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Posts Tagged ‘FDI

Time to halt the anti-labour pro-FDI momentum

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The new NDA government has within six weeks of its formation made its direction clear. It will seek the steady weakening of laws that have protected labour and will encourage foreign direct investment (FDI) into as many sectors of the economy as possible.

RG_socialist_fist_201406Such unilateral dismantling of workers’ rights and of self-reliance cannot be tolerated. Prime minister Narendra Modi, finance minister (and defence) Arun Jaitley, commerce minister Nirmala Seetharaman, home minister Rajnath Singh, rural development (and transport) minister Nitin Gadkari, urban development minister Venkaiah Naidu, agriculture minister Radhamohan Singh, labour minister Narendra Singh Tomar and their cabinet and ministerial colleagues are not in office as representatives of Indian companies and industry associations, nor are they in office as representatives of multi-national corporations and the finance industry.

But judging from their statements in so short a time, they need a strong reminder that it is the people – worker and kisan, householder and elderly – whom they serve. Where will that strong reminder come from?

The first such reminder has already been issued, forcefully, during a meeting between the central trade unions and labour minister Tomar on 2014 June 24. The minister of state for labour Vishnudeo Sai, the labour secretary, chief labour commissioner, Central Provident Fund Commissioner, finance commissioner, ESIC and other labour department officials also heard the demands and points of view of the central trade unions.

What has been asked for is what the central unions call “a directional change in approach and policy so that the legitimate interests of working people who produce wealth for the nation, resources for the exchequer and also profit for the employers are protected and taken care of and also the interests of the national economy and the national assets and resources are harnessed for the benefit of the majority of the populace”. This has become all the more urgent and necessary as the central govt (which is urging state governments to follow suit) is attempting to hurry major amendments to a number of principal labour statutes including the Factories Act, the Minimum Wages Act and the Child Labour Act.

RG_socialist_fist_201406_HThat it is necessary for such a change to be demanded (yet again, these have been central to successive sessions of the last few Indian Labour Conferences, the 42nd, 43rd, 44th and 45th) demonstrates how strong a hold Indian industry and their foreign collaborators have on the political class, regardless of the public persuasion of the members of that political class.

The trade unions had systematically arrayed before these government worthies the reasons for their opposition to the policy of opening up all sectors to FDI, to the reckless deregulation of strategic sectors and natural resources of the economy including the financial sector, to the aggressive disinvestment of public sector units and the privatisation of crucial public utility services. There were representatives from Bharatiya Mazdoor Sangh, Indian National Trade Union Congress, All India Trade Union Congress, Hind Mazdoor Sabha, Centre for Indian Trade Unions, All India United Trade Union Centre, Trade Union Coordination Committee, All India Central Council of Trade Unions, United Trade Union Congress, Labour Progressive Federation and Self-Employed Women’s Association (BMS, INTUC, AITUC, HMS, CITU, AIUTUC, TUCC, AICCTU, UTUC, LPF, SEWA).

RG_socialist_fist_201406_VThe trade union representatives presented the incontrovertible evidence – a presentation of great import but largely ignored by the urban-centric broadcast and television media – of the anti-labour and anti-people policies that have been the hallmark of UPA1 and UPA2, and which given their current orientation, will continue to be a primary characteristic of the new NDA government. These are:
* patronisation of deliberate default in tax payment by companies
* the violation of all basic labour laws on (1) minimum wages (2) social security (3) trade union rights (4) safety in workplaces (5) contractual work
* reckless opening of strategic and sensitive sectors of the national economies including public utilities for exploitation by foreign companies and speculators
The same destructive set of policies has been followed by the previous Congress-led government in the name of promoting employment, generating investment from the private sector (both domestic and foreign), all of which has combined to condemn the working class, rural and urban labour, farmers and the informal sector alike to impoverishment as India is wracked by an ever-deepening economic crisis.

Retail therapy and speed money merchants in urban India

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How India's retail sector is divided. Chart: Reuters

How India’s retail sector is divided. Chart: Reuters

Foreign direct investment (FDI) has been rolling into India at a steady pace, whether in banking and finance,whether in insurance (general insurance and health), pharmaceuticals, automobiles (particularly automobiles), information technology, food and beverages (very much so), and engineering and manufacturing. And then there is retail, which has so incensed all those who have firmly believed that India and Bharat need none of this and that the swadeshi and swarajya of the Independence movement are, 66 years on, needed even more than they were in the 1920s and 1930s. And I count myself amongst those so incensed.

It comes as a surprise then to read about the ‘brake on the economy’ that low-level corruption is in India, as a recent Reuters report has put it. The report is well done, and is right to probe the methods of corrupt underlings, but I find it bordering on the absurd that these practices – in short, hand over the moolah for the licence you want – are treated as hindering India’s ‘growth story’ (as the country’s finance minister monotonously calls it, ignoring the ecological idiocy of desiring more growth, unmindful of the millions of new deprivations his story has no place for).

Reuters has reported: “India is the next great frontier for global retailers, a US$500 billion market growing at 20% a year. For now, small shops dominate the sector. Giants from Wal-Mart Stores Inc to IKEA AB have struggled merely for the right to enter, which they finally won last year.”

This breathlessness, well captured by Reuters, is part of P Chidambaram’s favourite fairy tale. But of course, real life in curbside India is full of smoke and mirrors. Reuters said that a “daunting array of permits – more than 40 are required for a typical supermarket selling a range of products – force retailers to pay so-called ‘speed money’ through middlemen or local partners to set up shop”.

All that mall space unused, built atop what were once green fields. Chart: Reuters

All that mall space unused, built atop what were once green fields. Chart: Reuters

Speed money is a colourful term, and suited to the technicolour life and times of the retail business in India. Reuters sounds prudish when it reported, citing interviews with middlemen and several retailers, that the “official cost for key licenses is typically accompanied by significant expenses in the form of bribes”. The added cost, said Reuters, erodes profitability in an industry where margins tend to be razor-thin, and “creates risk for companies by making them complicit in activity that, while commonplace in India and other emerging markets, is nonetheless illegal”.

Commonplace and illegal as much as underpaying workers in the USA, I presume, which is what the retail capitalists do. See this report about workers at McDonald’s, Wendy’s, Yum! Brands, Burger King, Domino’s Pizza and Papa John’s going on strike in New York City demanding wages that are twice the current $7.50 an hour, which is described as impossible to live on. As for Walmart, it’s rankly exploitative imprisoning of its workers, paying them just above minimum wage but denying them freedom of association (the USA is a member state of the ILO, the International Labour Organisation) and medieval working conditions can hardly, in any country, make it a paragon or corporate virtue.

But the Reuters report, useful as it is in explaining the very broad-based and low-level graft that layers our cities like a fog, cannot venture into the area of the demands of international finance capital led neo-liberalisation. This seeks to prise open our economy – aided eagerly by the astoundingly greedy political class in India (Delhi, Bombay, Bangalore, Hyderabad, Ahmedabad, Calcutta and every other large city) – for profit maximisation. Never mind the few bleating complaints about streetfront corruption repeated by Reuters, there is optimism aplenty amongst financiers, business people, bankers, commodity brokers, the realty sector, the automobile and FMCG sectors, all fed by the fact that the United Progressive Alliance government of India is more than willing to bend, break and jettison wholesale regulations that favour the proletariat in order to satisfy international capital and Indian big business.

Only last December (2012) both the houses of Parliament in India were told that there would be an inquiry following media reports concerning the submission made by the global retail giant Walmart to the US senate that it had spent around Rs 125 crore (Rs 1.25 billion or about US$23.2 million) during the last four years on its lobbying activities, including the issues related to “enhance market access for investment in India”. Now, really, what’s a bit of ‘speed money’ compared to a sum like that? Or compared to the US$100 million (about Rs 455 crore) that Walmart is reported to have funnelled into India (to its Indian partner Bharti Enterprises) and at a time when multi-brand retail was not permitted?

