by Chetan Choithani

Level Playing Field or Unfair Competition

Enticing the consumer class on the ‘Everyday Low Prices’ model of Wal-Mart (well known as notorious player for its exploitative labour practices in order to curb the cost of production to gain competitive edge), [2] the domestic organized food and grocery retail chains of large companies including corporate giants like Big Bazar, Food Bazar, Reliance Fresh, Subiksha, More, Spinach etc. are trying to gradually capture the Indian food and grocery industry with huge investments considering its vast potential. For the matter of fact, food & grocery contributes about 41 percent (USD 154 billion) of private consumption expenditure and about 77 percent of total retail sales. [3] The growth of organized retailing in India is projected at an unprecedented 45-50 percent per annum and it will quadruple its share from a mere 4 percent at present to 16 percent in 2011-12 [4] and looking at the lion’s share of the food and grocery in total private consumption as well as in total retail sales, the major driver of growth for organized retail in the coming years would have to be food and grocery retailing. It is reported that 40 retail giants, the largest being Wal-Mart/Bharti, Reliance, AV Birla group and Future group plan to invest more than $25 billion (excluding real estate investment) to grow the share of organized retailing from the current 3 percent to 15-20 percent in four years. Of this, 60-65 percent of all investment will go towards food and grocery retailing. [5]

Traditionally, this has been the source of income for family run small retail shops, given the limited employment opportunities in formal segment of the economy comprising only 7 percent of the workforce as against 93 percent workers in the informal sector. Consequently, India has the highest retail density in the world at 6 percent with 12 million small shops catering to 209 million households. [6] It is a well acknowledged fact that the spurt in the growth of the modern format of retailing will be at the expense of unorganized retail shops snatching their already meager bread and butter. The share of unorganized retail which is currently 96 per cent of total trade will decline to 84 per cent in 2011-12. [7] In a small survey of Mumbai assessing impact of malls and more precisely of organized retailing on the small shops and street vendors, it was found that 50 percent of them (small shops and street hawkers) perceived the threat of either closure or substantial decline in sales. [8]

“Saheb hum to bahut chote vyapari hai, badi- badi companiyon se kaise lad sakte hai” (We are very small businessmen, how can we compete with the corporate giants), said the unorganized retailer operating in Sindhi Camp, Chembur (Mumbai) since 1948 during my interaction with him. “Dhandha itna gir gaya hai ki maal kharidhene ke bi paise nahi hai” (Sales have declined to such an extent that I do not have the money to purchase goods). Not only his sales have substantially declined but his business is the verge of closure with the arrival of Subiksha Retail in the area, as half of the area of his shop seemed empty indicating his inability to compete with modern grocery retailers and compulsion to walk out of the field. Yet there seems to be an attempt to promote the organized retail, as the report of the government-mandated think tank called “Indian Council for Research on International Economic Relations” (ICRIER), which was perhaps no lesser than the biggest surprise of the century, recommends not only the existence but also the need to vitally expand the organized retailing in the country by simplifying the licensing and permit regime for organized retailers. While, organized retailers planning to invest around $15 billion [9] on food and grocery alone, mom and pop stores find it difficult to invest even Rs. 1500/- to procure goods for selling. One of the crucial findings of ICRIER suggests that the majority of the unorganized retailers showed their preference to continue in the business but the question arises here- For how long will they be able to compete with ‘corporate honchos’ without a ‘level playing field’, think?

Era of Consumerism or Rising Inequality

Twenty-first century is being referred as an ‘Era of Consumerism’ and neo-liberal economist lobby misses no opportunity in depicting “India Shining” image of the country on the basis of rising per capita national income. This shine is often attributed to the liberalization policies making possible free flow of international finances and going by recent trends, it is claimed that India is well on the track of halving the poverty by 2015, [10] one of the eight goals set under the Millennium Declaration. On the contrary, report of the “National Commission for the Enterprises in the Unorganised Sector” reveals an astonishing fact that an overwhelming 77 percent of the population spends less than Rs. 20 a day [11] suggesting a steep increase in the inequality during the post reform period.

