Indian
Express
By
S Gurumurthy
Selling
India’s retail wholesale
Finally,
FDI in retail has arrived. The collapse of the Rupee by one-fifth in just
weeks,dwindling forex inflows and net FII outflows have forced a desperate
government to sellIndia’s retail trade wholesale. Corporate and
multinational lobbying to induct FDI in retail,branding it as “big
ticket reform”, has been intense in the last few years. The
lobbies havewon. India has lost. The decision betrays a metropolitan
bias; and exposes lack ofunderstanding of India’s agricultural and
rural economy. That it will endlessly damage thehuge 1.2
million strong community-run retail business in India is undisputed. But the
lessknown truth is that it will destroy food security in rural India. How? Read
on.The principal lobby argument for FDI in retail is that the
deep pocket and expertise ofWalmarts to establish supply chain will make
rural areas and farmers prosperous. It does notneed a seer to say how
illiterate those who advocate this view are about rural India. Thereport of
the “Working Group of the Planning Commission on Agricultural Marketing,Infrastructure,
and Policy Required for Internal and External Trade” for the XI Five Year Plan[2007-12], read
along with the 19th Report of the Standing Committee of
Parliament onFood, Consumer Affairs, and Public Distribution [2006-07] submitted
to Parliament drawsthe true picture of the rural/agricultural India. Compare
the farms in India with those in theWest. A total of 58.8 million of small and
marginal farming families, that is over 32 crorerural people, live on
farming in India. Their farm size is 5 acres or less. In contrast, in Canada,it
is 1798 acres; in US, 1089 acres; in Australia, 17975 acres; in France, 274
acres; in UK, 432acres. The US farm size is 250 times larger than the
Indian; the Australian farms, 4000 times!Therefore, Farm Gate to Walmart supply
chain that works in the US/West cannot beimagined here. Now look at
how - and how much of - the Indian farm produce is brought tothe
market.The Farm Gate to Walmart theory is founded on the elimination of
not only middlemen butalso small farmers by making farming contractual and
corporate to reap economics of scale.It ignores global studies and Indian
experience that affirm that economics of scale does notoperate in agriculture.
Actually smaller farms gives better production. The SMFs in Indiafarm about 34% of
the cultivated area, but produce 41% of food grains; their
productivity is33% higher. Replace small farms by large ones. Nation’s food
production will instantly fall by7%. Not just food. SMFs produce most of the
100.9 million tons of milk. So, unless half therural population is done away
with, small farming cannot be dispensed with. The WorkingGroup concluded: “The
small and marginal farmers are certainly going to stay for a long time in India
- though they are going to face a number of challenges. Therefore what happens
tosmall and marginal farmers has implications for the entire economy”.
More critical is thatwhat SMFs produce, they consume and share with the
farm labour; they have no surplus tosell. See how Walmarts will destroy
their food security.A less known, stunning truth about rural India is
that more than 60% of India’s foodproduction does not enter
commercial stream at all, but gets distributed, consumed withinthe villages. It is
retained or stored by farmers for consumption, payment of wages in
kind tofarm labour; and for use as seed and feedstock for animals; for sale
within the village. Even ifa small part of the 60% un-marketed food
production is drawn into the market throughsupply chain which Walmarts
will establish, that will mean urban pricing in rural areas. CanSMFs
and landless labour afford the market price and buy their food? Never. If that
happens,will that what happened Alfanso mango in Konkan and Kerala fish not
happen to rural foodalso? The Konkan people see, but don’t eat Alfanso but only
export it for high prices andspend that money on urban
goods. And the Kerala fishermen fish and export it at high rates,get cash
and drink foreign whisky! The FDI in retail undoubtedly puts at risk, t he
foodsecurity of SMFs and agriculture labour who who constitute 2/3 of
India’s population, as thesupply chain of Walmarts will make Alfanso
out of the basic food grains in rural areas.How does the marketable surplus of
40 percent of food produced by Indian farmers crossthe village borders and
enter the market? Nine out of ten tons [35%] of the surplus [of
40%]that enters the commercial stream enter the market through traditional
Haats, Shandies,Fairs whose number is estimated at 47000. Only the balance of
5% directly enters the 6359traditional wholesale Mandis organised under
government supervision. Here begins themodern market economy where the
surplus 40% of national production gets traded. This isfrom
where the government procures and stocks food for the nation!How
do the Haats/Shandies function? Some 3/4th of them are held once a week;
1/5thtwice a week; 1/20th on daily basis; one Haat covers some 14 villages;
all put together coveralmost the entire 6.58 lakh Indian villages.
Some 2/3rd are held at 16 km from the villages;1/4th at between 6 and
15 km; a tenth at less than 5 km. More than a third
of the buyerswalk to the Haat; 1/3 use bicycle; the rest use bullock carts,
even motorised vehicles.According to the Working Group, at the Haats,
the farmers not just trade, but also exchangesocial and cultural information about neighbourhood
areas, settle marriages and disputes,make crop choice and discuss
resource allocation. Therefore, the Working Grouprecommended that instead
of asking the farmers to come to government for knowing whatthey should
do and should not, the government should open its offices at the
place wheremillions meet at the Haats. Now, by its retail FDI policy, the UPA
government expectsWalmart to go where the Planning Commission Working group had
asked the government togo! See how the agricultural India is far removed
from even the government. NationalSample Survey data shockingly reveals that 7
out of 10 Indian farmers had not even heard es not even heard -
of the Minimum Support Price [MSP] announced by the governmentwith lot of
fanfare; 81% of the those who have heard of it do not know
- yes do not know -how to use it! This is because the
MSP system operates only in Wholesale Mandis, not atHaats.
That is why the Working Group wants the government to go to
Haats. The StandingCommittee rightly asked the government ‘how will
farmers who do not know what MSP is,make use of futures market’. The
government, which had no answer, finally banned forwardtrading in
foodgrain.QED: Thanks to FDI in retail, twelve million community-run retail
shops are in danger; andrural food security at risk. This is UPA government’s
gift for 2012 and onwards
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