Reform in India

Let Walmart in
Indias government should favour shoppers, not the middle men who serve them so poorly

Dec 3rd 2011 | from the print edition

OPTIMISTS reckon that Indias trajectory is self-correcting. Its messy democracy may not give it the sense of purpose that Chinas one-party state does. But if the economy gets wobbly enough, the politicians will eventually react, pushing through painful reforms that will keep Indias miracle intact. That cheery logic is being put to the test this week, as a proposal to let foreign supermarkets into the country has provoked an almighty row. The government must hold its nerve, for what is at stake is not just where India buys its onions, but whether it is able to make hard choices. The opening, announced on November 24th, is only partial. Multi-brand foreign chains, such as Walmart and Tesco, must operate as joint ventures, of which they may now own up to 51%, and may operate only in cities of 1m people or more. But this should still shake things up. Indian retailing is backward. Stores are tiny. Supply chains are rickety and shockingly wasteful. Perhaps a third of vegetables rot before reaching a plate. Foreign firms will make life harder for small shopkeepers and middle men. But their cash and know-how could help modernise Indian farming and move crops faster from fields to shopping baskets. That would curb food prices, benefiting the poor and easing Indias stubborn inflation (see article). In this section

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The new reform is timely. Growth has dipped below 7%. The rupee is weak, investors are nervous and business folk are livid about red tape. Indias troubles do not compare with the crisis of 1991, which spurred it to liberalise after decades of stagnation. But still, the government needs to lift confidence, and retail liberalisation could work like a bargain bag of yeast. Yet the political reaction has been furious and xenophobic. A party boss in Uttar Pradesh, Indias most populous state, has promised to defend small shopkeepers by torching Walmart stores. Perhaps half of Indias states say they will refuse to implement the reform, as is their right. Trade unions have promised strikes. Parliament has been shouted to a standstill. Already there is talk that the government might back down. All lost in the supermarket? A chunk of the blame lies with the main opposition party, the BJP. A decade ago it favoured economic opening, even of retailing, and celebrated Indias capitalist boom. Now it is a shoddy outfit, blocking change purely to weaken the government and discounting the national interest with even more zeal than the Beast of Bentonville discounts tomatoes. But this is also a mess of the governments making. A coalition dominated by the Congress party, it is led by Manmohan Singh, who serves as prime minister by approval of Sonia Gandhi, Congresss hereditary chief. He is a technocrat who helped pass the reforms of the 1990s. But for the past few years Mr Singhs administration has seemed exhausted. The complacent belief that a double-digit growth rate is Indias birthright appears to have taken hold. Had the government consistently made the case for reform and acted boldly on issues from land reform to subsidiesit might not be so bullied today. But now that it is, it must fight its corner. The retailing reform does not require parliamentary approval. The government should refuse to back down, and argue, loudly and often, that it stands with shoppers, not with the middle men and shopkeepers who serve them so poorly. Indias future as an open, competitive economy will not be decided in the supermarket aisles. But this is an important battle nonetheless.

ow India and Wal-Mart Will Create 10 Million Jobs

Bob Evans, SAP rashmipriyaWalmart should be welcomed to India. It is going to increase competition but it will be for good and only quality will stand and rest will fall. It is good [...] kmadathilThere is no economic basis for allowing hypermarket chains into India at this stage.With small retailers, a competitive market is assured, and so is employ [...] 3 comments, 2 called-out + Comment now + Comment now

Wal-Mart heads for India (Image via Wikipedia) New regulations allowing Wal-Mart and other major global retailers to open company-owned stores in India will create 10 million new jobs across the country within the next three years, according to Indias commerce minister. Now that Carrefour, Tesco, Wal-Mart and other global retailers are allowed to control up to a 51% ownership stake in their operations within India, the boom in employment opportunities is expected to extend far beyond store operations, according to an article in the Wall Street Journal: Large foreign retailers will reduce waste by creating modern cold storage and supply chains for fruits and vegetables, the article says. They will increase choice and lower prices by cutting out middlemen. Commerce and Industry Minister Anand Sharma expects fresh investment to generate 10 million new jobs over three years, about five to six million of them in logistics alone. Ah, yes, the power of logistics. In a global economy thats placing an increasing premium on speed, the ability to rapidly transport goods and services across great distances and in spite of great obstacles is becoming indispensable for any country hoping to gain or keep a competitive edge over the next decade. Over the past 15-20 years, most Indian entrepreneurs overcame the countrys gaps in physical infrastructure and logistics by focusing on business models

based on digits rather than atoms, and India became a global powerhouse in software and related high-tech services. Along the way, those software and IT-services businesses helped create a large and growing middle class in India that was eager to establish and enjoy higher standards of living in housing, nutrition, education, entertainment, clothing, and more. As that middle class continues to grow and thrive in India as well as in other developing countries, the need to have viable capabilities in logistics and infrastructure will become even more critical. Governments will need to work more closely with not only private enterprises but also citizens to establish appropriate policies to deal with the widespread impacts of disruptive events such as 10 million new jobs being created in just three years. And few companies on Earth know more about multi-modal and near-real-time logistics than Wal-Mart, Tesco, and Carrefour. Within their own operations and in collaboration with partners, those three global retailers will offer Indian partners and government officials an unrivaled level of understanding of everything from regional warehouses to RFID to just-in-time delivery to the sophisticated systems necessary to manage all of those demanding and nonstop processes. Speaking of sophisticated systems, all of that growthand all of that disruption will turn something old into something very new and vital: ERP. As millions of jobs are created to allow huge volumes of goods to be moved at great velocity, how will governments plan for new water systems, new electrical grids, new sewer systems, new financial models, new schools, new hospitals, new roads, new levels of security, and new residential neighborhoods? ERP will be the answer because thats what it was made to do: help large organizations plan and manage resources, and deliver optimal outcomes. And the new regulations in India governing the operations of these global retail powerhouses will require a lot of planning on the part of everyone from the retailers themselves, to their in-country partners, to the logistics companies that might account for up to 6 million of those 10 million new jobs, and out to the local and regional governments that have to try to help manage the growth all of that activity will generate. Page 1 2 3 Previous PageNext Page rashmipriyaWalmart should be welcomed to India. It is going to increase competition but it will be for good and only quality will stand and rest will fall. It is good [...] kmadathilThere is no economic basis for allowing hypermarket chains into India at this stage.With small retailers, a competitive market is assured, and so is employ [...] 3 comments, 2 called-out

