Retail FDI – A Story of The Future

There’s an old lady who comes carrying a bamboo basket full of spinach to Triplicane streets, calling out ‘keeré’, ‘keeré’ in feeble cry. ‘Keeré’ is Tamil for spinach so the word may be different from where you’re coming from. This lady is 85-year old and has more wrinkles on her than an alligator. She has two sons, one was a watchman in an apartment in upmarket Adyar and the other works for the Municipality. She had to work at that age because neither of them supports her. She gets the spinach from a middleman who deals in the local market. She tries to sell as many bunches as posisble and, at the end of the day, returns the unsold ones, pays him for the sold ones and keeps the balance. The midldeman is an evil operator and takes a huge cut from her profit.

One rough estimate stated that there are about 40 million people working in unsecured, unorganised private sector in India. These are the people you see working in your local ‘kirana’ store or ‘provisions’ store; the girl who packs your groceries in the neighbourhood market, the boy who serves your tea in the tea stall after or before your grocery shopping. You do screw your eyes every time you go into these markets. Because these people are not well dressed. And they are also noisy and messy. It is much worse especially because you had been to Singapore or Western Europe or the US. You had seen swanky supermarkets. They had shiny vegetables with ‘Date Packed’ and ‘Best Before’ labels, and neatly arranged and attractively packaged groceries with nutritional information and warnings (‘May Contain Nuts’). In your local kirana store, the pulses used to be wrapped in old newspapers. Today some stores have upgraded to green and black polythene bags, the variety that Greenspace frowns upon.

Then Tesco, Waitrose, Walmart or 7Eleven come to India. They are retail majors in the UK, Europe and the US. They ensure that the display is done as nicely as their countries of origin. They put up nutritional, allergy and expiry information labels. The staff wear tie and smile at you affectionately. The shops are clean and quiet and what’s more, soothing songs of Susan Boyle waft from the overhead speakers to enhance your shopping experience.

The farmers are able to sell their produce to these companies directly without a need for middlemen like the one who used to fleece the spinach selling lady. The benefits of the money saved in these commisions are passed onto the consumer thereby reducing the retail price, which immediately control the inflation.

In the UK (and probably elsewhere too) these retail majors have supermarkets that are huge and also small street corner versions. To replicate this model, these companies buy the provision stores and vegetable vendors that are dominant in each of the major areas and convert them into their local versions. Soon, this leads to closure of all other local, non-branded, vendors in the area. This cleans up the mess created by these local vendors and improves the look of your neighbourhood.

The prices are low, neighbourhboods are beautiful, products come in nice packages, farmers are happy and the consumers are super happy. Hence they all live happily.
Then, unlike in fairy tales, in real life, the story continues after the happy ending.

The retail majors had signed contracts with the farmers to sell their produce wholesale to them. Once the farmers become dependent on them, they are armtwisted to reduce the price. The farmers, having no other alternative, reduce the price and in turn cut corners in their agricultural labour to save their margins. And those who couldn’t manage the new price regime follow their usual route – hang themselves and become part of the statistics on farmers’ suicide.

This time, the benefits of the price reduction are not passed onto the consumer. Once the market is completely taken over by them, these majors form a cartel and decide the price of everything, from milk to rice. There are regulations in the UK and Europe against competitors contacting each other or setting up cartels. There are no such regulations in India and there are already cartels existing for other businesses. This practice effectively freezes price reduction and slowly the prices of all products rise, inexorably, to a few paise here, to a few rupees there, and rise to the extent where it starts to pinch the middle-class and strangle those below them.

At this stage, there is no option of resorting to local vendors because, somewhere in between the story, they had all vanished. We did not know when or where because we didn’t notice them disappearing. But they are effectively people; all 40 million of them or more, so they could not have gone into thin air. But yes, soon we hear them. We would not have noticed them going but their return is loud and noisy. Thrown out of the cities, devoid of their meagre livelihood, they were left in the lurch. This is no welfare state so they don’t get any unemployment benefits. And they can’t learn Java or SAP and get into Infosys. They will, however, have an ever-willing employer: The Maoists. This employer was already busy recruiting tribals across central and eastern India where the aggressive and indifferent mining business was throwing them off their forests and mountains. Still, the Maoism remained a minor and local phenomenon. Now, with 40 million potential recruits, their cadres swell into disproportionate strength. What was happening only in the jungles of Chattisgarh and mountains of Orissa now become a huge, uncontrollable phenomenon in the plains.

The middle-class does not understand the Maoists and wonder why they have to fight, and why they can’t study and get a decent job in TCS like their sons or daughters. They look to government to protect them. The government, however, look to the army and, consequently, what used to be the local phenomenon in Kashmir become the norm in the rest of India – the iron hand of the army.

Somewhere in between the story, the old lady who used to sell spinach didn’t understand why her dealer went out of business and why she couldn’t procure spinach for selling. She tried to sell some other odd stuff with no buyer. Desperate, she sat in front of one of the temples to become a beggar. A visit by the US president led to the state government forcibly vacating all the beggars from the locality and she was sent out of the city. She stayed under a bus stand for three days without food and died on the platform. Two days later, the body was collected by the municipality lorry.