On August 1, the Commerce Minister Anand Sharma announced further liberalisation in the foreign direct investment (FDI) policy of the government for the retail sector. This follows the policy changes announced in September last year.
On August 1, the Commerce Minister Anand Sharma announced further liberalisation in the foreign direct investment (FDI) policy of the government for the retail sector. This follows the policy changes announced in September last year. In addition to the changes in the retail sector, the cabinet also approved liberalisation of FDI in petroleum, natural gas, power, stock exchanges, telecom and defence sectors. In many sectors, the requirement that the Foreign Investment Promotion Board (FIPB) needs to approve the entry of a foreign company in the sector has been waived and the “automatic” route has been made the default, in the name of efficiency.
The announcement of the liberalisation norms for FDI in the retail sector will have a substantive impact on the masses of people. It will open the Indian market to the biggest global retail giants. A market of one billion people has been opened up to them for making big profits. In the conditions of the global crisis and the deepening recession in North America and Europe, major global retail chains such as Wal-Mart, Carrefour, Metro and Tesco are eager to penetrate the Indian market. They are eying our country as an under-exploited area with massive scope for modern large-scale retail chains to reap maximum profits.
Even as the Minister was claiming that it was in the interests of the people, the big Indian and foreign retail chains were elated and congratulating the Minister for this extremely “timely and necessary” policy. The policy announcement gladdened the hearts of the largest retails corporations in the world, who are now seeing a grand opportunity to make a killing from the large volume of trade in India of agricultural produce and manufactured goods. On the other side, stand the masses of working people and peasantry who are up in arms against FDI liberalisation. The opposition to this policy decision comes from the workers, peasants and small shopkeepers. It comes from small manufacturers who fear that they will be ruined by these global retail giants who will source their products wherever they can get them cheapest. Various sections of capitalist wholesale merchants and large-scale traders who currently dominate the trade in both agricultural and industrial consumer goods are also opposed to this course.
The Commerce Minister explained the “philosophy” behind the liberalisation policy. According to the Minister, this move was taken to meet the challenge of providing post-harvest infrastructure like cold storage and cold chain; secondly, in the interests of farmers; thirdly, in the interests of consumers by giving them more options for choice and fourthly, in the interest of creating jobs for thousands of the unemployed Indians. This move would have gladdened the hearts of the millions of workers, peasants and all working people of our country if this claim was only true.
It is true that the system of trade in our country needs to be modernised and managed on a larger scale, with cold storage facilities that would cut down the enormous wastage of perishable food items. Such wastage raises the cost to society and increases the prices that working people have to pay. However, it is not the interests of the society at large that is driving this whole process. The maximisation of profits of the biggest corporations and ensuring maximum returns to finance capital is the driving force behind this policy. It is a big lie that the best or only way to modernise trade is by handing it over to private profit maximising corporations.
Wherever Wal-Mart and other corporate trading monopolies have penetrated, in the world, there has been widespread destruction of livelihoods. It has led to ruin of small producers, who are squeezed by these trading monopolies to either sell at the lowest prices or perish. Traditional classes of trading intermediaries have been rapidly replaced by the modern monopoly capitalist intermediaries, integrating all stages from wholesale to retail, with enormous market power to squeeze both the producers and the consumers. It may appear that working people will have more choice in things they buy, but in fact, the choice will only be between this or that brand of the same good; once these monopolies are entrenched, then they have total control over the prices of goods and what they want to make “available” to the buyer. What appears as choice to the buyer is really what suits the monopoly retailer.
Similarly, the experience of our peasants with contract farming where the companies are committing to buy their produce shows that while price may be specified, the company decides on the volume of purchase in any season, and uses quality as a pretext for rejecting anything in excess of that limit. Both, in terms of price and volumes, the company sets the specifications to serve its interests.
