European retailers: threatening livelihoods in India

06 October 2010
Article

The role of major supermarkets like Tesco in wiping out small retailers across Europe is well known. Now the giants have India in their sights. For a country in which small-scale retail employs 33 million people, what kind of impact will this have?

In June 2001, Dilip Kumar, 38, took out a loan to run a tiny store East Delhi, India. By selling groceries and other goods for daily use, he supported his wife, two daughters and two younger brothers. Everything was going fine until 2008, when corporate Indian chain stores, Reliance Fresh and More popped up in the vicinity of his shop.

Within one year, Dilip was forced to close his shop, after suffering a sudden and drastic drop in sales. "They (big box retailers) continued running on losses which I couldn't afford. I had no other option than to close the shutters." He, along with his family, has had to move back to the impoverished district he grew up in, abandoning the dream of providing quality education to his brothers and daughters. "Both my brothers have now had to drop their studies." His whole family has been pushed back into acute poverty and debt.

Dilip's predicament will become even more common as European chain stores move in. Carrefour is about to open its first store in Delhi in a very low-income locality and near where Dilip was doing business. Metro is already operating five wholesale stores in four cities of India. Tesco is believed to have its first one up and running by the end of this year in Mumbai. This strong push by European retailers is likely to receive additional clout in EU-India current free trade negotiations, due to resume on October 6. The outcome could mean millions of Dilips.

Dilip's case is one of many collected by our organisation India FDI Watch. With persistent unemployment and underemployment, small-scale retail has long been a refuge for India's poor. Retail is the second largest source of livelihood in the country, after agriculture. In 2007-08 retail trade employed 7.2 percent of total workers and provided job opportunities to 33.1 million Indians. Hawkers, or street vendors, make up around 2 percent of all urban populations in India and the country has the highest shop density in the world, with 11 shops per 1000 people, much higher than any European country.

There are increasing signs however that retail is no longer the bolthole it once was for the poor. Between 2000 and 2005, fewer jobs were created within the industrial category "trade, hotels, and restaurants" than almost any other sector of the economy. This is despite the fact this category has been increasing its share of GDP in the same period. The number of workers employed or self-employed in retail has declined in India for both men and women. An Economic Research Foundation-International Labour Organisation (ILO) report says "there are forces at work which make it increasingly difficult for individuals to engage in petty retail trade, and make it less viable as an option to fall back on in the absence of other productive employment opportunities".

What might these forces be? Our study found that a majority of hawkers and shopkeepers are being adversely affected by new corporate and chain retail outlets. Significantly, as these corporate and chain retailers squeeze out their independent competitors, they do not show signs of creating comparable numbers of jobs.

Small grocers in Europe know what it's like to have to shut up shop as a result of unfair competition with big anonymous supermarkets. According to market research company AC Nielson, during the years 1981-99, the number of small retailers in the UK decreased from 56,862 to 25,800. Many Europeans have become aware of the social costs – in terms of loss of choice, the concentration of power in a few corporate hands, the undermining of farmers and the fraying of the fabric of community – only now that it is too late.

The economic, social and cultural devastation caused by the growth of corporate retail will be even starker in India. Unfortunately, rather than restraining the power of European retail in India, we are likely to see an expansion of their power in India. From 6 to 8 October, India and the EU will meet for their next round of negotiations for a Free Trade Agreement. European transnational retailers, like Tesco, Carrefour and Metro, are aggressively pushing for full liberalisation of the retail sector, allowing 100% transnational ownership of retailers in India. The European Commission, despite its knowledge of the sensitivities of the Indian retail sector, is fully supporting them.

Moreover, the ongoing negotiations for a free trade agreement won't have measures built in such as the economic needs test (a precondition to assess the need for a new store) applied in many countries of Europe including Belgium, France, Bulgaria, Denmark, Italy, Malta and Portugal. European retailers will have almost a free hand, due to India's lack of an effective and stringent regulatory framework to protect its small producers, retailers and consumers.

Dilip's is just one story of many that could be used to indicate the crippling impact EU trade policies could have on the ground in Asia. That is why activists, researchers, and social movements from both Europe and Asia will be gathering in Brussels at the time of the 8th Asia- Europe Heads of State Meeting (ASEM) in Brussels from 2 to 5 October to look at how we can better challenge these damaging trade agreements, and the corporate power underlying them.

The theme of the official summit is ‘Improving the quality of life'. You can imagine how cynical this sounds to someone like Dilip, who has lost his livelihood thanks to a hijack of trade by a large corporation. European policies look set to make livlihoods like his even more expendable. If European and Asian leaders want to improve the quality of life for all its citizens, they need to start listening more to people like Dilip, and less to the corporate directors of Tesco, Carrefour and Metro.

The writer is the director of India FDI Watch, based in Delhi, and co-author of the report "Trade Invaders. How Big Business is Driving the EU-India Trade". http://www.corporateeurope.org/global-europe/content/2010/09/eu-india-trade-invaders He worked with Kathy Cumming of TNI to produce and place this opinion piece in the European press.