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162-167
Research Paper - Commerce
Foreign Direct Investment And Emploment
Opportunities In Indian Retail Sector
Prof. Dr. R. N. Wakchaure
Arts, Science & Commerce College, Rahata, Ahmednagar
have shown the way, only time will tell how retailing will facilitate the entry of retails giants
promising it will be for retailers to setup shop in who could monopolize the market. Even in many
India. development countries big retails chains are
Some facts retaining sector in getting more powerful, and as they flex muscles,
India are mind-boggling. There are 12 million manufactures are realizing the importance of
outlets as against 8 million is USA even through dealing with them in a different manner, compared
their economy is 13 times larger. According to to the regular neighborhood kirana outlets.
KPMG survey, India has emerged as the top FDI In 2005, Wal- Mart had a turnover of $256
destination offering a higher return on investment billion it recorded a net profit of $ 10 billion. Its
than emerging markets like Mexico, Brazil and 4806/- sectors employee's 1.5 million persons. The
even China. average size of a Wal-Mart outlets is 86000/-
The retails sector is second largest source square feet and the average turnover about $ 54
of employment and the job market is hugely million. The turnover per employee is $ 185000.
receptive to this, with more and more Business By contrast, the Indian retailer had a turnover of
Schools focusing on the sector and large retailers Rs.1,87,075/- ($4200/-Appr) and only 4 % of the
setting up retailing academies. In addition to this it 13 million retail outlets occupied space larger than
is the experts opinion that experience of the 500 Squire feet. The total turnover of the
foreign players will certainly benefit India , unorganized retail sector, which employs 40.5
through India is all together a different market. million persons, of Rs.7,38,000 crore. India has 35
More importantly, the latest pool for retails sector towns each with a population of over 1 million. If
is somewhat trained and industry ready. All they Wal-Mart were to open, on an average, 1 store in
need is tweaking as per industry experts. Apart each of these 35 cities and if each and if each
from graduates from business schools to handle achieved the average Wal-Mart performance per
management posts, the retails sector would offer store, the turnover would amount to over
excellent job opportunities to youths with 10+2 Rs.8033/- crore and number of employs to only
pass category that boasts of lot more talent than 10,195/-
what the BPO needs, namely graduates. The most important argument against
The CSO's employment numbers give a modern retailing and supply chain integration is
comprehensive picture of the importance of this that it displaces labour in a labour-surplus society.
form of livelihood in India. Organized retail trade Till such time that we are in a position to create
employees roughly 0.6 million people & jobs on a large scale in manufacturing and
unorganized 40.5 million. The fact that about 4 % construction, it would make eminent sense to keep
of the population is employed in the unorganized on hold any policy that results in the elimination of
retails trade speaks volumes about how vital this jobs in unorganized retails sector. The primary
business is to the socio- economic equilibrium in task of the Government is still providing
India. As associated concern is that FDI in livelihoods and not create so-called efficiencies of
scale by creating redundancies. If we assume 40 sector to the Wal-Marts and Carrefour of the word
million adults in the retails sector, it would :-
translate into around 160 million adults in the While Dr. Abhijit Sen, former co-chairman
retails sector, if would translate into around 160 of the Nicco Group and now Honorary Council for
million dependants. Opening the retailing to FDI Shri Lanka in Kolkata, said there was empirical
means dislocating millions from their occupation proof that FDI in retail will not shrink employment
and pushing vast number of families under the opportunities, going by the US example, Prof.
poverty line. The Western concept of efficiency is Dipankar De of ICFAI Business School, Kolkata,
maximizing output while minimizing the number expressed doubts over the actual benefits that may
of workers involved. accrue to the nation through FDI in retail. He cited
Extrapolated to the rest of the country, it a report of the UK Competition, which says
would mean displacing around 4,32,000 persons. thousands of retail jobs were lost on the entry of
In other words, every new Mal-Mart employee hypermarkets through FDI in retail in the UK.
will render 40 retailers surplus. If FDI retailers Quoting the recently released World Investments
with deep pockets were to take over 20% of the Report for 2004-05, he said there was a distinct
retail trade, this mean a turnover of Rupees slowdown in investments in retail trade in
147000 crore. This represents an employment of developed countries. Therefore, why the Wal-
about 43000 persons, displacing nearly eight Marts and others are eager to come to India, where
million persons in the unorganized retail sector. some domestic investment in retail trade was
This will only increase social tensions in a already beginning to happen?
developing country like India, where tens of In India, retail trade in the organized
millions are still seeking gainful employment. segment was only two percent, with a whopping
Companies such as Wal-Mart boast about how 98% being in the unorganized sector, against
they give the consumer better value. Not china's 20% and 80%, respectively, according to
surprisingly, Wal-Mart procured $ 20 billion Dr. D.R. Agrawal, Director, SRI. The size of
worth of goods from China and just $ 1 billion India's highly unorganized and individually small
worth of goods from India. This is simply retained trade is close to $ 200 billion, nearly 14%
because China is a better producer of of our GDP, and employs 21 million, which was
manufactured goods and not because Wal-Mart about 7% of our total labour force. This is said to
has stores there. be six times bigger than that in Thailand and 5
INDUSTRY Professional and academics, times larger than South Korea and Taiwan.
debating the hot topic of "FDI" in retail sector in China's retail trade is 8% of GDP and accounts for
India at an interactive session organized by the 6% of total employment. FDI in retail in India,
Swadesh Research Institute (SRI), have expressed which has been recommended (to the extent of
divergent views, with the broad agreement being 49%) by ICRIER, a New Delhi based Policy
only on abundant caution before opining up this Research Group, is under the consideration Union
Government. The thing tank has suggested that Even if the political parties do not seriously
any opening up of FDI in retail should be gradual believe this, they apparently would still like to
(3-5 year) to give the domestic industry enough exploit the paranoia about foreigners to secure
time to adjust to the changes. votes for them.
