The simmering issue of FDI in retail was resurrected on Tuesday when the Left parties demanded that the UPA government prevent the “back door”' entry of retail giant, Wal-Mart, saying it would lead to large-scale displacement of unorganised retailers across the country. The move would also squeeze out domestic manufacturers and farmers from the sector, the Left alleged. Left have threatened to launch a countrywide agitation if the government does not intervene.
On Monday, the business deal between Wal-Mart and Bharti Enterprises was announced. While it comprises joint ventures in the warehousing and wholesale trade sector, in the retail sector, the Indian company would own the outlets under the Wal-Mart franchise and brand name. The CPI (M) politburo said Wal-Mart's expansion, even within the United States, had triggered closure of small stores and bankruptcy in poorer communities.
"In the context of massive unemployment existing within the country (India), such employment-displacing FDI is the last thing the Indian economy needs at the moment. In fact what is urgently required is a strong regulatory framework for the domestic organised retail sector, which is expanding at a rapid rate,'' the politburo said.
The UPA has already allowed 100 per cent FDI in the warehousing (cold storage) and wholesale trade besides single brand retail (brands like Nike have set up shop in India). Under NDA, 100 per cent FDI was allowed in cash and carry trade.
"But in these three, traders, especially in the unorganised sector, are not displaced. But in multi-brand retail lakhs of small traders would lose their livelihood. Farmers too would be adversely impacted. It's a franchise deal now. But one year down the line, it seems, other retail giants, like Tesco, would also be allowed in with majority stakes,'' CPI (M) sources said, adding that it's unlikely that the deal would have been clinched without the government's tacit support. On October 24, 2005, the Left had submitted a note to the government, citing reasons why it was opposed to FDI in retail. “FDI in retail is fundamentally different from greenfield foreign investment in manufacturing. While the latter enhances the economy’s productive bases, technological capability and generates jobs, entry of MNC retail chains has positive spin-offs…”