Tuesday, November 22, 2005

Retail FDI and the false arguments

There are many well known arguments all of which are against bringing retail FDI into India. The most heard ones are that it will destroy the kirana (should they really be saved- more on that later), it will destroy the social fabric of india, sourcing from China will wreck indian industry and it will reduce the availability of jobs. Jobs. It is a myth that kiranas provide jobs. Apart from self employment for perhaps a family or two, kiranas by their very nature employ family memers or child labour or underpaid labour imported from villages. Organised retail, on the other hand will provide more in- shop jobs. Walk into any big store and you will know what I mean.

Yes, retail FDI will cause a fair amount of unemployment, but that will mostly be for the middlemen who would have been eliminated because of direct sourcing. This is especially true for farmers. The sooner the farmer gets into the mode of talking to the ultimate buyer, the better it is for the industry. The sooner we bring some semblance of process to the farming sector, the better it is for us.

It will not kill the kiranas, maim them yes. It will surely reduce the quantum of business going to the kiranas, but the cause is not the entry of big stores. The cause of it would be changes in the buying patterns. People would buy more and at less frequency. Between these big ticket visits, the kiranas would fill the gaps. And then again, unless you are really close to a big store, where would you go to shop?

The kirana. The big thing about organised retail (foreign or Indian) is the fact that it will eliminate the profits made by the kirana (and some of which is passed onto the customer) by way of tax evasion. It will open up newer sources of taxation too- the rich farmers (and there are many/all of them) who dont pay a rupee as tax.

1 comment:

LI said...

Right , May be the opponents of retail FDI can do a case study on China where FDI in retail has created more jobs that it has effaced.