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Getting real about retail PDF Print E-mail
Friday, 05 October 2012 00:00
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A small note to Arun Jaitley, asking for clarity on his somewhat unidimensional arguments about FDI in retail

"What I'm not clear about is our stand on the steep drop in clerical workers or that in typists who were done to death by Bill Gates. And what if these chaps have got job elsewhere -- argue that they had no option buy to take up the jobs?"

 

Dear Arun,

Just to tell you I really loved your piece on the dangers of FDI in retail in terms of what it would do for jobs, not just in retail but also in Indian manufacturing—I saw your points in various news items and then finally tracked down the Pioneer article you’d written. Anyway, I’ve done some research to supplement your work on saving jobs—by the way, the make-or-break for Obama is also what he has done for jobs.

The first big fat exaggeration by the government—you haven’t spoken of this yet—is that 30-40% of Indian farm produce goes waste, so we need retail FDI which will bring in cold chains required to stop this huge annual loss. Since the real figure is much less, the so-called ‘saving’ once Walmart comes in is a lot lower. I found this on Montek’s website if you please, and did a graphic on it in FE (http://goo.gl/OOHwn)—Praveen Khandelwal of the kirana association has been using this to expose the government, but he hasn’t even once credited FE. But that’s okay I suppose, since I do it all the time.

Your 4-crore workers in retail figure may be a bit off, but you know there have been all kind of definition changes in the 2009-10 NSS round. The figures for 2009-10 I have vary from 17 million households (Rajesh Shukla) to 25 million people (Laveesh Bhandari) to 43 million (Surjit Bhalla).

But I’m a bit confused. Laveesh’s data shows there has been a dramatic fall in the number of supervisory workers (2.4 million in 1993 to 1.5 million in 2004), clerical workers (8.5 million to 5.3 million) … Shouldn’t we be protesting for them also? Or is it because the BJP is a traders’ party? And how do we explain the fact that these chaps may have got jobs—the number of bricklayers and construction workers, by the way, is up from 5.4 million to 13.1 million, hotel/dhaba workers from 1 million to 1.5 million, maids and domestic help from 2.2 million to 2.9 million, hairdressers from 1.3 million to 1.8 million, and so on. So, is the argument here that they were forced to take up the new jobs since the poor can least afford the luxury of remaining unemployed?

By the way, I’m glad Kapil is giving Sunil Mittal & Co a hard time; this is the one industry that is single-handedly destroying the economy even though it is employing around 5 lakh people. Some simple maths makes this clear. If 10 crore new chaps get a mobile in a year, that’s R1,000 for the phone and another R1,000 for the phone bill. That’s R20,000 crore gone, which could have been spent elsewhere—on 8 lakh Marutis for instance. Maruti’s annual production is around 11 lakh, so the impact is huge. Look at it in terms of two-wheeler sales and the impact is even higher. (Between us, I got this idea from Arvind Singhal, but I’ve used it often enough for people to think it’s mine!)

But since Maruti hasn’t closed down, and the clerical staff we talked about have got new jobs, it’s a good idea to get Sidharth Nath Singh (you know we were in school together?) to counter this point about how, in dynamic economies, people get absorbed in other jobs, and the more educated they get, the higher the salaries they get. My book on caste, you remember, has some details—in 2005, for instance, while a household headed by an illiterate person earned R23,866 per year, that by someone who had studied till 5th grade earned R31,174, R71,647 for someone who’d finished school and R1,17,844 for a household headed by a graduate … you know that sort of stuff.

The other thing Sidharth needs to check is the money these people earn. Starting salaries in Bharti-type Easyday stores are R6,000-7,000 per month while a kirana assistant gets around half this. In a sense, the argument is that we’re condemning people to a lower level of salary and a much harder life. And if you do some sort of basic training for a few months, the kirana chaps can get such jobs easily. I don’t travel across India the way you do, but in the cities where the Walmarts are allowed, a lot of kiranas are closing down because of high rentals—you make more money by giving your shop on rent, to an ATM or a Costa. I am, of course, aware of the attendant risks involved in giving people higher salaries with lower working hours, but you know how these figures can be misused.

The good news, by the way, is that since Walmart has been restricted to a maximum of just 51 cities (it’s around 22 in the states which have agreed to allow FDI-retail) and ones that are spread out really far apart, the damage may not be as large as we expected. If the total size of the retail industry is $500 billion, this means the at-risk market is probably $40 billion at the outermost. And given that Walmart will never get the kind of space it needs, the danger is even less—rentals being what they are today, new retailers have to shell out 25-30% of turnover which makes them completely unviable! (Arvind Singhal has some good numbers on how kiranas can grow their business 50% and employment 40% in 10 years even if organised retail’s share doubles, http://goo.gl/dcO8T, but the maths is too involved for anyone to really understand it.)

What I’m confused about is why we, and that includes Khandelwal, are opposing Walmart but not Reliance Retail or a Big Bazaar since that too will hit kiranas, won’t it? Or is it a swadeshi thing? If it is, I couldn’t agree more since I’ve seen how Japan’s Suzuki finished off our local Ambassador and Fiat—this may have fuelled 10 million dreams (or has Suzuki sold 11 million cars?) but look at the environmental damage with all the cars. And look at all the Chinese goods—you’ve talked of how Walmart will sell low-cost Chinese goods and kill Indian manufacturing, but these guys are already killing us even without Walmart being there. Can’t we just ban them when you come to power? Just because consumers want low-priced goods doesn’t mean we allow our industry to suffer. Or will they vote against you if you do this?

One thing we need to worry about. I met Rajan Mittal who looks after the Bharti retail stores. He was saying he hires 19 people for each of his 2600 sq foot Easyday stores—if the kiranas hire around 2 people (including the owner) for a 500 sq feet shop, this sort of takes away a large part of the steam of the job-loss argument when Big Retail comes in. But I suppose if Easyday isn’t hiring the same kirana chaps who’re losing their jobs, there’s a vote opportunity out there, right?

One last thing. The FDI-in-retail proposal that the NDA sent to the Group of Ministers for clearance, the one that was published in The Indian Express the other day (http://goo.gl/DRo5R), that was incorrect, wasn’t it? Else, it’s difficult to justify what you’ve been saying on FDI.

Best,

Sunil

 
 

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