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Journalism of Courage
Commerce minister Kamal Nath indicated, while speaking at the Indian Express hosted Idea Exchange, that FDI in retail may be allowed to a limited extent in a segmented way. Segments such as apparel, footwear, electronics, stationery and books, which will not harm small retailers, can be opened up slowly. As the minister argued, opposition to FDI in retail is largely based on the perception that it will lead to job losses, but if FDI is confined to those sectors that pose to competition to the traditional ‘kirana’ sector, it should cause no problem.
This tip-toeing around the issue may be politically strategic, but there can be no getting away from the facts. The fact is ‘FDI’ is being used as the foreign bogey man. FDI in retail, apart from bringing in new technology at lower costs due to better supply management and procurement policies, has obvious advantages to Indian consumers, besides providing larger markets for agricultural produce. A modern retail sector is also a tool to attack the black economy. Where there is a cash economy, it becomes easy for both the seller and the buyer to hide the transaction and escape paying taxes. The way out is to increase the share of the formal sector and reduce the component of the cash economy. While local shops do not provide a receipt, the supermarket does. Today, wholesale plus retail trade constitutes 14 per cent of GDP and can be a significant source of tax revenue. With the Goods and Service Tax planned for 2010, a modern retail sector will make a huge difference to the revenues of both the Centre and the states.
Second, and more substantively, the argument that jobs will be lost in the ‘kirana’ sector assumes that there is something holy about jobs in local stores. Modernisation brings job losses in some sectors and growth in others. This is happening in many sectors and not just in India, but all over the world. In India, growth has brought job loss in traditional sectors and job growth in emerging sectors. This churning is painful to those at the receiving end of it, but it is very myopic to argue that it can, or indeed should, be stopped. Over the next decade we expect to see significant job losses in low productive agriculture and retail as people move to services and manufacturing. Should we be opposing this? Should we prevent modernisation, for example, in agriculture so that 60 per cent of India’s work force continues to till the land, with low productivity and low wages, producing 20 per cent of the country’s GDP? The story about the retail sector is also a story about India.
