Tag Archives: Prime Minister Singh

Indian States are Putting More Roadblocks in front of Walmart Expansion

New Orleans   Two reports yesterday from Dharmendra Kumar, director of the India FDI Watch Campaign affiliated with ACORN International, point out how far the superstore giants like Walmart, Carrefour, Tesco, and Metro really are from being able to freely enter markets throughout India.  This is largely a story that the global business press is missing as they tout the rise and fall of the stock market without trying to understand that there continues to be a huge struggle over these issues of foreign direct investment in multi-brand retail.

            First and foremost, when Prime Minister Singh announced that he was pushing forward the modification, he could only do so generally at the parliamentary level.  Specifically each of the twenty-eight India states, not to mention the seven territories, has the right to independently decide whether to allow this FDI expansion in their jurisdictions.  As of this date, only 11 of the 28 states have indicated a willingness to tolerate such expansion with 17 thus far militantly opposed.

            As Dharmendra reported yesterday, there continue to be more roadblocks. 

            Walmart had teamed up with India-based Bharti in recent years to operate a “cash-and-carry” business that sold only to other businesses and not the general public, something like Sam’s Clubs the United States.  The Government had indicated that a “group” business like Walmart-Bharti had certain restrictions, but in recent years the ambiguity of the “group” business definition had allowed them free rein.  No more. 

            To quote from Dharmendra’s report:

On 3rd June 2013, Govt. of India defined Group firms as two or more enterprises that directly or indirectly are in a position to exercise 26% or more voting rights in the other enterprise or appoint more than 50% members on board of directors in the other enterprise. Amidst widespread opposition to the Walmart’s backdoor entry of FDI in Multibrand retail (through Bharti-Walmart, the 50:50 joint venture between Walmart and Bharti for operating Cash-and-carry outlets in India), in April 2010 Govt. of India framed a policy that asked cash-and-carry businesses (Bharti-Walmart) to limit their sale to group firms at 25 per cent of their turnover. In absence of clear definition of what group firms meant Bharti-Walmart’s cash & carry business (20 Best Price Stores) continued to sale almost 85% of their products to Bharti Retail’s 200 Easy Day stores.

Now, Bharti-Walmart will either have to limit its sale to Easy Day to 25 per cent of its turnover or restructure its corporate structure.

 

There can’t be happiness in Bentonville over this new clarification.

 

Yesterday the Indian Department of Industrial Policy and Promotion (DIPP) was also meeting and was expected to also propose additional heartburn for the superstore outfits.   India FDI Watch expected the following actions:

It is likely that the DIPP

 

– Would ask global superstores to invest 50% of only the first tranche of investments (minimum $100 million) in back-end infrastructure.

– Would declare that the 51% foreign direct investment limit in multi brand retail is composite one, including FDI and foreign institutional investment (FII).

– Would allow superstores to create back-end infrastructure in states that do not allow any FDI in multi-brand retail

             Forcing the big boys to put their investments up front rather than only in the logistics and supply at the backend of a retail operation almost puts a bull’s-eye specifically on the usually smiley-face of Walmart.

            There’s a lot more fight to come in India over FDI’s expansion into retail.

Indian States and Walmart Expansion Audio Blog

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Stiglitz Opposes India FDI Modifications, Walmart Admits Knowledge of Bribes

Professor Joseph Stiglitz

New Orleans    Talking to ACORN India’s Mumbai Director Vinod Shetty via Skype on Tuesday, he could hardly wait to tell me about the news headlines all over the country as Nobel prize winning, former World Bank economist Joseph Stiglitz added his voice to our longstanding opposition to Prime Minister Singh’s unilateral actions to modify foreign direct investments in multi-brand retail that would allow Walmart and others to come into the country and work their will.  ACORN International’s India FDI Watch Campaign has been an active organizer and voice in this effort for the last 8 years.  Stiglitz, now a Columbia University professor, is the highest profile economist to line up against these new, desperate political moves by the Prime Minister and the ruling Congress Party in advance of coming elections in 2014.

