person or company is unacceptable to Indian ethos.

Shockingly, the Government’s Labour Bureau has in a survey found staggering data:  Four crore people did not have any job in 2010. Worse, unemployment increased from a little over 7 per cent in 2002 to 8 per cent in 2008 and 9.4 per cent in 2010. It is estimated at over 10 per cent presently, over 4.5 crore are jobless.

Further, there is a linkage between increasing FDI and fall in jobs. In 2002, the FDI flow was $ 3134 million. In 2005, it was $ 3754 million. From 2007-2008 onwards the FDI increased to $ 24580 million, in 2008-09 it stood at $ 27309 million and in 2010-11 it touched $ 28014 million. This is besides the short term equity investment by foreign institutional investors (FII), which stagnates around $ 3000 million a year.

If what the policy makers, World Bank wizards and MNCs, are professing had been correct, jobs would have grown proportionally if not exponentially. On the contrary, more jobs were lost and not many new ones created to employ those who were thrown out of job during 2007-2010, a period that saw a high level of FDI.

This is not a dichotomy, nor a puzzle. Given that the sectors inviting FDI are not creating as many jobs as the induction of FDI is causing a loss. In fact, though it is being said that the Government is not considering opening up the farm sector, but its policies have gradually opened up FDI in many related areas. The 2011-12 Union Budget virtually allowed FDI in farm warehousing and cold chains. Leading to MNC clones registering as Indian companies and going into the farm sector in a massive way.

Indisputably, the Labour Bureau figures reveal a lot. It finds rural unemployment crossing 10.1 per cent and female rural unemployment rate at 14.6 per cent. This underscores that many rural families are finding living a difficult proposition.

This also speaks of the extent the country is neglecting the traditional farm sector. Which is based on small holdings employing 15 to 50 or more, generating moderate wealth which is distributed among the stakeholders.

World Bank-trained Planning Commission experts find that they need to chip in and turn them into employees so that these self-sustaining people could have “better life”! This conflict was reflected in Nandigram, Singur, Posco’s Kalinganagar, Vedanta’s Verdant forests, Jaitapur’s farms or Noida’s and western UP’s villages.

Moreover, large investments in building, highways, mining or other projects have not improved the living conditions of the people in these areas. Instead it has rendered them without a proper vocation. Most of them have lost one and the big investors have come up with the alibi that they cannot provide jobs to all those who lose their land or are depended on it. In reality, the locals in most cases do not get more that one to two per cent jobs in such ventures.

The FDI is welcome. But the time has come to debate where the country needs it and how to invest it. The theory being propounded to remove 72 crore people out of the farm sector and another four crore people employed in the retail sector is too dangerous to accept.

The country needs to learn from US and Europe’s massive recession and joblessness. There too the MNCs backed by the World Bank and IMF have virtually destroyed individual entrepreneurship. Bringing things to such a pass that all are now direct or indirect employees of large MNCs. With profits dipping the MNCs are finding sustaining their operations difficult. This has driven big and rich countries into a severe debt crisis.

Clearly, our policy makers have to understand that almost 65 per cent of the population, over 80 crore, have a sustenance model in the unorganised sector which only requires strengthening of the existing system. Any attempt to destroy it would have a catastrophic effect.

Plainly, an economy does not grow on imperfect experimentation. It has to draw lessons from contemporary events. This calls for replacing our policy makers with those from the grassroots so that there is an improvement in the job market which will lead to improved living conditions.

In sum, it is time to review the new multi-brand retail FDI policy. If this is not stopped, the misery of the people would increase. The country needs to strengthen the unorganised sector and benefit from the traditional wisdom of the farm and unorganised retail sector.

Unmistakably, no organised industry has the capacity to employ over 80 crore people. Losing a few dime of FDI is worth looking for a policy that sustains India’s strength. The Government urgently needs to empower people and desist from coming out with policies that destroy them! ---- INFA

(Copyright, India News and Feature Alliance)