FDI in retail — UPA ‘retired hurt’

FDI in retail — UPA ‘retired hurt’

P. Sainath

Here's the wonderful thing about the FDI-in-retail debate: never have struggling Indian farmers found so many champions. They've been crawling out of the woodwork.

Foreign direct investment in retail may be on hold, but Hillary Clinton can stop worrying about Anand Sharma and Pranab Mukherjee.

“How does (Commerce Minister) Sharma view India's current Foreign Direct Investment guidelines? Which sectors does he plan to open further? Why is he reluctant to open multi-brand retail?” Those were among the questions U.S. Secretary of State Clinton posed in a cable to her embassy in New Delhi in September 2009, some months after Prime Minister Manmohan Singh began his second term. (See: Hillary checks out Pranab, and the competition, from The Hindu-Wikileaks India Cables series: March 18, 2011).

Note her pointed query on opening up ‘multi-brand retail.' She had other worries, too. “Why was (Pranab) Mukherjee chosen for the finance portfolio over Montek Singh Ahluwalia? How do Mukherjee and Ahluwalia get along?” And “does Sharma get along with Mukherjee and Prime Minister Singh?” They get along fine, Hillary, and they're all in it together, as a team.

Hillary has reason to be concerned about FDI in retail. There's the tens of thousands of dollars she earned from serving as a director on Walmart's board. And the other thousands of dollars contributed to her 2007-08 campaign by Walmart executives and lobbyists. An ABC News report on that in 2008 also observed that as a director, Hillary Clinton remained “a loyal company woman” (Clinton remained silent as Wal-Mart fought unions: ABC News, January 31, 2008).

And she surely knows the UPA's FDI retreat is tactical. Pranab Mukherjee put it with disarming candour: we don't want mid-term polls. Hillary too had flip-flopped during her election campaign, going by the ABC News report. (While on its Board of Directors, she had said: “I'm always proud of Walmart and what we do and the way we do it better than anybody else” — June 1990.)

Yet, Hillary's campaign website of 2007-08, points out the ABC News report, omitted “any reference to her role at Walmart in its detailed biography of her.” As the race heated up, she recanted: “Now I know that Walmart's policies do not reflect the best way of doing business and the values that I think are important in America.”

Perhaps Hillary's FDI concerns are loftier. She must be worried about the poor Indian farmer. The wonderful thing about the FDI-in-retail debate is the explosion of concern for agriculturists. Never have struggling Indian farmers found so many champions. They've been crawling out of the woodwork ever since the FDI announcement. From Deepak Parekh to Ratan Tata, they've suffered sleepless nights, agonising over the small farmer.

They might want to take a look at the American farm population. At their family farms, especially smaller ones, wrecked by corporate monopolies at every level, from giant agri-businesses to mammoth retail chains. Presently less than one million Americans claim farming as their occupation. That figure was over 25 million in the 1950s.

With what credibility does our regime, on whose watch farm suicides crossed the quarter-of-a-million mark, speak of helping farmers? Who knows what windfalls the deals struck with retail giants have brought to individuals in this most corrupt government in our history? We need to embrace that old journalistic principle: Follow the money. (Hillary does, though in a very different way.) Meanwhile, look at our government's claims.

Who it affects

Doing away with the ‘middleman': The first to be devastated will be that poor ‘middlewoman' — the vendor who daily provides our towns and cities with fresh produce. She did not push up the prices and has her modest margin squeezed each time they rise. That woman carrying that huge basket to your doorstep, on her feet 14-16 hours a day to feed her family. She's the first ‘middleman' target.

The more exploitative middlemen in the chain will be co-opted by giant retail which needs collectors and contractors, though not so many. It will slash their numbers after a while. This is The Mob taking over from the little guys on the block. You're looking at massive displacement in the agricultural supply chain. Only, the new ‘middlemen' will be Cardin-clad and Gucci-shod, with better access to government than the farmers everyone's dying to save.