What India is to the world, what Indians will struggle with

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Children in a village in the district of Krishnagiri, Tamil Nadu

From within India (Bharat, we call it) there are ever more worrying signs that the club of rich and inter-connected global corporations, financial entities and their political patrons are working in concert to fulfil their programme of rapid and sweeping change in the country. Inside India, the government of the day, a technical coalition led by the Congress Party (the Indian National Congress it its full name) has for the past two years ignored widespread public movements against corruption, against the rise in food prices, against the blatant manner in which the country’s political and industrial elite has thrived in conditions that have led to the continuing impoverishment of the rural and urban poor.

In a joint call to G20 country governments, the WTO and the OECD said: “The difficulties generated by the global economic crisis, with its many facets, are fuelling the political and economic pressures put on governments to raise trade barriers. This is not the time to succumb to these pressures.” What will that call, if acted upon, do to the lives of these two Indians, one very young, the other unconcerned by the machinations of the capitalists but nonetheless affected by them?

This group includes politicians and their families and cronies (regardless, mostly, of party and political affiliation (the parties of the Left excepted)), what is commonly referred to as ‘India Inc.’ by which is meant the country’s large and medium businesses, led by all those who have found inclusion in the list of the top 100 most wealthy Indians (see the latest odious ranking by Forbes magazine’s India edition), and it also includes the senior corporate and industrial associations in India and abroad (several based in the USA, which bring together the most exploitative elements of the American capitalist class who find common cause with their Indian counterparts, and who can count on the strengthening of Indo-American ties whether economic, financial, defence, agricultural or scientific to pursue their agenda) which are regularly and well represented in the World Economic Forum for example. Also ranged against the Indian (the Bharatiya) proletariat are the OECD, the IMF, the World Bank, the ADB, the several dozen thinktanks funded through government back channels and innocuous-sounding foundations apparently dedicated to ‘low carbon’ growth or ‘sustainable development’ or even water and sanitation – their cover stories all sound alike.

And it is this group that sets the agenda for India between now and say 2020. The signs of how the concert is directed become plainer to see with each passing month. Let us look at a few of the many signals that have come to public attention recently. The most recent is the ‘Second Quarter Review of Monetary Policy 2012-13’, by the Reserve Bank of India (the country’s central bank), which was released at the end of October 2012. This report bemoaned the “global slowdown and uncertainty” amidst which “the Indian economy remains sluggish, held down by stalled investment, weakening consumption and declining exports”. In this report however the governor of the RBI said that “recent policy initiatives undertaken by the Government have begun to dispel pervasive negative sentiments… As the measures already announced are implemented and further reforms are initiated, they should help improve the investment climate further”.

The Reserve Bank of India’s projections about the turns India’s wholesale price index can take. Yes, and what about the real price of ‘dal’ and ‘roti’?

Now consider a report released by the OECD (the Organisation for Economic Co-operation and Development) entitled ‘India – Sustaining High And Inclusive Growth’ (pdf). This is part of the OCED’s ‘Better Policies’ Series, a sinister name for strong-arm pressure which the OECD describes as promoting “the OECD’s policy advice to the specific and timely priorities of member and partner countries, focusing on how governments can make reform happen“.

Reform according to the OECD and the agents of primitive accumulation means turning the rural and urban poor into households dependent upon hand-outs, destroying the public sector, turning over public goods to corporations, shutting down social sector services like healthcare and education and turning them into profit centres for corporations using methods like public-private partnership. ‘Reform’ also hastens the creation of that class so beloved of the global marketers and their comrades in our government whose effort it is to purloin resources, engender urbanisation, monetise an apology for tertiary education in the name of ‘faster and more inclusive growth’ – it has done so in China (under a quite different guise) and is doing so in India. Consult this product, ‘The $10 Trillion Prize: Captivating the Newly Affluent in China and India’ (Harvard Business Press Books) which breathlessly advises: “Meet your new global consumer. You’ve heard of the burgeoning consumer markets in China and India that are driving the world economy. But do you know enough about these new consumers to convert them into customers? Do you know that there will be nearly one billion middle-class consumers in China and India within the next ten years? More than 135 million Chinese and Indians will graduate from college in this timeframe, compared to just 30 million in the United States?”

This is what the OECD report has said about India: “The potential for sustained strong growth is high. The Indian population is young by international comparison and this together with declining fertility has led to a falling youth dependency rate. The national savings rate is also high and, given favourable demographics, could well rise further in the medium term, providing the capital needed to fund investment in infrastructure as well as strong expansion in private enterprise. Furthermore, despite employment rising in the industrial and service sectors, around half of all workers remain in low value-added agriculture. The scope is therefore enormous for economy-wide productivity gains from the further migration of workers into modern sectors.” Indeed, who will then produce the food India needs for her modest and still mostly vegetarian diet?

The image used by the OECD for its India report. Throw out the public sector and turn over health, transport, energy and education to the corporations, the OECD has told its India collaborators.

What stands out here is the sort of language used, so common now in these inter-governmental circles of avarice and resource-grab, so worryingly mirrored in the pronouncements by India’s ruling coalition politicians and its central planners and their hired guns in compromised ‘research’ thinktanks and ‘policy advice’ units. Thus they have talked about fully reaping the “benefits of the demographic dividend” and of supporting “a return to high and more inclusive growth” (India’s Eleventh and Twelfth Five Year Plan documents reek of this statement). Thus they have repeated as a chant that “India needs to renew its commitment to sound macroeconomic policy and implementation of reforms”. The imperative given is clear and will be enforced by all arms of the executive and those opposing are threatened by punitive action, for they insist that “public finances on a sound footing and improving the fiscal framework so that persistent large deficits do not undermine macroeconomic stability and investor confidence“.

You see the importance given to ‘investor confidence’ by the governor of the RBI, by the OECD overlords and recently, by the prime minister of India Manmohan Singh. First, on 15 September 2012 he told a meeting of India’s Planning Commission that “the most important area for immediate action is to speed up the pace of implementation of infrastructure projects. This is critical for removing supply bottlenecks which constrain growth in other sectors, and also for boosting investor sentiment to raise the overall rate of investment“. Singh added that where “macro-economic balance” is concerned, the [Twelfth Five-Year) Plan (2012-17) “envisages a substantial acceleration of growth. This is critically dependent on raising the rate of investment in the economy. The investment environment is therefore critical.” Second, on 20 September 2012 in a statement he made clarifying this government’s decision to permit foreign investment in the retail sector he said: “We are at a point where we can reverse the slowdown in our growth. We need a revival in investor confidence domestically and globally. The decisions we have taken recently are necessary for this purpose.”

Members of a self-help group in the district of Krishnagiri, Tamil Nadu, at their weekly meeting.

Where is the common Indian, the resident of Bharat, in all this? The government of India and the Reserve Bank of India say they are worried that what they call “headline WPI (wholesale price index) inflation” remained at above 7.5% (calculated only over a year) through the first half of 2012-13 (that means April to September 2012). The truth is far more severe. Retail prices per kilogram of cereals and pulses have in every single city and town in India have increased, from early 2006, by between 180% and 220%. This when the daily wages for those who spend 55% to 65% of their income on food have increased over the same period by no more than 50%. And instead, the prime minister and his advisers say foreign direct investment will provide more jobs and better wages. Did 25 years of structural adjustment as rammed down the throats of millions of citizens in the countries of the South, by the International Monetary Fund and the World Bank in collusion with an earlier generation of elite accumulators, sound any different?

Written by makanaka

November 1, 2012 at 16:29

How the crop cultivation and food habits of 1.21 billion are being hijacked

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A woman sells small seasonal fruit from her basket on a bust main road in Mumbai (Bombay).

In both 2009 and well as this year, 2012, there were droughts. The impact of one drought on rural cultivating households is considerable, and we have known of the severity of these impacts ever since the chronicling of the famines of 1943-44. What happens when over a five-year period, there are two droughts? Before the end of 2012, we shall begin to know, and this will be a grim learning – drawing from the conclusions of several surveys conducted on drought and its impacts between 1970 and 2002, rural cultivating households suffer annual income losses of at times more than 60% in drought years. Can they recover enough in three years to withstand such drastic income erosion a second time in quick succession? We will learn soon enough, but the circumstances in which we learn is already being influences by major changes afoot.