Stiglitz speaking at a media interaction on this week in Bangalore, organized by the Azim Premji Foundation, Joseph Stiglitz, a professor at the Columbia University, said that the consequences of foreign direct investment in retail would be that it drives down prices received by Indian suppliers to compete with foreign firms, thereby increasing inequality.  Stiglitz was clear about Walmart as well, as is obvious from this excerpt from www.hotnhitnews.com of his comments:

Citing that foreign investment would bring in more corruption, Stiglitz said that “Don’t focus on FDI in the belief that it will solve all problems.” He also warned the Indian government saying, “Walmart certainly brings greater capacity in bribery, it was their source of success in Mexico. You don’t need to bring that in, you already have enough of that.”  Apprehending that the investment inflow would shift the production bases to outside countries, the Nobel Laureate said, “There is concern in this area that some MNCs (multinational companies) might use their monopsony power, their ability to access cheap goods from China, and use that monopsony power to give them a competitive advantage. That’s not a good basis for growth,” quoted Livemint, a financial newspaper.  [from www.hotnhitnews.com]

These were not slapdash, off-the-cuff comments made by Stiglitz.  In an interview with Pranay Sharma published as “Unpopular Opinion” on a blogsite,  he was even clearer on October 21, 2012:

PM Manmohan Singh announced a clutch of economic reforms recently, particularly in regard to allowing FDI in multi-brand retail. Do you think India needs to open up its market?

India is an unusual country and different from many other developing and emerging markets. It has a large entrepreneurial class and has lots of savings, wealth. And this entrepreneurial class is very talented. So that raises the question as to why India needs foreign entrepreneurs in any sector, particularly the retail or the financial sectors.

And what’s your answer to that?

I have not seen a good explanation yet. To me, as most economists say, a little competition is good. On the other hand, the worry is that a company like Walmart may owe some of their success to its power and ability to drive down prices. Because they can buy things out and if that’s the case then they will use that power to have Chinese goods displace Indian goods. The real harm will not be to the retail sector. That is not the real problem. The harm will be to the Indian supply chain going into the retail sector. The other concern is that Walmart has succeeded in expanding its business by adopting abusive labour relations.

Is that the experience of other countries where it has a presence?

That is the experience of other countries. It is a business practice that you don’t want to import to your country. Bribery in Mexico, free-riding on healthcare, a policy against unionisation, discrimination against women—a whole range of accusations, some of which have been proved and others that remain accusations but are hard to win in courts. Why would you want to import such business practices into India? Many economists see the breakdown in social contract as one of the reasons for inequality. There is also a worry that Walmart will break down the social contract in India that is already frail.

So how does one go about it?

The other reply to these concerns is for India to have legislations to ensure these problems don’t happen. You should have good protection from large multinationals.

Stiglitz in yet elsewhere has also committed the heresy of questioning the impact on Indian farmers and their sourcing, which has been the one fig leaf the government has been hiding behind.

Meanwhile in the United States two Congressman yesterday released emails from Walmart CEO Duke from 2005 while he was head of Walmart’s international operations (and frequently in India promoting the FDI changes!) proving he and the top officials had knowledge of the Mexico bribes from their legal counsels there and elsewhere.  NPR reported this morning that Walmart has said that it had already admitted having knowledge of the bribes in 2005, just as ACORN International’s India FDI Watch Campaign was gaining steam and our work organizing Walmart workers and Florida alliances was underway in the US.  They continue to be silent on why they did nothing to stop the bribes or modify their corrupt corporate culture or report the violations to any authorities in the United States or Mexico.

Thanks to Professor Stiglitz, who is also credited in many circles for promoting the 99% percent argument about inequality among academics, we may have found a friend that will be harder to ignore in India and the United States, if it is not too late.

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