That poor woman vendor, whose life we need to improve, not destroy, brings you fresh produce. She has to, or she can't sell it. (Tip: big retail operators pasting the words ‘natural' or ‘fresh' against their names are selling you stuff that could have been refrigerated, even frozen, for days).

Ten million jobs: Try not to die laughing. This comes from a school of economics that has gifted the world jobless growth for three decades now. We worked hard for two of those, making a big expansion of jobs impossible within our policy framework.

From the early 1990s, fantastic claims have been made of small farmers gaining from neo-liberal globalisation. For instance: farm incomes would rise 25 per cent if Indian prices were aligned to global prices; purchasing power would shoot up.

Many steps were taken on such claims, including 100 per cent FDI in sectors like seed. All achieved the opposite. These moves helped double the indebtedness of the peasantry and further spurred the worst-ever recorded wave of suicides. Apart from which we've seen seven-and-a-half million people abandon agriculture in a decade, many driven out by policies to ‘benefit the farmer.' Now we should believe that FDI in retail will undo all the damage that these policies — from the very same authors — caused? And these guys predict 10 million jobs within a year?

The UPA wants to open up a sector that for all its awful flaws and hardships presently employs 44 million people and has total sales of close to $400 billion. (That's about 20 times the number Walmart employs on roughly the same turnover.) And gives some sustenance to many millions more if you think families. Small shops and ‘big box retail' can co-exist, so croons the corporate choir. Sure, after wiping out countless thousands of tiny shops, the survivors can ‘co-exist' with the big guys, who might even have minor errands for them to run. India's powerful will run the more important errands. That was clear from 2005 when then Walmart International Division chief John Menzer told his company's annual meeting: “In our six government meetings, we created a very positive image [of Wal-Mart]…” And: “We've energized the FDI lobby and preempted the anti-FDI lobby in India.” (Wal-Mart's Hot in India, CNNMONEY.COM, June 6, 2005)

Efficiency: The giant chains can never match the efficiency of farmers' markets selling food produced locally or nearby. Their sourcing of produce from all over the world, central warehousing systems, giant transport operations — all these are hugely energy intensive. Which means a lot of what you get is old and much-refrigerated or frozen. Know the other costs of what you pay for.

Benefitting farmers: Here's a paradox. Just when we march determinedly towards super markets, people in the homeland of Big Retail are buying more and more from “farmers' markets.” That is, the oldest form of direct marketing by small producers. More and more Americans seek decent produce not drowned in chemicals, pesticides and preservatives. Growing numbers of that nation's small and family farms are selling through farmers' markets each year. In India, every market was once a farmers' market. Over time, farmers have lost control of such markets to traders and moneylenders. Now comes the coup de grace.

The coming of Big Retail is not simply about shops in the towns of over one million. It brings a radical restructuring of the entire agri-supply chain. The kind of investments — above $100 million — will obviously not go towards labour-intensive operations. The new structures that will confront farmers are stronger than any they have ever known. As a paper on the “U.S. Farm Crisis” from the Kerr Center for Sustainable Agriculture, Oklahoma, puts it: “large corporations have in recent years moved to curtail farmer independence through production contracts and other forms of vertical integration. These moves have included establishment of huge corporate-owned Confined Animal Feeding Operations, where animals are raised without farmers.”

The new middlemen the government welcomes have no regard for village and community. Maximising their own profit is their sole concern. As the number of buyers shrinks to a handful of corporations, farmers will have fewer places to sell their produce. What kind of bargaining power will they have against these mega-middlemen, some of whose worth would place them, if treated as nations, amongst the top ten economies in the world? The “contracts” in the new dispensation will reflect that power equation. The National Commission for Farmers headed by Dr. M.S. Swaminathan had observed that rushing into contract farming without ensuring the needs, safety and bargaining power of the farmer would result in major displacement in the sector. But not to worry, Hillary, your team is still out there batting. Only retired hurt for the moment.