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Big Retail

Supermarts a super risk


Nowhere in the world has the advent of big retail helped the long-term cause of the farmer
October 17, 2010 15:58
Tags : Indian farmers | UP | Bihar | West Bengal and MP | Rural Sociology | Pennsylvania State University |


It is being projected as a boon for the agricultural sector. In reality, it will be the beginning of the end for Indian farmers. 

It has happened in the US. Ever since big retail – dominated by multi-brand retailers like Wal-Mart, Tesco and Carrefour – has entered the market, farmers have disappeared and poverty has increased. Today, not more than 7 lakh farmers remain on the farms in America.   
In Europe, despite the dominance of big retail, every minute one farmer quits agriculture. According to a report, farmers’ income in France came down by 39 per cent in 2009, having already slumped by 20 per cent in 2008. In Scotland, low supermarket prices are being cited as the reason for the exodus of dairy farmers. It is therefore futile to expect the supermarkets rescuing farmers in India. 
Despite the destruction of farming globally, the ministry for commerce and industry is gung-ho about allowing foreign direct investment in multi-brand retailing. “The agriculture sector needs well functioning markets to drive growth, employment and economic prosperity in rural areas,” says a discussion paper drafted by the Department of Industrial Policy and Promotion. 
Since 2006, India has allowed a partial opening up of the retail sector. Have these retail units benefited Indian farmers and the consumers? The answer is no.  The argument is that the supermarket chains will squeeze out the middlemen thereby providing higher prices to farmers and at the same time provide large investments for the development of post-harvest and cold chain infrastructure. All these claims are untrue, and big retail has not helped farmers anywhere in the world. 
If the supermarkets were so efficient, I would like to know why the US is providing a massive subsidy for agriculture. After all, the world biggest retail giant Wal-mart is based in America and it should have helped American farmers become economically viable. But it did not happen. Till 1950 in America, a farmer used to receive about 70 per cent of every dollar spent on food. Today, it is no more than 3 to 4 per cent. And that is why the American farmers are being supported in the form of direct income support by the government. 
 A 2010 report by the Organisation for Economic Cooperation and Development (OECD), a group comprising the richest 30 countries in the world, states explicitly that farm subsidies rose by 22 per cent in 2009, up from 21 per cent in 2008. In just 2009, industrialised countries provided a subsidy of Rs 1,260 billion. And it is primarily for this reason that farm incomes are lucrative. Take the Netherlands: the average farm family income is 275 per cent of the average household income. This is because of farm subsidies, not supermarkets. We are therefore importing a failed model from America. 
 Regarding employment, big retail does not squeeze out middlemen from the food chain. Supermarkets claim that they remove middlemen and therefore are able to provide a higher price to farmers. In reality, what happens is the opposite. Supermarkets are themselves the big middlemen. They replace the small fish. Supermarkets replace the plethora of small middlemen. The arhtiya clad in a dhoti-kurta is replaced by a smartly dressed up middlemen. So while the farmer is pauperised, the profit of supermarkets multiply.   
Based on biased studies by consultancy firms and some institutes, the government believes that supermarkets will create employment and therefore help in ameliorating poverty. This is a flawed assumption. Lessons need to be drawn from a 2004 study done by Stephen J Goetz and Hema Swaminathan of the Department of Agricultural Economics and Rural Sociology, at Pennsylvania State University. The authors measured the impact of Wal-Mart’s retail boom on poverty in various American states. In this eye-opening study, entitled “Wal-Mart and Poverty”, the comprehensive study clearly brings out that those American states that had more Wal-Mart stores in 1987, had higher poverty rates by 1999 than the states where fewer stores were set up. “Equally important, the counties (districts) which built new Wal-Mart stores during the period 1987 to 1998 also had high poverty rates,” the report concludes. 
At stake is the livelihood security of 120 lakh small shopkeepers, 4 crore hawkers and at least 20 crore (of the 60 crore)  small farmers. What is needed is more public sector investment in setting up a chain of mandis across the country, especially 
in states like UP, Bihar, West Bengal and MP. Providing an assured market and procurement price is what Indian farmers need. This has to be supplemented by a network of foodgrain banks at panchayat level that assure local production and distribution.
The views expressed by the author are personal
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Posted By: Maninder | Ludhiana | November 18th 2011 | 16:11
In Retails markets, every thing is sold with bill which will amount to millions of rupees in taxes which is currently given by 120 lack shop keepers you are talking aboutm that will help the country a lot.
Posted By: Rahul Gupta | Kotkapura | June 12th 2011 | 13:06
Talking of the opposite side, I will say these retails shops provide us with benefits also like they are one stop shop , quality of the product avaliable and many other things. If we consider the point mentioned in the article that removal of middleman has resulting in more destituion for farmers, I disagree with that because these retail shops have given a atmosphere of competition among them to produce the quality product .

Issue Dated: Feb 5, 2017