The bourgeoisie always claims that capitalists “create” jobs; they want to hide the fact that capitalist needs labouring power of the worker in order to produce, and employs only as many workers and for as much time as he needs. The capitalist has no qualms about throwing workers out on the street during a lean period. Further, already thousands of young men and women working in the Indian corporate retail entities are over-exploited through long hours of work at abysmal wages without any break. They are offered jobs on contract and hence these jobs are not secure.
The government had earlier allowed 100% FDI in single-brand retail and 51% in multi-brand retail. This entry was subject to certain prescribed conditions with respect to sourcing of goods, maximum limit of investment in factories and machinery and restriction of retail outlets to cities with population of more than a million. Further, there was a minimum investment requirement in back-end infrastructure. Since then, several multinational retail corporations such as Walmart and TESCO have been exerting pressure on the government to remove or dilute these conditions. They withheld their decision on investments in India and held out their demands as a pre-condition for their entry. They deliberately held back any announcement of their plans for investment in India.
Now, the multi-brand retail giants are congratulating the Indian government for welcoming them with fully open arms. Walmart and TESCO, among others, have welcomed the proposed changes. “Small” industries have been redefined by the government so that the foreign retailers are no longer constrained to sourcing 30% of their supplies from enterprises with less than $1 m in plant and machinery. On the issue of investment, foreign retailers were unclear on whether the 50 per cent investment in back-end infrastructure would have to be made from the mandatory minimum initial investment of $100 million or from the total amount brought in by investors. This has now been “clarified” – under the changed guidelines; the 50% investment will refer only to the first tranche of $100 million. As per the new guidelines, foreign retailers can also open stores in cities with a population of less than one million. Earlier, the government had accommodated Swedish furniture maker IKEA’s demands on diluting sourcing norms in single-brand retail. After this, IKEA rolled out its 10,500 crore investment plan.
The Indian bourgeoisie represented by the Indian corporate houses, including Reliance, Tatas, Birlas, Bharti and some others, have also welcomed the policy announcement.
Indian corporate monopolies who have already established trading chains in the country are on an expansionary imperialist course. They are 49% partners in the monopoly capitalist offensive to gain control over trade. They are counting on becoming bigger on the strength of their partnership with the global giants. Till recently, they were insisting that FDI must be allowed only in single-brand and not in multi-brand retail, so as to protect their territory from foreign competition. Now the majority of them have realised that to become 49% partners with global giants is the quickest route to gain control over the lucrative retail market of our country.
The Indian bourgeoisie is part of the capitalist imperialist system and therefore, inextricably tied up with the global economy. It has invested capital abroad where it has seen avenues for making profits. At the same time, it desperately seeks foreign investment in India to preserve and consolidate its control over the Indian economy in collaboration with the foreign capitalists. The Indian bourgeoisie is also experiencing a severe economic crisis as part of the global economic crisis. It is under pressures from global finance capital; it has to concede to the demands of potential investors, while at the same time defending its own interests. All this is resulting in the even more closer integration of India into the imperialist system. The FDI policy liberalisation in general, and the policy of FDI in retail trade in particular, must be seen in this context.
The Communist Ghadar Party calls on all those opposed to the monopoly capitalist offensive to unite and demand that foreign trade as well as wholesale internal trade be immediately nationalised and a modern universal public distribution system be established, covering essential agricultural and industrial consumption goods. The best alternative that is in the interests of the large majority in society is to socialise the ownership and control over trade. This means to establish public wholesale procurement and distribution, through a variety of public and private retail outlets. Peasant committees and cooperatives should supervise the fair procurement of farm produce. People’s committees in the towns must supervise the fair price shops where the final products are sold. State monopoly over wholesale trade will ensure that all retail outlets will have to rely on this single source for their supplies.
This is the only way that the interests of workers, peasants and all the working people will be secured. They must become the owners of the means of production and trade and thereby ensure that the livelihood of producers will be protected, that there will be security of jobs for those involved in the movement and distribution of essential goods and that working people in the towns and cities will have access to affordable and good quality food and other essential items of consumption.