Much
hype has been created over the higher employment potential in the economy once
the FDI is allowed in retail, whether, single brand or multibrand. Any policy
issues are supposed to be taken up and implemented only after detailed analysis
of facts and encapsulating situations on economic as well as on social fronts.
Presumably so, in context of FDI in Retail the same approach must have been
taken up by the government. Similar detailed studies must have been carried out
on the Employment Scenario post implementation of FDI in Retail. Whether,
Retailing per se, leave aside, the Foreign Investment in Retailing, resulting
into more number of retail superstores being opened up in the country, shall be
harbinger of higher employment growth, is a question, we could not find logical
answers from any of for the government information available in public domain.
Ground realities as analysed in this piece
brings forth the fact that in country like India with substantial population
belonging to below poverty line, employment generation through Retailing is
just a delusion and piped dream.
The Labour Scene
Report
to People of Labour Ministry - 2010 issued by Ministry of Labour, Government of
India makes certain interesting revelations, and these are presented here,
verbatim, in italics.
Although the overall economic growth
achieved by the Indian economy, particularly during the current decade, has
been impressive, employment growth has not kept pace. This has significantly
limited the “trickle-down effect‟ and widespread distribution of the benefits
of the high economic growth.
Government
is wary of the realization that employment growth has not kept pace with the
economic growth in the country and the thus the benefit of growth has not
reached the lower segments of economy due to low employment generation.
The ongoing demographic changes are
likely to contribute to an ever increasing size of labour force in the country.
The Census projection report shows that the proportion of population in the
working age group (15-59 years) is likely to increase from approximately 58% in
2001 to more than 64% by 2021.
In absolute numbers, there will be
approximately 63.5 million new entrants to the working age group of 15-59 years
between 2011 and 2016. Further, it is important to note that the bulk of this
increase in the population is likely to take place in relatively younger age
group of 20-35 years.
In 2004-05, the estimates of total
labour force in the country varied from nearly 420 million (as per Current
Daily Status-CDS) to nearly 470 million (as per Usual Principal and Subsidiary
Status-UPSS).
By
2014-15 an estimated 574 million countrymen shall be there as part of labour
force. It is clear that we need rapid growth in employment generation to match
these numbers. Substantially higher numbers of young men and women shall aspire
to get sufficiently, adequately and gainfully employed. If adequate employment generation
does not happen at the warranted pace, we must be ready to face frustrated
youth with discord resulting in likely social disharmony.
UNEMPLOYMENT
SITUATION
Unemployment in India is not a
straightforward issue that can be either estimated directly with a single
measuring rod or addressed with a single policy initiative. Even if a person is
not reported to be unemployed on a particular point of time, he/she may be
actually unemployed/under employed. Poor and weaker sections of society,
particularly those who are engaged in subsistence agriculture and low income
earning self-employment activities frequently face this situation as they do
not get employment round the year. Hence, various approaches are used to
measure different dimensions of unemployment in the country. The estimates for
2004-05 varied from 10.8 million (as per usual status - widely referred to as “open
unemployment‟) to 35 million (as per daily status which includes both open
unemployment and underemployment). Hence, addressing underemployment along with
open unemployment is important for policy initiatives, particularly, from the
point of view of “inclusive growth‟.
Almost
3.5 crores willing workers could not be provided with jobs resulting in their
questioned sustenance. Among these, more than 1 crores were totally
unemployed. And mind you these are Government
numbers, which the Report itself is not very sure of. In reality the number of
unemployed may be much more.
Some of the high employment potential
sectors include information technology, information technology enabled
services, engineering goods, gems and jewellery, ready made garments, other textiles
and handicrafts. Increased international trade has also provided the impetus
for the introduction of new and modern technologies and thus have direct
bearing on skill enhancement of Indian workforce.
Ministry of
Labour did not consider Retailing as an important and potentially high
employment generator.
The
employment elasticity with respect to GDP growth, however, can be enhanced by
promoting labour intensive technology and sectors of employment with high
labour capital ratio. In the recent past, different studies have identified
such sectors of employment at least at broad level. These studies highlight
that manufacturing sectors such as “sugar‟, “food processing‟, “industrial
machinery‟, “leather and leather products‟, “jewellery‟, “footwear‟, “jute and
mesta textiles‟, “readymade garments‟, “coir‟, “furniture‟, etc. are labour
intensive sectors with an employment elasticity of more than 0.30. It is
important to promote these industries in addition to enhancing investment in
road infrastructure and power. In addition to these manufacturing sector
industries, service sectors such as rail and road transport, tourism, retail
trade, etc. are highly labour intensive. It is important to note that Public
Private Partnership (PPP) is critical for attracting the necessary investment,
especially in developing infrastructure.
Retail is just one
small sector that can give some employment but it cannot be a strong ground for
promoting retail in a greater magnitude. Under Indian conditions major
employment generators are manufacturing and infrastructure development sectors.
