IS INDIA READY FOR FDI IN RETAIL

Walmart is one of the biggest retail store chains in the world and they are operating in 12 countries with over 3700 outlets in US alone and $285.2 billion in sales. They are waiting to enter India and the President of Walmart John B. Menzzer has already visited India in May 2005. Walmart is supposed to bring in millions of dollars , technology, inventory management and the use of IT in catering to consumer demand. They will sell very cheap too because of their sourcing their supplies from low wage countries. They are also likely to buy from Indian suppliers and give them specifications about the quality of product to be sold in their stores that would be world class. People who support the opening up of retail trade hope that this will bring about a huge increase in Indian exports because Walmart and others would buy in India and sell in different countries. They will also impart latest quality control techniques and this will upgrade the quality of Indian exports something that is badly needed.
The flip side of allowing FDI in Retail trading should also be examined. While Walmart would boost exports and buy directly from farmers, invest in food processing and generally lead to higher standards in Indian agricultural products, it would also affect the livelihood of 15 million small retailers scattered around the country. They constitute 98 per cent of the country's retail trade business and are contributing to 10 per cent of the country's GDP. These small traders may be selling from hand pushed carts, or from baskets, or small corner shops but they do cater to the population's immediate needs quite adequately. Many of these small retailers will go out of business and though competition will strengthen a few who may be able to survive, there will be a huge rise in unemployment. In a country with more than 41 million unemployed, retail trading has offered a means of livelihood for many in recent years. These people who are eking out a small monthly income from selling from pavements and small shops could be wiped out. While it is true that big retail chains will employ many more people but they may be those who are educated and skilled and can be trained. The small retailers who are neither educated nor skilled are least likely to find employment in Walmart. These retail giants also are likely to use more machinery than people.
Secondly, what guarantee is there that Walmart will source its supplies from India alone? They could be selling goods from Thailand, Nepal, Indonesia or China, Hondurus or Bangladesh in their shops. How can we be sure that the giant retailers would invest in food processing and refrigerated trucks and help the small farmers sell their produce to the big retailers? What happens when the farmers are unable to supply according to the exact specifications and there is a problem of rejected produce? How does the farmer get rid of such produce? It would of course be most desirable if the retail giants invest in storage, and give farmers better inputs and loans. But would they do so? If they went deep into the problems of low productivity in Indian agriculture and tried to solve it by introducing new technology, better irrigation methods and better post harvest management, they should be most welcome. They would then give a boost to many other sectors in the economy linked with farming activities. Similarly if they source their garments, socks and shoes from Indian manufacturers, it would boost manufacturing activity in India. China has become the manufacturing hub of the world because of the retail giants have been sourcing all their garments, shoes, bags, belts from China. Would they do so in India? Or are they just interested in the big market India offers with its middle class of 150 million people where they can sell products from everywhere else? After all they are interested in their profits most.
This are the few factors that must be considered before opening up India's market to foreigners.