Let us consider the global concern about drought and the need expressed for support to cultivating (and rural food consuming) populations experiencing drought (and food price inflation) stress. “We cannot allow these historic price hikes to turn into a lifetime of perils as families take their children out of school and eat less nutritious food to compensate for the high prices,” said World Bank Group President Jim Yong Kim in a recent statement concerning high food prices. “Countries must strengthen their targeted programmes to ease the pressure on the most vulnerable population, and implement the right policies.” The World Bank, together with other multi-lateral lending organisations and many governments worried about agrarian distress and chronic food price inflation, has spoken often about “measures and policy to protect the most vulnerable against future shocks”.

The immense sprawl of Mumbai, with over 20 million inhabitants, a food magnet that drains food producing districts up to 500 kilometres inland.

What sort of measures have been and are being discussed and implemented? They include agriculture-related investment, policy advice, fast-track financing, support for safety nets, the multi-donor food security programmes, and risk management products. The Government of India has also talked about cash transfers and increased investment in agriculture, in the same breath that it has talked about technological ‘solutions’ (the introduction of drought-resistant crop varieties, they like to call it) to surmount the yield per hectare limits currently experienced in food crop staples. How sensible or opportunistic are these measures? How true are they towards being ‘inclusive’ and ‘participatory’ (terms our government and major line ministries, including the Ministry of Agriculture and the Ministry of Rural Development, like to use)? How much are they driven by the demands of industry rather than the needs of the food insecure and price vulnerable?

Before I indicate some of the answers, it is useful to look at the conditions in the same sector in our neighbour, the People’s Republic of China.

Inside China, the country is fast approaching the limit of its own available farmland resources – the so-called ‘red line’ for food security of 120 million hectares of arable land, set by the government. China’s typical solution has been to import cheaper agriculture commodities like soybean and maize while saving its farmland for higher-value exports like fish and vegetables. But there is another force driving the rise in soybean and maize imports: the rise in meat consumption in China (a reduced example of which we are seeing in the cities and towns of India, in which the middle class diet includes a growing meat component, usually poultry). In China, meat is increasingly coming from large-scale commercial farms – not small-scale or household farmers – and is therefore dependent on animal feed rather than food waste (which has and continues to be an important portion of animal feed – think goats and chicken – for India’s small agricultural households).

From a growers’ collective in India’s Western Ghats region, a visual aid to help urban consumers identify vegetables that can be grown organically in cities.

Looking back at the pronouncements of India’s planners – whether in the Ministry of Agriculture, in the Ministry of Chemicals and Fertilisers, the directorates in states for major crops and horticulture – and its lobbyists (mostly in the chambers of commerce and trade associations) one comparison made frequently with China is seen: that our per hectare use of fertiliser is low. What they conceal is the tremendous ecological damage that has taken place in China as a result of unregulated growth in the use of synthetic and inorganic fertilisers, which has rendered toxic and sterile vast farming tracts in China. To even consider such an approach in India ought to be anathema to our farmers – but they are being pressured and coerced by a business-centric lobbying front which is alas being supported by the central government and by the governments of major states.

“Smallholder farmers are capable of producing the food necessary to feed their country, but face increasingly difficult barriers,” concluded a recent report from the international NGO Grain, which campaigns for farmers’ rights worldwide. The report by Grain added that government decisions to rely on agricultural commodity imports serve the interests of agribusiness and its need for cheap sources of feed “but threaten the land, livelihoods and local food systems of communities”. It is this linkage that lurks behind the recent ‘reform’ (a distorted and dangerous term) that now has permitted foreign direct investment (FDI) in India’s (and Bharat’s) agriculture and food retail sector.

Such changes come against a legacy of corruption concerning access to and misuse of foodgrains that deeply affect our public distribution system and with it, equitable and affordable access for our population to nutritious food. A recent report in Bloomberg, the international news agency, exposed one such fraud, which found that Rs 2,700 crore worth of foodgrain “was looted by corrupt politicians and their criminal syndicates over the past decade” in Uttar Pradesh alone. The report quoted Naresh Saxena, a commissioner to the Supreme Court who monitors hunger-based programmes across India, as having said: “This is the most mean-spirited, ruthlessly executed corruption because it hits the poorest and most vulnerable in society. What I find even more shocking is the lack of willingness in trying to stop it.” How can they begin to stop it when, in a country whose agricultural production in absolute numbers has reached ecological limits, the food retail and processed food industry continues to demand more? And will pay more for new supplies and will gratify the looters more?

A one-kilo packet of ‘ragi’ (finger millet) from an organic farm in Andhra Pradesh state, central India, packaged and labelled in a manner that provides an alternative to the premium rice brands (mostly basmati) sold in urban centres.

Imagine the psychological effect of this sort of fraud on those who work in and for our agriculture markets. The number of regulated (secondary) agricultural markets (‘mandis’) stood at 7,157 as of March 2010 (compared to just 286 in 1950). There are also reckoned to be about 22,200 rural periodical markets, about 15% of which function under the ambit of APMC (Agricultural Produce Market Committees) regulations (there are at least 27 such acts in different states). It is against this density of local collection and distribution that the impact of agri-business on inflation (both direct and indirect) may be viewed. The direct impact of agribusiness is visible in the form of food price inflation, as the Reserve Bank of India has also observed. There is demand arising from increasing population and (especially in urban and urbanising centres – see this report in a business daily, which ignores entirely the food demand footprint of urbanising India) prosperity has outstripped the growth of agricultural output, hence food inflation in India will certainly to persist and deepen (in rural areas as a result of the agri-business-led escalation of marketing channels and investment in infrastructure to move crop and food – the current government and its industry partners are doing all they can to convince middle-class urban India this is good for ‘growth’).

There is a dictatorial emphasis on food processing, on trading (consider the number of commodity exchanges today compared with ten years ago, and the much enlarged scope of their futures trading business, all of which requires access to stored raw crop that serves as the basis of such trade) and on marketing. The growing demand for protein-rich and what are called “high-value foods” (fruit, vegetables, edible oil and meat) is simultaneously raising the demand for what the food industry (processed food manufacturers, food retailers, crop terminal markets promoters, exporters) calls “high quality, safe and convenient (frozen, pre-cut, pre-cooked and ready-to-eat) foods”. Hence the view now shared by the central government, planning agencies and business and industry associations is that meeting these demands will facilitate growth (of national GDP and of the agriculture sector; see the National Summary Data Page for growth rates, however meaningless these are to the cultivating households of rural Bharat) and moderate inflation (in complete disregard of evidence from countries all over the world in which the growth of modern food retail has contributed to inflation in the prices of food staples).

The strength of the ‘growth’ totem does not diminish, and nor does the artificially inflated appeal of the ‘growth is good, more growth is better’ fiction. This is wholly and utterly misguided and mischievous and is responsible for deepening the agrarian distress in Bharat. How entrenched this fiction is can be seen in allegedly authoritative pronouncements that can be found even by the RBI, which recently said: “There is, however, near unanimity, amongst all that agriculture and agri-business growth is a necessary prerequisite for moderation of inflation, particularly food inflation, as well as for acceleration and sustenance of inclusive growth.” Growth as defined by the resource-intensive and ecologically destructive direction of the central government, Indian business and an urban middle class divorced from rural realities has directly caused this same inflation the RBI (and others) is complaining about. Yet in the policy space the contradiction is ignored – true reform that benefits Bharat rather than India is not considered.

A neighbourhood vegetable market in Bengaluru (Bangalore). How these small markets cope with the dictatorship of the food retail and food processing industry will depend on local consumers and their support.

Our central problem in the near future will continue to be the divide between Bharat and India, between food growers and the food consuming populations they support (usually unseen and unheard, often unrepresented). The English-language media that represents the interests of the well-off urban elite have become uniformly uncritical of the different aspects of agri-business and the ‘supply chain’ (another loaded term that spells danger for rural Bharat) which are being transformed (to be fair, major regional language media can be equally uncritical). Reports such as these, one from an Indian business and finance daily, Mint (which holds up GM food as the panacea for India’s food insecurity, and the other from the Wall Street Journal, which is read and quoted in business circles (which said the new ‘reforms’ are not comprehensive enough), reflect the aspirations and tendencies of urban upper middle class India and the disproportionate influence this minority enjoys over national policy, especially policy concerning agriculture and food.