EMPLOYMENT STATUS OF WORKERS
Employment
status, mainly categorised as self-employed, regular and casual, is usually
used as a broad indicator of assessing quality of employment of employed persons.
In India, bulk of the employment (approximately 57%) falls in the category of
self employed. Approximately 60% of the rural labour force and 45% of the urban
labour force is self-employed. After a long period of declining trends during
the 1980s and 1990s, the proportion of the self-employed has shown significant
increase during the early 2000s. The proportion of regular
employed has remained stagnant at around as low as 7% in rural and
approximately 40% in the urban areas. The recent increase in self-employment
has taken place mainly at the cost of casual employment, with the proportion of
the latter declining from 37% to 33% in rural and from 18% to 15% in urban
areas between 1999-2000 and 2004-05 respectively.
Self
employed do not operate in the labour market for wages or earnings, but earn
profits out of their own enterprises. A small proportion of these is
exclusively employers, while a large section of them works as owners/employers
cum workers. Further, an overwhelming proportion of these self-employed workers
are small and petty traders and small and marginal farmers, and many a times,
their earning levels are as low as those of casual workers.
The impetus on the Self Employment is high and
that is rightly so. Instead of job seeker a self employed person becomes a job
provider. In country like ours, this trait is of paramount importance. Entry
barriers in self employment are far too low. Low level of capital needs for a
majority of self employed, makes flexibility to exit is also relatively easy, in
case he or she wishes to move ahead in value chain in an alternate job or
enterprise. Another startling fact is that increase in self employment has
taken place mainly at the cost of casual employment, indicating, more stability
of livelihood and better economic conditions for such persons.
Unorganized Sector
Self
employed do not operate in the labour market for wages or earnings, but earn
profits out of their own enterprises. A small proportion of these is exclusively
employers, while a large section of them works as owners/employers cum workers.
Further, an overwhelming proportion of these self-employed workers are small
and petty traders and small and marginal farmers, and many a times, their
earning levels are as low as those of casual workers. In
urban areas, the percentage of unorganised sector workers is close to 65-70%.
The past
trends and all the available evidence suggest that the bulk of the growth in
employment in future will come from the unorganised sector.
Livelihood of small and petty traders which
form a substantial chunk of our economic work force needs to be protected at
all cost. Even the medium term strategy lined up by the Ministry predominantly
gives focus on self-employed and casual
workers for improving livelihood.
ACCESS TO REGULAR EMPLOYMENT
Access to
regular employment is mainly limited to better educated workforce. Only 4% of
illiterate workforce has access to regular employment. In contrast,
approximately 40% of them are casual labourers. Only 9% workers with primary
education have access to regular employment while overwhelmingly 35% of them
are casual labourers.
56% of illiterate labour work force are self
employed, while around 40% are casual workers. With such large numbers of
illiterate labour force, how many can be accommodated in so called
supermarkets? Has somebody given a serious thought to it?
IMPACT OF
RETAIL OPENING UP
Nineteenth
Report of the Committee on Foreign and Domestic Investment in Retail Sector
As
per the Nineteenth Report of the Committee on Foreign and Domestic Investment
in Retail Sector as was laid in the Parliament on 8th June 2009, the
Secretary, Department of Industrial Policy and Promotion informed that the
retail industry is roughly growing at five to six per cent per year. The total
retail business is considered to be of the order of Rs. 12,00,000 crore which
comes to be about one-third of the country’s GDP. Out of this, about 95% is in
the unorganized sector and only five per cent is in the organised sector. This
sector provides employment to 20 to 22 million people, which is the second
largest manpower employer in the country, after agriculture. In the last four
to five years the space for shopping malls has increased ten folds.
The
Committee observes that another issue which merits attention is unemployment
created by corporate retail. At present, unorganized retail provides employment
to more than 40 million people, which accounts for 8% of the total employment.
Many of them are not well educated. Projection of corporate retail to create
two million jobs is highly exaggerated, ignoring the 200 million people,
depending on the retail sector likely to be rendered jobless. Once displaced,
there is no in-built policy to relocate or re-employ the dislocated persons.
The
Committee also felt that in a country with huge numbers of people and high
level of poverty,
the existing model of retailing is most appropriate in terms of economic
viability. Unorganized
retail is a self-organized industry, having low capital input and high levels
of decentralization.
The Committee, therefore, recommend that the Government should ensure that
some in-built policy must be established to relocate or re-employ the people
who are dislocated
due to opening up of big malls in the vicinity of their shops.
The
entry of big domestic and foreign retailers will not merely destroy the
economic foundation of the small retail supply chain, but will have social
underpinning, in view of the fact that the small retailer is mostly illiterate
or semi-literate and would not be able to find gainful employment elsewhere. The
Committee, therefore, recommend that in view of the adverse effects of corporate
retail (foreign as well as domestic) on the small retailer, there is a compelling
need to prepare a legal and regulatory framework and enforcement mechanism for
the same, that would ensure that the large retailers are not able to displace
the small retailers, by unfair means.
