Column: Getting real about retail

Written by Sunil Jain | Updated: Oct 5 2012, 18:14pm hrs
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 manufacturingI saw your points in various news items and then finally tracked down the Pioneer article youd written. Anyway, Ive done some research to supplement your work on saving jobsby the way, the make-or-break for Obama is also what he has done for jobs.

The first big fat exaggeration by the governmentyou havent spoken of this yetis 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 Monteks 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 hasnt even once credited FE. But thats 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 Im a bit confused. Laveeshs 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) Shouldnt 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 jobsthe 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, Im 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, thats R1,000 for the phone and another R1,000 for the phone bill. Thats R20,000 crore gone, which could have been spent elsewhereon 8 lakh Marutis for instance. Marutis 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 Ive used it often enough for people to think its mine!)

But since Maruti hasnt closed down, and the clerical staff we talked about have got new jobs, its 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 detailsin 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 whod 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 were 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 dont 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 rentalsyou 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 (its 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 lessrentals 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 retails share doubles, http://goo.gl/dcO8T, but the maths is too involved for anyone to really understand it.)

What Im 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, wont it Or is it a swadeshi thing If it is, I couldnt agree more since Ive seen how Japans Suzuki finished off our local Ambassador and Fiatthis 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 goodsyouve 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. Cant we just ban them when you come to power Just because consumers want low-priced goods doesnt 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 storesif 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 isnt hiring the same kirana chaps whore losing their jobs, theres 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, wasnt it Else, its difficult to justify what youve been saying on FDI.

Best,

Sunil

sunil.jain@expressindia.com