Wal-Martization of India: A Threat to Economy, Ecology and Democracy

On 11^th July Dr. Vandana Shiva filed a Public Interest Litigation on behalf  of Navdanya in the Delhi High Court through Senior Supreme Court Advocate Pinky Anand to call on the court  to investigate whether Walmart was making an indirect entry into the retail sector in India through Bharti.  The court has served notice to the corporations and the government.

FDI is not permitted in Multi Brand Retailing in India.

The Ministry of Commerce and Industry, through DIPP issued a consolidated policy and regulation of FDI which are contained in FEMA and RBI regulations being Circular 1 of 2011 which prohibited multi retail trading and indicated guidelines for violation.

By letting Multi Brand retail giants like Walmart to directly and indirectly penetrate into the Indian retail sector is violative of Articles 14, 19 and 21 and the Directive principles of State Policy listed under Articles 38(1) and (2) and 39(a) and (c) which direct the State to ensure the welfare of the people and strive to minimize the inequalities in income.

Walmart operates under 69 different banners in 27 countries. With fiscal year 2012 sales of approximately $444 billion. From $30,000 in 1962, Walmart’s earnings have touched $ 15.8 billion in 2012. Wherever Walmart enters,it destroys the local economy, ecology and democracy.

Protests had prevented Walmart’s entry into retail, but, in 2007, it did get a backdoor entry for whole sale only through a joint-venture with Bharti. Their stores go by the names of Easyday and Best Price Modern Wholesale. In 2006, it was decided that instead of having to seek FIPB approval, FDI up to 100% would now be allowed under the automatic route for wholesale cash and carry trading.

The stakes are high on both sides. For people and the world, it is vital to protect livelihoods and democracy. For Walmart and the government of US and India, Walmarts profits come before people and democracy.

In 2011 the cabinet decided to allow 51% FDI in retail. After considerable opposition, the decision was rolled back. The Government has however continued to announce its commitment to a policy for promoting FDI in retail, a codeword for Walmartisation of the Indian Economy.

The company is so powerful that President Bush and  Prime Minister ManMohan Singh signed a bilateral agreement to force its entry into India.

The pressure for FDI in retail goes back to 2005, when Prime Minister Manmohan Singh signed an agriculture agreement with the US, along with the nuclear agreement. On the board of the US-India Knowledge Initiative in Agriculture, as it is called, sits Monsanto (the world’s leading producer of GM seeds), ConAgra (among the world’s biggest agribusinesses, along with Cargill) and Walmart (the world’s largest retail giant).

Even after a change in government in the US the administration has continued to push for Walmart. Secretary of state Hilary Clinton made a visit to Kolkota to meet Mamta Banerjee, since Mamta Banerjee had blocked the Government attempt to open up the retail sector to Walmart in 2011.

Wal-Mart has emerged as one of the largest corporations in the world, and definitely the largest in retail. It started only fifteen years ago. In 1990, Wal-Mart had only nine supercentres. By the end of 2000, it had 888 supercentres in USA, and had become the number one retailer in the country. Today it has become the biggest grocery seller in the world. In the U.S. it controls 16% of the grocery market. In some cities its share is 30%. Walmart now has 3,811 stores in the USA. It has become the largest retailer in Mexico and Canada, the second largest grocery seller in U.K – all in a few years.

All the profits which Wal-Mart has made till now have been by exploiting their suppliers,workers and the communities.

Workers in China’s Guangdong province work for 13 to 16 hours a day, 7 days a week, with 20 hours shift in peak season. Even though the minimum wages in China is a s low as 31 cents an hour, these production workers are paid 13 cents an hour. Workers are accommodated in horrible and unsuitable conditions, charges exorbitant rates for the food and are fired if they are too ill to work. There are no health and safety enforcements in the work units and the workers suffer from repetitive stress disorders. The factories mostly employ young employees and teenage girls. Many of the factories from where Wal-Mart gets its products including food has been declared by the Chinese Government as violating safety Specifications. Wal-Mart sources most of its products from factories in China, where 80% of the 6000 factories that supply to Wal-Mart are located

India’s retail sector with its overwhelming preponderance of small and self-employed retailers  offers livelihoods for 50 million. These are not just “mom and pop” businesses, such as the neighbourhood kirana shop. For every one of them, there are dozens of handcart and pavement vendors with little more than a pile of vegetables or fruits as their investment for survival.

Wal-Mart and its friends in government are spreading myths that the retail giants entry will benefit Indian people.

Myth 1: India’s  small farmers will earn more

The Food and Agriculture Organization has warned that the dominance of global supermarkets “has led to consolidated supply chains in which buyers for a handful of giant food processors and retails wield increasing power to set standards, prices and delivery schedules.”

Hyper markets displace diversity, quality and taste and replace it with uniformity, quantity and appearance. As Tobias Reichart reports, “to ensure timely delivery to numerous retail outlets, companies like Wal-Mart prefer to buy large amounts to products meeting uniform standards from a limited number of supplies. The contracts are often designed in a way that allows retailers to place orders on very short notice, refuse products for quality reasons and pay several months after delivery, thereby cap turning value while passing business risks to suppliers and farms”. Big retail goes hand in hand with big agriculture. There is no place for small farmers in a Walmart world

A U.K. Government Competition Commission Enquiry identified 27 practices by supermarkets that were against the public interest. The Commission also uncovered regular selling by all major retailers below the cost of product, a practice retailers call price flexing. This led to negative margins for suppliers. Average operating margins were 2-4%. As a result of the Wal-Martisation of Indian agriculture more farmers will be driven off the land, or into debt and suicide.

