India's FDI retail saga: From Wal-Mart to Agarwal-Mart?

WASHINGTON: "I actually did vote for the $ 87 billion (war funding) before I voted against it," was a line that destroyed John Kerry's Presidential campaign in 2004. He could never live down the flip-flopper reputation after opponents simplified his statement to "I was for the Iraq War before I was against it." Subtle nuances and elegant explanations, not to speak of a possible change of heart after things went south, were lost in the verbal melee in an atmosphere where you were either "for it or against it."

Something similar is happening in the debate in India about foreign direct investment in the retail sector, in which the American superstore Wal-Mart has become the figurehead. You are either for FDI or against FDI; Wal-Mart is all good or pure evil. Look, look...says one distinguished opposition leader now in his twilight years, even Americans (or New Yorkers) are against it. Of course, some Americans are against Wal-Mart; many are for it. Many Americans are also pro-outsourcing. And anti-globalisation. And pro-China. And anti-China. It's never black and white.

In fact, as the popular Facebook-era metaphor goes: It's complicated. As someone who divides his time between U.S and India, here's my $ 0.02, or Rs 1.06 at the current exchange rate, about the FDI/WalMart debate: I am against Wal-Mart in America, and for Wal-Mart in India. How's that for a $ 2.00 Made-in-India flip-flop ? or "double standard" as a colleague put it? I am also mostly vegetarian in the US, but have no problems eating non-vegetarian in India. And there's a connection between the two.

The simple explanation for all this is the U.S and India are at different stages of market economics, especially in the in production, distribution and marketing of food produce. The US has made some awful mistakes in embracing its current food cycle, the same way it has erred espousing a mindless automobile revolution. So while adopting the "good" that FDI retail/Wal-Mart can offer, there is no compelling reason for India to follow the U.S model to the T; it need not make the same mistakes. Call it retail revolution with Indian characteristics, if that is possible.

Let's break it down with examples by first looking at the "good" that the proposed retail revolution can bring into India, some of which has been articulated by ardent votaries of FDI. First off, it will improve supply chain logistics, including cold storage, and broadly bring India further in tune with 21st century western style market economy. It will save the 30 per cent wastage of perishables that we have been moaning about for 30 years. Of course there is always the question about whether it is better to eat fresh produce never mind the wastage, or whether to can the waste and eat preserved food. We'll come to that later - the simple answer could be it is better to eat something than nothing at all....

Initially at least, the so-called FDI revolution in retail will provide better prices and returns to farmers through better yields, productivity, and distribution. It could also offer more choice, better quality, greater uniformity, improved display and packaging. All this is not a given and will not necessarily improve your health or quality of life. In fact, it could be the other way around. Here's how it has panned out in America.

The corporatization of the food chain has its upside -- and downside. Farmers are coaxed -- or forced -- to improve yields, attain the kind of quality and uniformity that corporate interests demand, and as a result may get more remunerative prices, at least in the beginning. But it also edges out the small and marginal farmer, vastly reduce farm labor (with increased mechanization), and result in mediocre but commercially viable produce.

In fact, this prospect brings home the very malaise that more "advanced" western societies are starting to realize and wanting to avoid or reverse. This is where you want to continue buying from the neighborhood push-card vendor in India who's bringing in fresh produce to your doorstep from a local grower rather than the retail chain with its stock of mass produce whose provenance and vintage is unknown. This is where more and more westerners, at least those who can afford it, are switching to shopping at farmers market with local produce even though it is much more expensive than supermarkets.

So why is it produce cheaper (or will eventually become cheaper) in the supermarkets, you ask? Because the economies of scale make big chain produce much cheaper. They also have deeper pockets to suffer initial losses and eliminate competition, as Wal-Mart has demonstrated in many countries.

What modern retail in the west has done is introduced food produce not just on an industrial scale but on an industrial quality too. And this is where my "prefer vegetarian in U.S but okay with non-veg in India" choice kicks in. That massive ten-pound pack of chicken breast at dirt cheap price...we really have no idea of its origins or vintage. Wait...we do have a rough idea. It was raised in a massive chicken farm owned by a corporate monopoly in methods and circumstances that will make you puke. Chicken (or cattle) that are cooped up in the dark, medicated, and force-fed continuously so that they attain maximum weight in the minimum time with minimum movement and metabolism. That's how corporates maximize profit. In India, you still have to the option of seeking out the healthier free-range or home-grown chicken, fresh locally grown- or sourced vegetables and fruits. You could be saying goodbye to all that (or at least end up paying much much more) with the FDI fiesta.

On a recent trip to the great American outback, your correspondent saw visual evidence of what this corporatization and industrialization of food production - widely seen as inevitable once the retail FDI gates are open - can do to the landscape and population. Thousands upon thousands of acres of farmland, typically owned or leased by corporates or large farming interests, grew bounteous harvests of corn (even in a drought year). This was not the corn, the "bhutta" from the push cart vendor that you eat with relish. It is mostly genetically modified, tasteless, industrial-grade rubbish that is aimed at maximizing yield. When it is not used as animal feed, it is turned into corn syrup which is used sweeten almost everything you see in the supermarket, including that sugary soft drinks you guzzle.

The result is all too visible in much of the U.S., nowhere more than the heartland of the country, where people come in large, economy size, with consequent health issues (obesity linked diabetes and heart disease). Much of this comes from eating cheap, low-quality, industrial grade food -- from mass-produced breads and meat. There are few places in the world is where food available as cheaply (relative to income) as America. Till a couple of decades ago, Americans spent up to 15 per cent of their income on food; it is now below ten per cent and still dropping. It is now an accepted fact that the poorer the state in America, the more obese people are, because they are eating cheap, mass-produced food of the kind offered by fast-food chains. That dreadful burger and pizza and cola that you are wolfing down from the retail assembly line...it's the cheapest and the worst kind of food you could be eating.

So here's the equation. If you allow the kind of retail revolution that has overtaken America, you could end up consuming cheap, low grade, mass-produced, industrial quality produce. Of course, it is easy to sniff down at all this from the high vantage point of those who have money in the pocket and the luxury of choice. But what about those with limited means who cannot afford to spend as much on fresh produce as corporatization of the food chain takes hold? So should be just reject the American/western way and stick to our current way, as many of those opposed to the Wal-Mart way are recommending? Then what happens to the farmers who seek better market access and greater returns, who want to eliminate waste and spoilage. Isn't FDI retail lucrative for him -- at least to begin with, before predatory practices set in. Which way should we go? Will we, to paraphrase John Kerry, end up being "for it, before we turn against it."

The answer, without it sounding like a cop-out, is to embrace the middle way. We need all the systems and logistics that FDI retail will bring, but we need to tweak it to make sure we don't go the American way. In some ways we should be reassured by what has happened already: the arrival of American retail food chains such as KFC, McDonalds, and Pizza Hut, did not destroy Indian eateries or Indian eating habits. We took the best practices from them, and today many Indian food outlets have the same look and feel of their western counterparts while continuing to serve the Indian palate. So the arrival of Wal-Mart may just herald the birth of the Agarwal-Mart.

Source: http://timesofindia.indiatimes.com/business/international-business/Indias-FDI-retail-saga-From-Wal-Mart-to-Agarwal-Mart/articleshow/16604326.cms

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