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rashmipriya 1 month ago Walmart should be welcomed to India. It is going to increase competition but it will be for good and only quality will stand and rest will fall. It is good news that the company will also generate more jobs prospects for citizens of India. Called-out comment Permalink Flag Reply

kmadathil 1 month ago There is no economic basis for allowing hypermarket chains into India at this stage.With small retailers, a competitive market is assured, and so is employment for millions even Adam Smith would agree. As for logistics, giving the Indian market time to develop logistics solutions on its own will lead to more innovative mechanisms reference the dabbawallahs of Mumbai. The deficiency in cold storage is a market opportunity which Indians themselves can exploit, or invite foreign partners to jointly profit from.

With its huge bargaining power and relentless profit drives, these hypermarket chains are only going to worsen lives for the many millions of farmers you only have to look at the many farmer suicides every harvest season. And finally, retail is simply too strategic a sector to invite foreign companies into, and there are no checks and balances. Walmart is American, Carrefour is French and Tesco is British despite their so-called global company status, their responsibility centres are primarily in their home countries. Should these ventures go belly up, the execs only have to catch the next flight out of the country, leaving the people to sort out the mess. There are simply no assurances about commitment to the society or any other indication that these companies will bear the burden of any misadventure. Only look back at Bhopal 1984 for the results of that. In direct opposition to rashmipriyas comments, I would say that introducing MNCs in retail will simply kill all competition in the otherwise competitive Indian market. Deficiencies in logistics are no reason to sell out a strategic sector. If anyone reads this, it would be worth investing in the Indian cold storage sector, but probably not retail. As much as India is a consumer society, it is also a production society. Employment does matter here. And there is no lack of competition in the Indian market today which the MNCs can address. Called-out comment Permalink Flag Reply + expand comment - collapse comment

dja61 2 weeks ago Bob, the only jobs Wamart will create will be for Indian Nationals and not workers in the US. Here is a real story Bob which you should have written about jobs and INDIA: My name is Dan Armstrong. I am fifty years old and I have worked in the mutual fund industry in Boston since 1987. I thought I would write to you regarding a news event that is occurring, which you are most likely unaware of, and as far as I am concerned is morally and ethically wrong, and is a NATIONAL DISGRACE.

My former employer (I left a week ago), State Street Corporation, a large Mutual fund firm in Boston, received approximately $3 billion in US government TARP bailout money about two years ago, and is now embarked on a program (A Joint Venture JV with SYNTEL of TROY, MI) of sending hundreds of jobs (in small increments in order to avoid the attention of the media, the press, and politicians) to India where the workers will receive approximately $400 per month to perform work for which American workers in Boston and in Kansas City, and Irvine, California, currently receive approximately $3,200 a month on average to perform. This action is all being taken under the direction of State Streets CEO Jay Hooley and his operations man Alan Greene. When my former employer needed help. the federal government bent over backwards and provided a huge amount of operating capital which ultimately came from each American Worker. Currently in the cities of Pune, Chennai, and Mumbai, India, there are large campuses filled with workers from a company called Syntel where hundreds of workers are performing Fund Accounting, Portfolio of Investments compilations, Custody work, and SEC and IRS Compliance testing. All of these people are now doing work that was once being done by Americans in Kansas City, Irvine California, and Boston, and other parts of Massachusetts. I was told by one of the Syntel workers that in Pune alone over 1,200 workers are now performing jobs which less than two years ago were being performed in Massachusetts, and Kansas City. I was told by a Administrative person who worked in the office of the former Unit Head, that State Street plans by the end of 2012 to move almost all of the Fund Admin operations which is about 725 people, to Mumbai and Punai where Syntel will perform all of these jobs leaving several hundred Massachusetts residents out of work at a crucial time in our economy and our history. If you contact State Street and they tell you they are not going forward with the JV They are lying We Just send a team to INDIA last month to train workers to take US jobs. If the US congress enacted a Jobs Expatriation Act which require any corporation with 100 employees or more doing business in the US to file paperwork each year with the Federal government indicating just how many employees they (the corporations) have on their payroll. If there were any change in employment figures within such a firm during a given year based on the fact that an organization expatriated US jobs to a foreign country, than that entity would have to pay the federal government a $200,000 tax per job expatriated. If such a firm within that year failed to report such activity, a fine of $500,000 would be assessed for any unreported expatriated US employment. This act would halt corporations like my former employer State Street Corporation from depleting the US job base to enrich the lives of a few corporate officers, and a hand full of institutional investors who are presumably pretty wealthy to begin with.

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