These media views celebrate “rural prosperity” which is “thanks to government job schemes” (no mention of the labour distorting effect of MGNREGA (the Mahatma Gandhi National Rural Employment Guarantee Act) that is now widespread and which has pushed up farm labour costs to benefit the manufacturers of agricultural machinery – see this report for one of the implications of this cost rise, and see this compilation [pdf] by the Indian Social Institute on NREGA-related wages news), the drive for more “domestic demand from rural areas” (to benefit the consumer goods companies and their financiers primarily), the need for “better private-sector jobs in manufacturing and services”, the obsession with how to “boost purchasing power” and the tiresome illogic of “a virtuous cycle of growth”.

The government that sold India

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On 14 September, India’s ruling political coalition, the United Progressive Alliance, of which the Congress (the Indian National Congress is its full name) is a dominant member, decided to allow foreign investment into a number of sectors. These include what is called ‘multi-brand retail’ and aviation. This government in taking this decision has ignored and overlooked the views and fears of tens of thousands of small shopkeepers, small traders associations, consumer groups and citizens – representing the will of several millions of households – who have publicly expressed in many fora their opposition to permitting foreign control (or consolidated, large domestic control) of the processes of aggregating and selling food products.

The decision, which has been raucously welcomed by the three major industry associations (CII, Ficci and Assocham) and which has been uncritically hailed by the Indian (English-language) business press, represents the whole gamut of neo-liberal policies which have been pursued by the Congress-led UPA government since coming into office in 2004 (and since 2009, when its current term began).

In their shrill and utterly partisan acclaim of the foreign investment decision, the business and financial press – in particular the newspapers Economic Times, Business Standard, Financial Express and Mint – have further underlined their role as propaganda sheets for the industrial-political class and their global partners in the project to loot India.

There has been a differential impact of the more than 20 years of economic liberalisation on the various classes of Indian society. Inequalities have grown rapidly, and there are some sections who have been more adversely impacted. Some sections of the middle class have benefited, at the cost of rural landless labour and the urban poor. Under this neo-liberal regime a large section of the working class is now in the unorganised and informal sector. Those who are on contract work and other irregular forms of employment constitute the bulk of the urban poor. There is also a large section of self-employed persons in the services sector who eke out a subsistence living.

In India, there are substantial classes and sections of society most affected by the policies of liberalisation and the intensified exploitation in the countryside. Landlords, big farmers who are politically well-connected, contractors, moneylenders and regional politicians (those in state assemblies) constitute the rural rich and have intensified the exploitation of the peasantry, agricultural workers and the rural poor. It is this tendency that has deepened India’s agrarian distress, contributed to the food and agricultural crisis – and it is in these chronic circumstances that this Congress-led government has allowed the inflow of foreign investment into food retail, fully aware of all the consequences that decision will heap onto the struggling rural and urban poor.

To illustrate some of these, the Communist Party of India (Marxist) in its Political Review Report in early 2012 had commented: “The issue of land acquisition has acquired a new dimension after the onset of the neo-liberal regime. As part of the capturing of natural resources the corporates and the real estate companies are out to grab land cheaply with the aid of the State apparatus. The peasantry, particularly the small peasantry sees this as a serious threat to its livelihood and especially when corporates and real estate speculators are going to make huge profits out of such lands.”

Can there be an alternative? As far as economic policies are concerned, most of the regional parties adhere to the policies of liberalisation. These regional parties represent mainly the interests of the politically astute and opportunist rural rich, the district bourgeosie who see themselves as brokers of every description to fit ‘reform’ decisions of every prescription. That is why most regional parties take no stand against the ‘liberalisation’ (or ‘reform’, to use the notorious International Monetary Fund-World Bank term) policies which have benefited regional rich too.

The very logic of neo-liberal reforms leads to and perpetuates the rapid growth of a labour force that is increasingly relegated to what is called the unorganised sector. The conversion of regular employment into casual and contractual labour, apart from generating higher profits, is part of the programme to ensure that working class unity remains divided. Larger and larger numbers – from the affected districts, such as the 320 drought-affected districts of 2012 – are joining the ranks of casual, temporary and self-employed workers, with few rights, uncertain wages, in the face of galloping food inflation, with no collective representation or honest political representation. These are the circumstances so ruthlessly exploited by India’s current government to usher predatory forces into our agriculture and food sector.

The day India said ‘yes’ to Wal-Mart

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Update – The real nature of the neoliberal economy of India has become clearer with the decision – against the run of public opinion and against the evidence from the agricultural and food sectors – to permit opening up the retail sector.

Since the decision was taken, the central government has spared no effort in a cynical and devious campaign to claim that permitting foreign direct investment in retail will benefit farmers and consumers. On Sunday, 27 November 2011, large advertisements were released in newspapers proclaiming the benefits of this decision. Nothing is further from the truth. India’s urban households, those eking out livelihoods from informal work and precarious manufacturing sector jobs, recognise the untruth and see the evidence in the 10%-15% annual food inflation. Our trade unions know this and our left parties know this.

Ranged against this population, rural and urban, are the ministries and industries who see in the permission a new means to control access to food and the provisioning of food. That is why I support the opposition represented by the Communist Party of India (Marxist), whose concerns reflect those of this broad majority.

The CPI(M) has said correctly that this decision “will destroy the livelihoods of crores of small retailers and lead to monopolisation of the retail sector by the MNCs”. The party’s statement said: “Coming in the backdrop of persistent high inflation, growing joblessness and agrarian distress, this decision shows the utterly callous and anti-people character of the UPA Government. The Government seems to be more eager to meet the demands of the US and other Western governments and serve the interests of the MNCs like Walmart, Tesco and Carrefour, rather than protect those of its own people.”

India’s central ministries – now even further disrobed to reveal their predatory nature as instruments of the country’s business satraps – have held up the flimsy excuse that conditions imposed will safeguard the farmer, consumer and small retailer. This is lies.

The restriction that foreign retail outlets are limited to operating in cities of over 1 million population is meaningless because those are precisely the places where the MNCs want to go, to tap the lucrative segment of the market. It is in these cities – there are 53 cities with populations of over a million – that small retailers are mostly concentrated. India has the highest shopping density in the world, with 11 shops per 1,000 persons – these have evolved as neighbourhood suppliers and represent a cultural integration of small supplier and household familiarity.

The result is a rich density of trusted small retail – India has over 12 million such shops and these employ directly over 40 million persons. Well over 95% of these shops are run by self-employed persons in floor areas of under 500 square feet (about 48 square metres). It is these small shopkeepers in urban areas who fear for their future with the now-sanctioned entry of the MNC retailers. International experience shows that supermarkets everywhere invariably displace small retailers. Small retail has been virtually wiped out in the developed countries like the US and Europe. South East Asian countries had to also impose stringent zoning and licensing regulations in order to restrict the growth of supermarkets, after small retailers were getting displaced.

Then there is the cunning untruth that the condition for making at least 50% of the investment in ‘backend’ infrastructure will benefit rural populations, as this is said to lead to more cold chains and other logistics, benefiting the farmers. International experience has, however, shown that procurement by MNC retailers do not benefit the small farmers – we have seen this in India despite the specious and manufactured ‘case studies’ produced by India’s management schools (the several worthless and compradorist Indian Institutes of Management and their similarly worthless competitors). Over time, smallholder farmers receive depressed prices and find it difficult to meet the arbitrary quality standards. Allowing procurement by MNCs will also allow the central government to reduce its own procurement responsibilities, and this will directly affect the food security of those millions of rural and urban households which depend India’s public food distribution system.

2011/11/25 – This is a turning point for India’s economy. The central government has allowed foreign investment up to 51% in the retail sector for ‘multi-brand’ ventures, and has allowed 100% foreign investment for single brand retailers.

With this permission, the ruling United Progressive Alliance has ignored utterly the concerns of hundreds of representations made over the last year by small traders and wholesalers, and by grocery shops’ assocations all over India, against the entre of foreign direct invetment in the retail sector. The ruling United Progressive Alliance has also ignored the needs and conditions of hundreds of thousands of smallholder farming families, who will from now on be steadily exposed to increasing levels of coercion to submit to corporate and industrial farming pressures, or to quit cultivation and join the masses of informal labour in urbanising towns and cities.

