How FDI in retail affects Yadav community?

17 September, 2012

Given the fact that Kirana stores were thrown out of business after Big Bazaar and Spencer Daily opened up here, it doesn't take much to believe that whole of the city is going to face the same situation, once big stores like Walmart reach the capital city of Uttar Pradesh.

I WAS just wondering what Akhilesh Yadav, Mulayam Singh Yadav and Shivpal Yadav might be thinking right now? Will the FDI in retail hurt the small retailer? Well if Lucknow is any example then let us do a quick survey and see what happened when Big Bazaar and Spencer Daily and Vishal Megamart opened up.

The first thing that happened was that several Kirana Stores in Kapoorthala Market Aliganj closed down. These included Move and Pick, Kundan Kirana, Keshav Kirana and several others. FDI in retail will hit all business in retail eventually and the impact will be greater in a city like Lucknow where there is no industry and businessmen survive by getting material from manufacturing centres and selling them in Lucknow.

But why are the Samajwadi Party and Akhilesh Yadav so confused about FDI in retail? The ambivalent stand of the the party on this issue confuses its voters too. Its voters are members of the Yadav and the minority community. Will FDI in retail hurt them too?

Let us take the case of the Yadav community. Traditionally they are dairy farmers. If FDI in retail permits Ghee from New Zealand to be sold in Lucknow it could be far cheaper than Desi Ghee in fact, it would be available at half the price. What is the reason for this? High cost of inputs in India and one of these inputs is high rate of interest charged by banks on loans to manufacturers.

On the other hand, banks operate on very low rates of interest in the West and other countries where capital formation and population levels are not an issue. These could be as low as 6-7 per cent. Will FDI then have a spin off. After destroying the dairy farming industry in India, could it then force Indian banks to lower their rate of interest on deposits and loans?

If this happens both dairy farmers and pensioners may have to do without milk and ghee and butter, for the simple reason that they may not be able to afford it. Cheap food could flood the market, but people could find that cheap food to be out of reach as their incomes and businesses shrink. But all this argument is going to become academic very soon. The government has rocked the boat by clearing the way for FDI in retail.

The battle for Indian market territory is about to begin.