Displacement of Jobs
Shri
Arun Jaitley, MP and the noted lawyer opined that the latest NSSO survey shows
a loss in employment. Self-employment continues to be the largest single source
of bread earning. Agriculture and retail are the largest job providers in
India. Is International retail going to give additional jobs, or is it only
going to displace existing jobs? If purchasing power increases with the
expansion of Indian economy, it will reflect in the co-existence of structured
organized domestic retail and small retail. International retailers with deeper
pockets will displace existing jobs in the retail sector, rather than creating
additional jobs.
The
first consequence will be an adverse impact on domestic manufacturing. Domestic
retailers source domestically. International retailers operate on the principle
of buying internationally at the cheapest cost. Majority items to be sold by
international retailers are going to be sourced from cheaper manufacturing
economies like China. Clothes, shoes, toiletries and other items of daily use
are not likely to bear Indian signature. The fall in manufacturing sector jobs
is likely. India needs manufacturing sector reforms in the first instance, so
as to enable us develop into low-cost manufacturing economy.
Dislocating Jobs
CPAS
Report of 2004 as quoted in Corporate Hijack
According
to the report, if you assume that 40 million adults in the retail sector, it
would translate into
around 160 million dependents using a 1:4 dependency ratio. Opening the retail
sector to FDI would
mean dislocating millions from their occupation and pushing a lot of families
under the poverty
line. The western model of maximizing utility by minimizing labour will not
work in India, as
millions in the country are still seeking on gainful employment.
Here,
given the lack of opportunities, it is almost a natural decision for an
individual to set up a small shop or store, depending on his or her means or
capital. And thus a retailer is born, seemingly out of circumstance rather than
choice.” Commenting on the likely impact of foreign competition, the CPAS
report stated: “India has 35 towns each with a population over 1 million. If
Wal-Mart were to open an average Wal-Mart store in each of these cities and
they reached the average Wal-Mart performance per store—we are looking at a
turnover of over 80,330 million rupees [$1.82 billion] with only 10,195
employees. Extrapolating this with the average trend in India, it would mean
displacing about 432,000
persons.”
The International Scene
Former
MP and president, Rashtriya Vyapar Mandal, Banwari Lal Kanchal says various
studies have shown that the advent of organized retail chains in foreign
countries also has led to closure of small retailers. “Studies have shown that
almost 52% of small retailers closed down within years of organized retail
spreading in England. There is a strong opposition to Walmart even in the US,
where the company was founded, as small businesses have been forced to shut
down,”
In Thailand, over 30% of independent small retailers were
taken out in 10 years! If this happens in India, the loss of employment will be
enormous:
Contrary to myths being spread, Big Foreign Retail will not
create net additional employment. For every one job created by Big Foreign
Retail, at least two to three jobs will be lost in India (and that is a
conservative estimate).
Perturbed
with the disturbing equilibrium in the native community and local economy, the
Senate of the State of California has promulgated a Law with the intent to
legislate to promote
economic
development in all communities of the state and to address the impact on the
state’s small businesses from the superstore retail model. Therefore, the
Legislature declared apart from the other issues,
a.
That
the transformations in the big box retail industry have altered retail
business nationwide. The engine of this change is the retail format known as
the superstore—a big box retail store that also contains the equivalent of a
full-size grocery store, with the total floor space often three to four times as
large as that of a conventional supermarket.
b.
As a result of the restructuring of
retail business, particularly the grocery sector in California, the following
effects may be seen: local grocers, who yield a greater community return on
investment, are driven out of business; less community access to viable
superstore alternatives; lower wages and benefits paid to grocery workers by
superstore retailers;
The legislation
seeks to mandate that prior to approving or disapproving a permit for the
construction or conversion of a superstore retailer, a city, county, or city
and county shall cause to be prepared an economic impact report. Such Report
shall inter alia include an analysis of whether the proposed superstore will
result in a net increase or decrease in employment in the market area, apart
from other issues involving the livelihood of other retailers. Therefore, the
land of Retailing now is feeling the brunt of opening up large superstores and
the impact these have made in disturbing the local economic equations within
the community.
In conclusion
Therefore
our learned Parliamentarian and former Finance Minister of the Country, Shri
Yashwant Sinha has rightly commented that, “We should not confuse the agenda of
economic reforms with FDI…100% FDI has been permitted in the food-processing
industry. The government itself says that we need $25 b of FDI in food
processing in the next three years. But the total investment in this industry
is just $ 330 million. Obviously, the food-processing sector is not attractive
for the investor.”
Therefore
the large format stores are primarily here for making money and they do not
have any love lost for India or Indians. Are they here to help our simple and
poor countrymen grow by providing them with more and better employment opportunities,
it is seriously doubted. Let’s live up to the reality.
Note: This article was conceived in January 2012 by the author (Avineesh Matta) . Nothing much has changed since then!
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