India’s powerful business and indutries associations – the Confederation of Indian Industry (CII), the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Associated Chambers of Commerce and Industry of India (ASSOCHAM) – have vigorously for the last two years been manoeuvring the ruling political alliance towards this position. They have been aided substantially by representations from the countries and regions who have the most to gain from this permission being given – the USA and the European Union.

The so-called economists and analysts who are regularly polled by the business media and whose pronouncements are used to justify the progression of policy towards such permission, are making a variety of claims about the effects the expected foreign investment will have on India. They are saying that this “much delayed reform” will help unclog supply bottlenecks and help ease food inflation, that it will benefit farmers who can get better prices for their produce and will bring in international expertise to streamline supply chains in India.

This is rubbish meant to distract. The big retail corporations have for years been demanding entry into a country which is estimated to have a retail sector whose annual sales are said to be around US$450 billion. But this is a sector populated by tens of thousands of tiny family-run shops that account for 90% of this enormous volume of sales. This is a turning point for India’s economy, for it signals the start of yet another struggle to first block, and then throw out the retail conglomerates.

Here are some of the many news stories on this important matter:

Moneycontrol.com – ‘Don’t expect investments to flow instantly: Bharti Walmart’ – After a long wait, the government has finally allowed 51% foreign direct investment (FDI) in the multi-brand retail. It has also decided to raise the cap on foreign investment in single-brand retailing to 100% from the current 51%. …

The Hindu – ‘Cabinet approves 51 per cent FDI in multi-brand retail’ – In a bid to remove the impression that UPA II was suffering from “decision making paralysis” and kicking off the second generation reforms, the Union Cabinet on Thursday gave its approval to allowing 51 per cent foreign direct investment (FDI) in …

Shanghai Daily (subscription) – ‘India to allow global chains to open multi-brand retail stores’ – MUMBAI, Nov. 24 (Xinhua) — India’s cabinet has given the green light to foreign investors to take up to 51 percent stakes in multi-brand retail stores later Thursday after a meeting chaired by Prime Minister Manmohan Singh, said a report by the …

MarketWatch (press release) – ‘Government of India Unleashes Potent Phase II Reforms’ – WASHINGTON, Nov 24, 2011 (BUSINESS WIRE) — The US-India Business Council (USIBC) today hailed India’s steady progress in advancing major economic reforms with the Cabinet’s approval of opening India’s vast multi-brand retail sector to foreign direct …

Reuters India – ‘India opens supermarket sector to foreign players’ – India threw open its $450 billion retail market to global supermarket giants on Thursday, approving its biggest reform in years that may boost sorely needed investment in Asia’s third-largest economy …

Wall Street Journal – ‘Carrefour Welcomes India’s Decision To Open Multi-Brand Retail Market‘ – PARIS (Dow Jones)–French retail giant Carrefour SA (CA.FR) said Thursday it welcomed the Indian government’s decision to open the country’s multi-brand retail market to foreign investment. “Carrefour will follow with attention the finalization of the …

Voice of America – ‘India Opens Retail Sector to Foreign Supermarkets’ – November 24, 2011 India Opens Retail Sector to Foreign Supermarkets VOA News India’s Cabinet has approved a plan to open up the country’s $450 billion retail sector to foreign supermarkets, a reform that could unclog supply bottlenecks that have kept …

Wall Street Journal – ‘India Unlocks Door for Global Retailers’ – MUMBAI—India paved the way for international supermarkets and department stores to establish joint ventures, a major step in opening one of the last great consumer markets that has been off-limits to many of the world’s biggest …

Hindustan Times – ‘Left and Right sharpen knives for FDI battle’ – The Cabinet’s approval of 51% FDI in multi-brand retail is likely to flare up into a major political controversy with the main opposition parties gearing up to oppose it. While BJP leaders Sushma Swaraj and Arun Jaitley jointly condemned any such move …

Namnews – ‘Government Opens Up Country’s Retail Market’ – It’s official – the Indian retail market is now open to international chains, setting the stage for a major change of the local industry. Earlier today, the Indian government approved Foreign Direct Investment of up to 51% in multi-brand retail, …

Bloomberg – ‘India Allows Foreign Investment in Retail, Paving Wal-Mart Entry’ – India approved allowing overseas companies to own as much as 51 percent of retail chains that sell more than one brand, paving the way for global retailers such as Wal-Mart Stores …

indiablooms – ‘India opens retail to foreign players’ – New Delhi, Nov 24 (IBNS): India on Thursday decided to allow foreign direct investment (FDI) in its closely-guarded multi brand retail market, paving the way for global supermarket giants to step into the $450 billion sector that was widely seen as one …

Tehelka – ‘Cabinet approves 51% FDI in multi-brand retail’ – The Cabinet cleared 51 per cent foreign direct investment (FDI) in multi-brand retail on Thursday paving the way for global retail giants like Wal-Mart and Carrefour to enter India. The Cabinet also cleared 100 per cent FDI in single-brand retail. …

Newser – ‘India to allow more foreign retail investment, likely paving way for Wal-Mart’ – India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global …

NetIndian – ‘Cabinet clears 51% FDI in multi-brand retail’ – After dithering for a long time, the Union Cabinet today cleared a proposal to allow 51 per cent Foreign Direct Investment (FDI) in multi-brand retail and raised the cap to 100 per cent in single brand retail. This will allow global retail giants like …

Boston.com – ‘India opens more to foreign multibrand retailers’ – AP / November 24, 2011 NEW DELHI—India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global …

Retail Week – ‘Indian cabinet approves foreign investment in retail‘ – The Indian government has cleared the way to allow multinational retailers including Tesco, Carrefour and Walmart to enter its retail market. We provide a range of advertising opportunities. By advertising with us, you are guaranteed to reach the …

Atlanta Journal Constitution – ‘India opens more to foreign multibrand retailers’ – AP NEW DELHI — India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global retailers such as …

Houston Chronicle – ‘India opens more to foreign multibrand retailers’ – NEW DELHI (AP) — India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global retailers such …

IBNLive – ‘FDI in retail cleared; multi brand 50 pc, single brand 100 pc’ – The Union Cabinet FDI in multi-brand retail and single brand retail despite division within the UPA on the issue.

Moneycontrol.com – ‘Cabinet approves 51% FDI in multi-brand retail’ – Indian retailers finally get a chance to rejoice as the Cabinet today cleared the bill to increase foreign direct investment to 51% in multi-brand retail and 100% in single brand. Commerce and industry minister Anand Sharma said that he would give a …

Business Standard – ‘Too early to celebrate for Pantaloon retail’ – Valuations may prove to be a hurdle, while real gains will take time to yield. Stocks of organised retail companies like Pantaloon Retail and Shoppers Stop have been in action in the recent past on hopes that foreign direct investment (FDI) in the …

BusinessWeek – ‘India Allows Foreign Investment in Retail, Paving Wal-Mart Entry’ – Nov. 24 (Bloomberg) — India approved allowing overseas companies to own as much as 51 percent of retail chains that sell more than one brand, paving the way for global retailers such as Wal-Mart Stores Inc. …

Washington Post – ‘India to allow more foreign retail investment, likely paving way for Wal-Mart’ – NEW DELHI — India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global retailers such as Wal-Mart. …

STLtoday.com – ‘India opens more to foreign multibrand retailers’ – AP | Posted: Thursday, November 24, 2011 10:36 am | Loading… India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to …

Newser – ‘India to allow more foreign retail investment, likely paving way for Wal-Mart’ – India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global …

Wall Street Journal (blog) – ‘FDI in Retail: If Wal-Mart Builds It, Will Indians Come?’ – The Indian government deserves credit for doing what , for at least five years, it has been contemplating: setting the stage for the creation if a modern retail industry. It is unlikely that the Cabinet was seized by Adam Smith-like …

Houston Chronicle – ‘India opens more to foreign multibrand retailers’ – NEW DELHI (AP) — India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global retailers such …

Zee News – ‘Cabinet clears FDI in multi-brand retail’ – New Delhi: In a major decision, the government Thursday approved 51 percent FDI in multi-brand retail paving the way for global giants like WalMart to open mega stores in cities with population of over one million. The nod from the Union Cabinet came …

This permission, given by a ruling political coalition that has allowed food inflation to rage on unchecked for the last three years, which has regularly pushed up the prices of petrol (gasoline) and diesel, and whose record on tackling corruption and graft is shamefully weak, will not go unchallenged.

