Retail therapy and speed money merchants in urban India

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

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?