FDI in retail will cause unemployment: Retailers

Traditional retailers are strongly against foreign direct investment (FDI) in retail and are against any move to opening the sector to foreign capital. In fact, the Confederation of All India Traders (CAIT), an umbrella organisation of 5000 retail associations across the country, has brought out a book on FDI in multi-brand retail.

Interestingly, the book suggests measures for a strong retail sector which are similar to the suggestions made in a working paper on the subject authored by two IIMA members of faculty. DNA had recently published a report on the working paper's conclusions and recommendations.

The Central government has argued that influx of foreign capital in retail will generate employment and trigger huge investments in backend infrastructure of retail chains in the agriculture and food segment.

But traditional retailers are against the move as it may harm the interests of farmers, and small and medium enterprises. The book brought out by CAIT also argues against allowing FDI in retail.

CAIT has said that the Centre should instead improve infrastructure for trading and take steps for removal of intermediaries in agriculture retail. It has also suggested that the government should focus on skill development in the workforce for better employability before allowing FDI in multi-brand retail.

"Our book gives some realistic arguments against the government's assumptions and claims in terms of creation of jobs, investment in backend infrastructure, etc," said Praveen Khandelval, general secretary of CAIT.

On the claim that 4 million jobs will be created in the first three years if FDI in retail is allowed, the CAIT book says that it is unrealistic.

"If 4 million jobs are to be created, even Wal-Mart, which has the largest average employee per store, will need to open over 18,600 supermarkets in India. This means 644 retail stores in 53 cities," the book states.

It further says that the global experience in organized retail has shown that instead of creating employment, mega-retail corporations actually reduce employment. This is so because they promote technology and automation which cuts the need for manpower. The claim that FDI in retail will also benefit farmers is eyewash, claims the book. Supermarkets actually push up prices and pass on payment risks to farmers and growers.

"Milk producers in the US got only 38% share of the consumers' dollar that was spent on milk. In the UK, milk producers got only 36%. However, in India, the milk producer gets more than 70% of the consumers' rupee on an average," the book says.

The government thinks consumers will be the second major beneficiary after farmers as competition among the retail chains will bring down prices.

"Research findings have established that retail and brand companies have positioned themselves as powerful gatekeepers between the consumers and the producers. Organized mega-retails encourage mass consumerism. As a result, the consumer tends to spend more than his current requirement," the book says.