Industrialising India’s Food Flows: An analysis of the food waste argument

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The alternative economics webcentre MacroScan has published my article on food waste/loss, food flows and food processing in India.

Here is the introductory text: “From the mid-term appraisal of the Eleventh Five Year plan onwards, central government ministries have been telling us that post-harvest losses in India are high, particularly for fruits and vegetables. The amount of waste often quoted is up to 40% for vegetables and fruits, and has been held up as the most compelling reason to permit a flood of investment in the new sector of agricultural logistics, to allow the creation of huge food processing zones, and to link all these to retail food structures in urban markets. The urban orientation of such an approach ignores the integrated and organic farming approach, as it does the evidence that sophistication in food processing has not in the West prevented food loss or waste.”

Written by makanaka

May 23, 2011 at 11:17

The realities of India’s fields and farms

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India’s economy planners when discussing agriculture are no closer to farm and field realities. That much is clear from a reading of the ‘Review of The Indian Economy 2010-11’, by the Economic Advisory Council to the Prime Minister, released to the public on 2011 February 22.

The document had, I suspect, been finalised and was waiting for the data from the Second Advance Estimates of agricultural production for the 2010-11 year. A cursory analysis of this forms the ‘Agriculture’ section of the ‘Review’ [read the relevant portions of the Review here].

Chairman of the Economic Advisory Council to the Prime Minister, C Rangarajan (centre), flanked by members Suman Bery (right) and Saumitra Chaudhuri releasing the 'Review of the Economy 2010-11' in New Delhi on 21 February 2011. Photo: The Hindu/V V Krishnan

Chairman of the Economic Advisory Council to the Prime Minister, C Rangarajan (centre), flanked by members Suman Bery (right) and Saumitra Chaudhuri releasing the 'Review of the Economy 2010-11' in New Delhi on 21 February 2011. Photo: The Hindu/V V Krishnan

It is in the ‘Concluding Comments’ section concerning agriculture in India that the intent and direction of the current government are underlined. There are a few strong pointers:

* “As against the target of average 4 per cent growth during the Eleventh Plan period, the actual average growth is likely to be slightly less than 3 per cent.” Which only indicates that ‘growth’ in the agricultural sector will continue to be seen as a primary consideration, outweighing the sustainable use of natural resources management. The growth insistence will also mean the continued support of high-input and financially burdensome agricultural methods.

* “Somewhat in parallel, the per capita availability in grams per day has also not gone up in a context where per capita income has been rising quite strongly.” The Economic Advisory Council has not been honest enough to draw the needed connections – between population growth and therefore foodgrain demand, and the need for urgently revisiting the basis for planning agricultural cultivation at the district level.

* “The international prices for grain have been very volatile and much elevated in recent times and therefore higher levels of domestic output is an even more important factor to consider in the context of domestic food security.” This is spot on. Why doesn’t the rest of the Concluding remarks section build on this?

* “Attention must be focused on building rural infrastructure, developing technologies that are appropriate to the region which have to be disseminated – delivered in an efficient fashion. The institutions that are enjoined with this task have to be activated in a more energetic fashion.” The Concluding Remarks does not build on the above point because of such weak, vague and misguided points as this one. ‘Technologies’ and ‘Infrastructure’ for growth at 4%? Or for food security?

* “The liberalization of the economy has benefited the farm sector and as a result the terms of trade for agriculture are no longer adverse.” This is one of the Big Contradictions of the Review. No, the liberalisation of the economy has NOT benefited the farm sector. Has the Government of India and its economic planners so quickly and so completely forgotten that 200,000 farmers have committed suicide over the last decade?

* “Investment in the farm sector has also picked up substantially and capital formation as a percentage of agricultural GDP has more than doubled in the past decade.” To what end? To achieve the 4% growth target which is denominated in ‘technology’ and ‘infrastructure’ in the agri sector? Has there been even 2% annual growth in the incomes of the cultivating households?

Demonstrators shout slogans as they hold steel plates during a protest rally in New Delhi February 23, 2011. Tens of thousands of trade unionists, including those from a group linked to the ruling Congress party, marched through the streets of the capital on Wednesday to protest food prices, piling pressure on a government already under fire over graft. Photo: Reuters/Parivartan Sharma

Demonstrators shout slogans as they hold steel plates during a protest rally in New Delhi February 23, 2011. Tens of thousands of trade unionists, including those from a group linked to the ruling Congress party, marched through the streets of the capital on Wednesday to protest food prices, piling pressure on a government already under fire over graft. Photo: Reuters/Parivartan Sharma

* “There seems to be evidence that better quality seeds and superior cultural practices are available, but the delivery system for translating these to the field are lagging.” This is where the threat in the Review lies. What delivery systems and who owns them?

* “A major hurdle in agricultural development is the inefficiency of the delivery systems. There is a plethora of institutions in research, extension, credit and marketing. However, efficacy of these institutions to deliver goods and services to the country’s vast small and marginal farms section is quite limited. This is a serious cause for concern.” True. How to support this point and rescue it from the overall contradictions of the Concluding Remarks?

* “There is need therefore, to attune these various institutions to the emerging agrarian structure, which is progressively identified with the small and marginal farmers.” True.

* “A two-fold strategy is indicated for this purpose. One, to encourage farmer’s collaborative efforts as in cooperatives, or more recently in producers companies, and vertical integration of production and marketing by suitable models of contract farming.” Emphatically NO. This is not the answer.

* “Two, at the institutional level, the organizational changes to cut down the cost of transactions (e.g. through a flexible and inclusive business correspondent model) and the use of information technology for the same purpose needs to be encouraged.” True with reservations. Infotech is a means and not an end.

* “In addition both for purposes of ensuring remunerative prices for farmers as well as an anti-inflationary measure, the strengthening of organized retail, as well as use of these outlets for public distribution along with the strengthening of the existing public distribution networks, are measures that need to be tried out seriously.” This is dreadfully ill-advised and apparently motivated by the FDI-seeking stand of the central government. This point of view must be stopped immediately. Dozens of farmers’ cooperatives and small traders have clearly and vociferously rejected FDI-driven organised retail in India. This point holds the back door open for the entry of corporate retail and will be used to legitimise retail control over access to food to vulnerable rural populations.

* “Local procurement by State Government agencies provides an incentive for farmers to grow grain. Coarse cereals are a varied commodity and tastes differ across States. There is also a problem in handling coarse grains.” Yes, yes and no. This point must be supported and rescued from the other corporate-oriented directions of the Review.

[Second Advance Estimates are available from here.]

India’s economy planners when discussing agriculture are no closer to farm and field realities. That

much is clear from a reading of the ‘Review of The Indian Economy 2010-11’, by the Economic

Advisory Council to the Prime Minister, released to the public on 2011 February 22.

The document had, I suspect, been finalised and was waiting for the data from the Second

Advance Estimates of agricultural production for the 2010-11 year. A cursory analysis of this forms

the ‘Agriculture’ section of the ‘Review’ (read the relevant portions of the Review here).

https://makanaka.wordpress.com/agriculture-india-review-2010-11/

It is in the ‘Concluding Comments’ section concerning agriculture in India that the intent and

direction of the current government are underlined. There are a few strong pointers:

* “As against the target of average 4 per cent growth during the Eleventh Plan period, the actual

average growth is likely to be slightly less than 3 per cent.” Which only indicates that ‘growth’ in

the agricultural sector will continue to be seen as a primary consideration, outweighing the

sustainable use of natural resources management. The growth insistence will also mean the

continued support of high-input agricultural methods.

* “Somewhat in parallel, the per capita availability in grams per day has also not gone up in a

context where per capita income has been rising quite strongly.” The Economic Advisory Council

has not been honest enough to draw the needed connections – between population growth and

therefore foodgrain demand, and the need for urgently revisiting the basis for planning agricultural

cultivation at the district level.

