Wal-Mart has just announced that it’s moving into India, partnering with Indian telecoms giant Bharti Enterprises. The Financial Times today reports that
Allowing in Wal-Mart through the back door will test the government’s determination to open the economy. By some
estimates, the Indian retail sector is worth $250bn, roughly a third of India’s entire gross domestic product.
With sales of more than $312bn last year, Wal-Mart benefits from massive scale economies and an ability to procure
globally, squeezing suppliers.
Indian “mom and pop” stores, by contrast, tend to be below 50 sq ft in size, run from stalls and mobile handcarts
and scattered across more than 5,000 towns and 600,000 villages. They are adept at holding the political class to
“Over the next two-three years, the development in the retail sector may not have a significant impact on the
existing mom and pop shops,” says Morgan Stanley economist Chetan Ahya. “However, in the medium term, as the
reach of chain stores increases, some adverse impact on mom and pop shops is inevitable.”
Those mom and pop stores account for almost 97% of the Indian retail sector. And they’re almost certainly in for a hard time. More important, though, is the class of people who aren’t able to hold India’s political class to ransom – farmers. If Wal-Mart’s forrays into grocery retailing in the US are anything to go by, it’s unlikely that farmers already on the breadline can expect the prices of their produce to increase. If there’s any increase in turnover in the agricultural sector as a result of Wal-Mart’s entry, it’ll not be because prices for farmers have increased. It’ll be because Wal-Mart will have muscled its way into the growing urban consumer market, and killed any chance for farmers to market directly to city dwellers.
In one interview I did for Stuffed and Starved, Chukki Nanjundaswamy, one of the leaders of the Karnataka State Farmers Association in India, told me her vision for the future: “We want to get rid of the middleman – one Rupee less for the consumer, one Rupee more for the farmer.” Guess who’ll be getting the farmer’s Rupee now.
This is, incidentally, fruit from the tree of the Indo-American Knowledge Initiative. As the Indian food processing industry gears up to increase three-fold over the next ten years, destroying more healthful diets along the way, Wal-Mart is ready to jump in an capitalise along with a range of other US multinationals. Read more about it here.