“Samaj me nahi aata kya kare, ab to rozi-rooti ke laale pad gaye hai” (We do not understand what to do, now we are struggling even harder for subsistence), said two street vendors in Santakurj station area (Mumbai), whose sales have witnessed dramatic decline over the past one and half years with opening up of Food Bazar. While, the government seems to be gradually withdrawing on the social front, as the social sector expenditure as percent of total government expenditure has declined from 22.3 percent in 2001-01 to 19.7 percent only in 2003-04 and the same as percent of gross domestic product (GDP) has come down from 6.25 percent to 5.68 percent during the corresponding period [12] and there are no provisions of providing adequate social security to the informal workers at the time of contingencies, rapidly growing organized retail industry seems to be making it difficult for the working poor (food and vegetable hawkers and small grocery retailers) to fetch even two square meals a day. Another question to my mind - are we really heading towards an era of consumerism or ever increasing inequality?

Foreign Direct Investment (FDI) in Retail: Deepening the wounds of small unorganised retailers

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*Chetan Choithani is a post graduate student of “Tata Institute of Social Sciences, Mumbai” who is presently interning with “Focus on Global South, India” based in Mumbai.

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Notes:

1. Biyani, Kishore and Baishya, Dipayan (2007): “It Happened in India”.  Rupa and Company, New Delhi (India).
2. Wal-Mart has many times violated the labour laws in several countries and has been fined a hefty amount. For instance, it lost $78 million jury verdict in Pennsylvania in 2006 over rest breaks and unpaid work, $172 million verdict in California in 2005 over meal breaks. The most recent case against Wal-Mart is the violation of ‘State Wage and Hour Laws’, Hastings, Minnesota. Wal-Mart has reportedly denied the full rest and meal breaks to workers there for which it could be fined as much as $2 billion (Page 8, Economic Times, July 2 2008).
3. Ernst and Young (2006): “The Great Indian Retail Story”. Ernst and Young, India.
4. Indian Council for Research on International Economic Relations (2008): “Impact of Organised Retail on Unorganised Sector (2007). ICRIER, New Delhi (India).
5. Website of FDI India Watch: http://indiafdiwatch.org/
6. Ernst and Young (2006): “The Great Indian Retail Story”. Ernst and Young, India.
7. Indian Council for Research on International Economic Relations (2008): “Impact of Organised Retail on Unorganised Sector (2007). ICRIER, New Delhi (India).
8. Kalhan, Anuradha (2007): “Impact of Malls on Small Shops and Hawkers”. Economic and Political Weekly, Vol 42, No 22, pp. 2063-66.
9. Author’s calculations on the basis of aforesaid fact that Wal-Mart/Bharti, Reliance, AV Birla group and Future group plan to invest more than $25 billion in organized retail and 60-65 percent investment would be done in food and grocery retailing.
10. Central Statistical Organization (2005): “India Country Report on Millennium Development Goals”. Ministry of Statistics and Programme Implementation, New Delhi (India).
11. National Commission for Enterprises in Unorganised Sector (2007): “Report on the Conditions of Work and Promotion of Livelihoods in Unorganised Sector”. NCEUS, New Delhi (India).
12. Economic Survey (2005-06): Ministry of Finance, Government of India.
13. A.T. Kearny annual reports on market opportunities for global retailers:  
    –    A.T. Kearney (2005): “Emerging Market Priorities for Global Retailers: The 
          2005 Global Retail Development Index.” A.T.Kearney, U.S.A.
    –    A.T. Kearney (2006): “Emerging Market Priorities for Global Retailers: The 
          2006 Global Retail Development Index.” A.T.Kearney, U.S.A.
    –    A.T. Kearney (2007): “Growth Opportunities for Global Retailers: The 2007 
          Global Retail Development Index.” A.T.Kearney, U.S.A.