* “The international prices for grain have been very volatile and much elevated in recent times and

therefore higher levels of domestic output is an even more important factor to consider in the

context of domestic food security.” This is spot on. Why doesn’t the rest of the Concluding remarks

section build on this?

* “Attention must be focused on building rural infrastructure, developing technologies that are

appropriate to the region which have to be disseminated – delivered in an efficient fashion. The

institutions that are enjoined with this task have to be activated in a more energetic fashion.” The

Concluding Remarks does not build on the above point for the weak, vague and misguided point

here. ‘Technologies’ and ‘Infrastructure’ for growth at 4%? Or for food security?

* “The liberalization of the economy has benefited the farm sector and as a result the terms of

trade for agriculture are no longer adverse.” This is one of the Big Contradictions of the Review. No,

the liberalisation of the economy has NOT benefited the farm sector. Has the Government of India

and its economic planners so quickly and so completely forgotten that 200,000 farmers have

committed suicide over the last decade?

* “Investment in the farm sector has also picked up substantially and capital formation as a

percentage of agricultural GDP has more than doubled in the past decade.” To what end? To

achieve the 4% growth target which is denominated in ‘technology’ and ‘infrastructure’ in the agri

sector? Has there been even 2% annual growth in the incomes of the cultivating households?

* “There seems to be evidence that better quality seeds and superior cultural practices are

available, but the delivery system for translating these to the field are lagging.” This is where the

threat lies. What delivery systems and who owns them?

* “A major hurdle in agricultural development is the inefficiency of the delivery systems. There is a

plethora of institutions in research, extension, credit and marketing. However, efficacy of these

institutions to deliver goods and services to the country’s vast small and marginal farms section is

quite limited. This is a serious cause for concern.” True. How to support this point and rescue it

from the overall contradictions of the Concluding Remarks?

* “There is need therefore, to attune these various institutions to the emerging agrarian structure,

which is progressively identified with the small and marginal farmers.” True.

* “A two-fold strategy is indicated for this purpose. One, to encourage farmer’s collaborative

efforts as in cooperatives, or more recently in producers companies, and vertical integration of

production and marketing by suitable models of contract farming.” Emphatically NO. This is not the

answer.

* “Two, at the institutional level, the organizational changes to cut down the cost of transactions

(e.g. through a flexible and inclusive business correspondent model) and the use of information

technology for the same purpose needs to be encouraged.” True with reservations. Infotech is a

means and not an end.

* “In addition both for purposes of ensuring remunerative prices for farmers as well as an

anti-inflationary measure, the strengthening of organized retail, as well as use of these outlets for

public distribution along with the strengthening of the existing public distribution networks, are

measures that need to be tried out seriously.” This is dreadfully ill-advised. This point of view must

be stopped immediately. Dozens of farmers’ cooperatives and small traders have clearly and

vociferously rejected FDI-driven organised retail in India. This point holds the back door open for

the entry of corporate retail.

* “Local procurement by State Government agencies provides an incentive for farmers to grow

grain. Coarse cereals are a varied commodity and tastes differ across States. There is also a

problem in handling coarse grains.” Yes, yes and no. This point must be supported and rescued from

the other corporate-oriented directions of the Review.

The food industry in India and its logic

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Tractor on a road to the city, Kanpur district, Uttar Pradesh

Tractor on a road to the city, Kanpur district, Uttar Pradesh

The Economic & Political Weekly (EPW) 09 October 2010 issue carries a commentary I wrote as a backgrounder to the price rise of food staples. Here is part of the commentary:

On multiple fronts, the union government is proceeding to forge new compacts with the private sector food industry, whether global, regional or national. There is a new set of investors whose claims in the emerging food industry are being staked, and which are being encouraged by state governments eager to display their foreign direct investment (FDI)-friendliness. These are investors, promoters, asset management professionals who have learnt the patterns of the 2007-08 commodities (food included) boom and who are now well equipped to take positions, both financial and real, in the emerging food industry.

An indication of the size and scale of the national market for food (production, collection, processing, distribution, retail) being envisaged can be gauged from a “discussion paper” circulated by the Department of Industrial Policy and Promotion (DIPP) in July 2010. The paper, “Foreign Direct Investment (FDI) in Multi-brand Retail Trading”, has been circulated to “generate informed discussion on the subject” which will “enable the Government to take an appropriate policy decision at the appropriate time”. As this article shows, these decisions have already been taken and investment in the direction revealed by the paper has been rolling out for months.

Supported by the Ministry of Agriculture, the top echelons of India’s national agricultural research system and dedicated agricultural trade and investment bodies, the union government has tackled the arguments against FDI in retail by describing the “limitations” of current conditions in the Indian retail sector. That there has been a lack of investment in the logistics of the retail chain, leading to “an inefficient market mechanism”. The point is made that India is the second largest producer of fruit and vegetables in the world (about 180 million tonnes or mt) but has “very limited integrated cold-chain infrastructure” with only 5,386 stand-alone cold storages which together have a capacity of 23.6 mt. It points out that post-harvest losses of farm produce – especially fruits, vegetables and other perishables – have been estimated to be over Rs 1,00,000 crore per annum, 57% of which is due to “avoidable wastage and the rest due to avoidable costs of storage and commissions”.

A couple working in their paddy field, North Goa

A couple working in their paddy field, North Goa

From 2009, the Ministry of Agriculture’s approach to its subject has shifted perceptibly – from its stated protection of the interests of the farming household and the rural and urban consumer – towards the food industry. Employing the reasons listed above, all of which contain some reflection of actual conditions, the massive apparatus of the ministry and its appurtenant research system is now ushering in private participation and control of areas that were hitherto in the public domain. When read with the rapid movement of finance between the money markets and the commodity markets, with the extension of infrastructure and property conglomerates into the processed food “value chain” domain, and with new alliances between agricultural research institutes and market entrepreneurs, the outlook for India’s small and marginal farming households is bleak.

The concentration of funds, food handling and transport systems and growing corporate control from farm to fork can clearly be seen in an address by the Union Agriculture Minister, Sharad Pawar, at the Indian Council of Agricultural Research (ICAR) – Industry Meet on 28-29 July 2010. The meet focused on four theme areas: seed and planting material; diagnostics, vaccines and biotechnological products; farm implements and machinery; and post-harvest engineering and value addition.

Pawar said that the ministry recognises the role of the private sector in critical areas of agricultural research and human resource development. The conventional approach of public sector agricultural R&D has been to take responsibility for priority setting, resource mobilisation, research, development and dissemination. He then explained that agricultural extension, which has been neglected for several years now, is “no longer appropriate”. It is here that the impact of the Indo-US Agricultural Knowledge Initiative, now in its fifth year, can be recognised. The alternative, Pawar advised, is public-private partnerships through which public sector institutes (such as those in the ICAR network) can “leverage valuable private resources, expertise, or marketing networks that they otherwise lack”.

Coconut trees along a bund between field and stream, North Goa

Coconut trees along a bund between field and stream, North Goa

This is the undisguised merchant reasoning behind the creation of “Business Planning and Development units” in five ICAR institutes (Indian Agricultural Research Institute, Indian Veterinary Research Institute, Central Institute for Research on Cotton Technology, National Institute of Research on Jute and Allied Fibre Technology, Central Institute of Fisheries Technology). These units will tackle intellectual property management, commercialisation of research, find investors and begin businesses. India’s national agricultural research system, therefore, has decided to now become a broker of its own output (publicly funded) and a speculator seeking profits from the country’s agricultural and food price crises.

If the Ministry of Agriculture has its way, rural India will be a patchwork not of villages and hamlets but of “intelligent agrologistic networks combining consolidation centres, agroparks (agroproduction and processing park) and rural transformation centres”, which is how the MTMs and their typical built-up footprints have been described by one enthusiastic bank. The techno-industrial idiom cannot conceal the union government’s intention to encourage a dangerous new dimension to urbanisation, by provisioning infrastructure to support an internal trade in agricultural products, and doing so by allocating a greater share of scarce funds to support favoured business and trading constituents rather than to the rural constituents who need it most, the smallholder farmer and local agro-ecosystems.

