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India-EU Deal Threatens Mom-and-Pop Retail

Ranjit Devraj

NEW DELHI, Dec 19 2010 (IPS) - Retail giants pushing the European Union-India free trade deal promise consumers a “new and dynamic retail experience” but ignore the fate of India’s “mom-and-pop” stores and some 40 million people they employ.

Four years in the making, the EU-India Bilateral Trade and Investment Agreement made serious headway during Indian Prime Minister Manmohan Singh’s visit to Brussels Dec. 10 and is due to be signed and sealed early 2011.

But the negotiations have been criticised by activists, non-governmental organisations (NGOs) and opposition parties as lacking in transparency despite 90 percent tariff reductions that will impact health, agriculture, fisheries, banking and poverty-reduction programmes.

“India’s case is different because unorganised retail accounts for an overwhelming 96 percent of the total retail trade in this country, the bulk of it by kiranas (corner shops), general stores and hawkers plying push carts,” says D. Raja, member of parliament and national secretary of the Communist Party of India.

“Small retail offers easy livelihoods for millions of people, because of low capital, skill and infrastructure requirements, while providing a real service to communities,” Raja told IPS. Organised employment represents less than nine percent of the 450 million-strong Indian workforce.

“Organised retail, patronised by the rich, can only grow at the cost of the unorganised sector and it is already affecting livelihoods. Yet, the government refuses to discuss FTAs in parliament,” Raja said. “Here is a fine example of how jobless growth is being created in this country.”

“Although the EU-India trade deal will hugely impact agriculture and retail, which are state subjects under the Indian constitution, it is disturbing that state governments are not being kept in the loop,” said Venkatesh Narayan, coordinator at the New Delhi-based Commonwealth Human Rights Initiative, an international NGO.

However, central government intent is apparent in a series of discussion papers on foreign direct investment (FDI) in the retail sector released by the Department of Industrial Policy and Promotion (DIPP).

Arguments favouring FDI in retail, set out in the DIPP papers, emphasise the need for massive investments in logistics and infrastructure if the Indian retail market is to become more efficient.

Citing agriculture ministry figures, the DIPP papers point to poor cold-chain infrastructure and storage facilities as reasons why Indian farmers lose about 12 billion dollars annually in fruits and vegetables rotting on them.

Indian farmers produce about 180 million metric tonnes of fruits and vegetables annually, but lack access to credit and are unable to leverage market prices. A World Bank study blames a weak “farm-to-fork” supply chain for the non-competitiveness of India’s horticulture.

But these are not good enough reasons for allowing FDI in retail, argues Dharmendra Kumar, director of India FDI Watch, a Delhi-based coalition of labour unions, trade associations, NGOs and academics opposed to foreign players entering India’s vast and rapidly opening market.

“If there is a lack of credit and infrastructure it is for the government to step in rather than use it as an excuse to invite international conglomerates like Carrefour, Metro and Tesco, which are only interested in maximising profits,” Kumar told IPS.

“Infrastructure also means roads and power supply in the rural areas, where the farms are located, and big corporates can be trusted to limit investments to the metros,” Kumar added.

India FDI Watch’s stated objective is to ensure that foreign players are allowed in only on condition that small businesses are protected, fair wages and working conditions guaranteed and procurement derived locally.

According to Kumar, what is attractive to European retail giants is poor regulation to protect small producers, retailers and consumers. “In many European countries, a new retail outlet can be set up only after a needs assessment is carried out.”

Carrefour, in a representation to the DIPP on Jul. 30, said FDI in retail will help control inflation through rationalised prices to consumers, reduced wastage across the supply chain and by bringing best practices to the sector.

Carrefour also argued that FDI in retail would result in “the generation of significant tax revenues for the exchequer through collection of taxes,” alluding to the fact that most Indian retail businesses are too small to figure in India’s narrow tax net.

But Kumar, co-author of “Trade Invaders: How Big Business is Driving the EU- India Trade”, released in September, said Indian consumers were already paying a large direct sales tax on the goods they buy. The other author of the study is Pia Eberhardt of the Corporate Europe Observatory.

The authors charge that both the European Commission and the Indian government have delegated negotiations for the free trade deal to corporate lobbies, ignoring the needs of their citizens and affected groups.

Kumar rubbished Carrefour’s boast to DIPP that big supermarkets offer consumers “a new and dynamic retail experience.” European consumers, he said, are already paying a price in terms of loss of choice, arbitrary pricing by corporates and erosion of the community fabric, of which the corner shop is integral.

“Real social issues such as development, livelihoods, food sovereignty as well as environmental, social and gender justice need to be at the core of the trade policy agenda,” Kumar said.