Wal-Martisation of Indian agriculture will create more poverty for our people. It will also leave India poorer as a culture and civilization, in which the reel free trade takes place face-to-face on our streets and in our haats and bazaars. Box stores and hypermarkets will rob India of her diversity and decentralized economy, which is the source of our resilience and real wealth of the people.

Myth 2: “Localization”

In an article Wal-Mart’s vision of India published in the Financial Express, 1st June 2007, Raj Jain, President, emerging markets, Wal-Mart has stated:

“One key reason for Wal-Mart’s success is localization. We carry local products from local suppliers that appeal to local tastes, needs and fashions.”

If Wal-Mart was our local neighbourhood store, carrying only locally produced items, it would be different in every region of every country and it would not be a super centre. It would be a separate shop for different things—a sari shop, a bangle shop, a shop for electrical goods, a shop for vegetables.

A typical Wal-Mart store sells 60,000 different items; a super centre sells 120,000 items. And 80% are sourced from China. Wal-Mart is one of the best beneficiaries of corporate led globalization, and has made communities dependent on supplies from thousands of miles away for everyday items – including the food we eat and the clothes we wear..

The Wal-Mart model is based on the opposite principles to localization. It is based on principles of globalization. The reality has been identified by Charles Fishman in “Wal-Mart Effect”.

“One key reason for Wal-Mart’s success is globalization. They carry global products from global supplies that create global tastes, needs and fashions.”

By being the biggest buyer in most commodities, Wal-Mart determines the fate of producers – whether they will continue to produce and what price they will sell their products at.

As Sherrie Ford, a factory owner and long time manufacturing management expert has stated:

“Every time you see the Wal-Mart smiley face, whistling and knocking down the prices, somewhere there is a factory worker being kicked in the stomach.”

Myth 3: An ally of small retailers

Wal-Mart is presenting itself as an ally of the small retailers it will destroy.

“The Joint Venture will sell quality merchandise directly to retailers – big and small, including ‘mom and pop’ or kirana stores. The purpose is to establish an efficient supply chain linking farmers and small manufacturers – who have limited infrastructure or distribution strength.”

One would imagine that there are no wholesale markets or mandis in India which get farmers produce to the retailers. Our trade network is more sophisticated – more complex, more multilayered, more efficient than any system that Wal-Mart can introduce itself as a giant wholesaler. This will destroy millions of livelihoods in mandis and wholesale markets. In the mandis the retailer can choose to buy from hundreds of traders. With Wal-Mart farmers will have only one buyer and consumers will have only one seller. There is no reason to imagine that Wal- Mart will not destroy India’s small, independent retail as it has done in the USA. A study in the US shows that in the first year of a Wal-Mart store opening, 50 people who had a retail job in the county (locality) had lost their jobs. Three retailers closed within two years of Wal-Mart’s arrival, four closed within five years.. Another study found that Wal-Mart took away 15-30% sales from other supermarkets.

Wal-Mart has been prosecuted several times for predatory pricing behavior, which is defined as the practise as temporarily lowering prices in order to drive competitors out of business so that prices may be raised afterwards in a competition free environment.

Kenneth E. Stone of Iowa State University has published several studies on Wal-Mart. In 1997, Stone found that small towns lose up to 47 percent of their retail trade after 10 years of Wal-Mart stores nearby .  This happens in every country where Walmart enters. India will be no different.

Let us not fall into the trap of Wal-Mart’s myths. Let us not create a monster for India’s small producers and retailers.

At a time when movements like Slow Food are growing worldwide to promote and protect local food cultures and economies, the Indian elite and middle classes are rushing, headlong into an industrial food culture. At a time when the west is recognizing that the Wal-Mart – TESCO model degrades food, culture and employment, and farmers markets are growing everywhere, India with the largest and richest “bazaar” culture in the world is being manipulated by corporations and their friends in the governments of the U.S., E.U. and India to become part of the “clone” culture of supermarket chains that Andrew Simms describes so well in his “Tescopoly”.

He has called supermarket chains an invasive species (like Lantana and Parthenium) which destroys local ecosystems and local cultures.

Just as we need to protect ourselves from invasive species to protect our biological diversity, we need to protect our food cultures and livelihoods from the invasion of supermarket chains. “Free trade” for Wal-Mart and TESCO is the end of freedom for farmers, hawkers and vendors who constitute a population of more than 800 million in India. W.T.O. might be dying, but corporate hijack of our livelihoods in food and farming is more intensive than ever. And governments have become instruments and facilitators in the promotion of corporate farming and corporate retail.

Citizens must take the lead in shaping societies that protect the earth, give work to all hands and enrich our communities and societies. Our slogan “Our world is not for sale” must move to every farm and every street in every society. Our freedoms and our very lives are at stake.