Supported by the vast and powerful machinery of the Ministry of Agriculture, emboldened by the global trading successes of commodity cartels which learned their tactics in the Multi Commodity Exchange of India (Mumbai), the National Commodity and Derivatives Exchange (Mumbai), and the National Multi Commodity Exchange of India (Ahmedabad), the new entrepreneurs in India’s agribusiness sector are promoting MTMs as potentially attracting “leading foreign retail chains to anchor and plan their supply chain at and through the agrofood parks” and exploiting the MTMs’ “township model approach to attract Indian MNCs and foreign food processing companies”.

Shrinking cereals, growing food parks

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Local grain in Mapusa market, North Goa

Local grain in Mapusa market, North Goa

This short comment has been written for India’s alternative economics group, Macroscan, and you’ll find it here.

The first release of summary data from the 64th round of the National Sample Survey Organisation, ‘Household Consumer Expenditure in India 2007-08‘ (NSSO report 530), captures the early impact of the rising trend in food prices for rural and urban India. This period is significant in the recent history of food price rise in India, for it signals the strengthening of the factors that led to the retail food price highs of 2008 which began to be recorded around two years earlier. Several of the most important factors have to do with the rapid pace of urbanisation (most visible in the non-metro tier 1 cities) and the steady growth in the food processing and food logistics industries, which has taken place alongside the deepening of the agricultural commodity markets.

“To judge from survey data of food intakes, the situation has been getting worse rather than improving, at least in terms of per capita calories consumed, and this phenomenon is fairly widespread affecting all classes, rural and urban and those below and above the poverty threshold,” the FAO report, ‘World agriculture: towards 2030/2050‘ had stated in 2006 in its comment on India’s growth-malnutrition paradox. The report’s authors had at the time commented that matters in India “are getting worse in the rural areas as people have to pay more than before for things like fuel and other basic necessities of life” and that rural incomes have not improved at anything near the rates implied by the high overall economic growth rates.

To illustrate the continuing impact of rising cereal prices on rural households in Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh and Orissa, district per capita incomes for 2004-05 to 2009-10 are estimated for five representative districts from these states. These are districts that record a median per capita income based on data for the 2004-05 year (the last NSSO household consumption survey year) available with the Planning Commission’s district domestic product tables: Bhabua in Bihar, Dhamtari in Chhattisgarh, Deoghar in Jharkhand, Khandwa in Madhya Pradesh and Jajpur in Orissa. The per capita income increases in these districts are recorded upto 2006-07, and taking the national GDP growth rate for the years following (9.7%, 9.2%, 6.7% and 7.2%) the overall finding is that statistical per capita income increases are between 36% (for Khandwa) and 47% (for Dhamtari) for the period 2005-06 to 2009-10.

Expenditure on food and non-food needs, Indian states

Expenditure on food and non-food needs, Indian states

In these five states, the cereals basket occupies a dominant share of monthly per capita expenditure (MPCE) on food, accounting for 42% of MPCE on food and 25% of total MPCE in Bihar, 41% and 21% in Chhattisgarh, 42% and 25% in Jharkhand, 33% and 17% in Madhya Pradesh, and 42% and 24% in Orissa. The impact of a steady upward trend in the prices of cereals in these states – whose rural households spend roughly the same on food as they do on non-food needs (see Chart 1) – can be gauged from retail price data on essential food items collected by the Department of Economics and Statistics, Ministry of Agriculture. This data, although the most reliable weekly series recorded in a number of centres in the country, is weakened by deficiencies (gaps in series, numerical mismatches and so on). Even so, the patterns they provide are valuable.

From 2005 January to 2010 January, the prices of atta in Sehore and Bhopal (MP), of desi wheat in Bhopal and of maize in Patna have risen by 200%. The prices of ‘kalyan’ wheat (a widespread HYV cultivar) in Bhopal, Sehore and Patna (Bihar) have risen by 173% to 177%; the prices of maize in Ranchi (Jharkhand) and common quality rice in Bhubaneshwar (Orissa) have risen by 171%; the prices of ‘desi’ wheat in Patna and atta in Ranchi have risen 170%; and the prices of common rice in Cuttack and in Dhanbad (Jharkhand) have risen by 169% and 164%. Over this period, the price of the available basket of cereals has risen 157% in Cuttack, 162% in Bhubaneshwar, 159% in Sehore, 174% in Bhopal, 176% in Patna, 166% in Ranchi and 152% in Dhanbad.

Erratic data posting (and possibly validation difficulties) have meant that a better understanding of the food baskets of North-East India is yet to be achieved. Even so, NSSO 530 shows the heavy reliance by the households of the North-Eastern states on cereals (rice) with the regional average consumption greater than that of the states of eastern and central India in which rice also play a major dietary role: West Bengal, Orissa, Chhattisgarh, Bihar and Jharkhand. What Chart 2 illustrates is that for those regional populations dependent on rice, the cost of this dependency is high.

Cereal consumption and prices, Indian states

Cereal consumption and prices, Indian states

This is not so for wheat in Punjab and Haryana, whose average per capita consumption quantity of the cereal is both relatively low (as a percentage of the cereal component of the food basket) and less expensive. For Gujarat, Maharashtra and Karnataka – all three states affected by rapid urbanisation and absorbed by the race to build urban and transport infrastructure – their rural households are far less dependent on a single cereal than their counterparts in North-East, Eastern or North India. Wheat is the preferred cereal in Gujarat but accounts for no more than 40% of the total cereals purchase; rice is the preferred cereal in Karnataka but accounts for no more than 53% of the total cereals purchase; wheat is the preferred cereal in Maharashtra but accounts for no more than 36% of the total cereals purchase.

Food inflation is now a concern for the Reserve Bank of India (RBI) which has begun to make direct causal links between per capita availability of foodgrains and high retail prices. Deepak Mohanty, executive director of RBI, in an address on ‘Inflation Dynamics in India: Issues and Concerns’ (March 2010) has also drawn a connection between food prices the minimum support price (MSP) announced by the Government of India for procurement of various commodities. “The high increase in MSP since 2007-08 has given an upward bias to agricultural prices. Reduced availability of foodgrains also tends to keep food prices high. As per the Economic Survey 2009-10, per capita net availability per day of cereals and pulses has been lower than that observed in the previous four decades. The per capita daily availability of foodgrains was 447 grams in the 1960s and 1970s, which successively increased to 459 grams in the 1980s and 478 grams in the 1990s but came down to 446 grams during 2000-08 and stood still lower at 436 grams in 2008.”

At the same time, the Government of India has approved proposals for joint ventures and foreign collaboration (including 100% FDI) in processed food businesses (including 100% export oriented units), and “mega food parks”. According to Indian Credit Rating Agency (ICRA), the processed food market accounts for 32% of the total food market with the “most promising” sub-sectors listed as soft-drink bottling, confectionery manufacture, fishing, aquaculture, grain-milling and grain-based products, meat and poultry processing, alcoholic beverages, milk processing, tomato paste, fast-food, ready-to-eat breakfast cereals, food processing, food additives and flavours. From the point of view of the major national industry associations (CII, FICCI, Assocham) the approximately 7,500 regulated mandis lack critical infrastructure, the provision of which will cost at least Rs 12,000 at 2009 prices. The potential of the public-private partnership model in the foods business is seen by industry as being embodied in ventures such as Safal market in Karnataka (considered an example of wholesale market modernisation), ITC’s e-Chaupal, Hariyali Kisan Bazaar, Mahindra Shubh Labh, Cargill Farmgate Business and Tata Kisan Sansar.

Removed from such a view are the recurrent protests since late 2009 in a number of urban centres over food inflation, urgent signals that the increasing corporatisation of food production, procurement, movement and distribution is contributing to household food insecurity, particularly amongst the rural and urban poor. The ‘Report on the State of Food Insecurity in Rural India‘ (M S Swaminathan Research Foundation) explicitly stated that “over the longer period of 1993-94 to 2004-05, the states of Karnataka, Orissa and Madhya Pradesh show significant increase in the percentage of population suffering acute calorie deprivation. On the whole, it is clear that, by our measure of food insecurity, the period of economic reforms and high GDP growth has not seen an improvement in food security but deterioration for the majority of Indian states.”