According to Dr. Sen, some 16% of total Among the most consistent opponents of
employment was in retail trade, which is FDI are the trade unions specially those affiliated
dominated by the hypermarkets. And this has to the Left such as the Centre of Indian Trade
thrown up huge employment opportunities, he Unions (CITU), which is aligned to the CPI (M),
maintained, disputing the assumption that and the All India Trade Union Congress (ALTUC),
allowing FDI in retail in India will shrink which is close the CPI. They regard FDI as an
employment. He however, agreed that such integral part of what they call neo-liberal
investments will no doubt generate a different economic policies, which according to them are
kind of employment with varying skill sets. heavily tilted in favour of the rich. They also
Dr. Agrawal said though India has so far regard it as an instrument of America's
not made any formal commitment under WTO, imperialism, which has the backing of the World
nor has received any reciprocal market access by Bank and the International Monetary Fund.
other countries, autonomous liberalization of FDI The loss of employment on this score is the
in retail sector was beyond our WTO obligations. main argument advanced by the Left against FDI
He said the Government has already taken a stand in this sector. It is a matter of peasant surprise,
against commitment in certain areas of services therefore, that Dr. Sharad Joshi, who claims to
that include wholesale and retail trade in WTO represent Bharat against India, has spoken in
and by allowing FDI in retail outside WTO favour of FDI in the retail business. Dr. Joshi who
framework, Government may weaken its is the founder of the Maharashtra-based Shetkari
bargaining position in future negotiations, where Sanghathan and is a Rajya Sabha member, told a
they promise less than what they have already meeting of the parliamentary consultative
allowed. committee of the Union commerce and industry
Foreign direct investment (FDI) doesn't ministry that fears of the family run small stores
have too many supporters in the Indian political going out of business are unforced. Instead, he
class. Although it is favored by Prime Minister expects a huge increase in economic activity in the
Manmohan Singh and his few proreforms rural areas and a large-scale increase in
colleagues in the cabinet like the finance minister, employment opportunities. Because of his
it is a safe bet that a majority of politicians in the expertise in rural economy, his views will
congress and outside are uneasy about the undoubtedly attract a great deal of attention and
concept. They seen to believe that it means influence thinking in both official and unofficial
inviting foreigners to come and exploit the circles. According to him, FDI in the retail sector
country, as the East India Company once did. will have a multiplier effect any generating jobs in
construction, furnishing, hardware, food professionalism in the production and sale of the
processing, packing, management, data commodities in daily use, and also highlight the
processing, etc. because the supermarkets have a need for improved infrastructural facilities linking
huge potential for aiding development. As he has the towns with the countryside. Evidently, storage
said, "a nationwide retail network or, even better, and transport arrangements will receive a boost.
number of competing networks will bring about All of this has considerable employment potential.
an economic revolution and can delivered a body Since any economic change entails disruption,
blow to the problem of poverty and some small retailers will undoubtedly suffer
unemployment." He also said that the because of the competition. But the more
supermarkets and the small stores can be enterprising among them should be able to
complimentary to one another and not end up in a overcome the challenge by offering a greater
bitter competition. Both have their advantages. variety of goods and by establishing close personal
The small stores score over the supermarkets by contacts with the customers.
offering fresher products and greater personal The conclude, it has to be remembered that
attention. The supermarkets can be some what a major reason for opposing FDI in the retail
impersonal in this regard. But they do allow the sector is political and not economic. The
consumers to shop for everything less than one politicians seem to believe that by raising the fear
roof. of a foreign invasion they can appear more
The opponents of the giant retailers patriotic. They also apparently consider the
forget that India is large enough for both the thousands and thousands of small shopkeepers as
multinationals and the small family runs constituting some kind of a nationwide vote bank
businesses. For instance, when McDonalds, for those who oppose FDI. The Left and the RSS-
Kentucky Fried Chicken and other such outlets dominated Swadeshi Jagran Manch (SJM) also
came to India, their opponents in the Left parties have ideological objections. The former look
and in the saffron Swadeshi Jagran Manch (SJM) upon the supermarkets as typical of a capitalist
argued that the Indian eateries as well as the small society, were unbridled consumerism is the
roadside vendors will become bankrupt because driving force of the economy. For the SJM, the
the foreign investors have deep pockets. But attraction which the shining shopping malls have
nothing of this kind happened. All businesses for young people will make them imitate the
have thrived. The idli and dosa still remain the Western way of life at the expense of their Hindu
favorite meals of Indians along with the burgers. cultural roots. The anti-Western views of the Left
The aloo tikkis sold on the roadside still sell like and the Right are supplemented by a third, largely
hot cakes. nonpolitical group, which regards the fascination
There is nothing to fear, therefore, from for liberalization and globalization as a betrayal of
the advent of the giant retail stores. On the the Gandhian ethics of austerity exemplified in the
contrary, they will bring in an element of high simple life of the villagers, which is held up as a