In Defense of Wall Mart
Suppose you are a young executive in your twenties in a big multinational. You have some extra cash and are planning to get married, buy a home, and decorate it with some nice furniture. Well there is some good news for you!! IKEA is coming to town and bringing in cheap, world class furniture which you can assemble all by yourself!! You can thank the Indian Parliament for this! Now suppose you are a poor minimum wage laborer with a family of six finding it hard to make ends meet. The inflation is cutting a big hole in your pocket and you could really use some cheap vegetables. Sorry bro, you have to go hungry or choose which one of your kids gets to go to school. And once again, you can thank the Indian Parliament for this!!
Big means Bad
For those of you who don’t know, last month the Indian Parliament blocked the entry of multi-brand retail stores like Walmart, which would have given consumers access to cheap food products and other essentials, while allowing single brand retail stores like IKEA which sell non-essentials like furniture at cheaper rates, to enter the Indian market. The driving logic is the fact that Walmart would drive the prices so low that the current sellers of essential commodities, your local Kirana wallas, would not be able to compete. It is so huge that it sells every variety of everything, its supply chain so good that it can deliver products equivalent to the demand, on time, consistently. It will employ far more people than it puts out of business. It will be a boon for this nation where farmers commit suicide because they are forced to sell food grains at low prices, where the consumers are starving because they can’t cope with the inflation, and middle men have grown so rich and powerful that they can get the politicians to act against the country’s interests. Walmart cuts off these middle men and provides goods to people at a cheaper rate. It is the best at what it does. Hence, it does not deserve to be in India.
Will of the Minority
One of the biggest threats that a democracy faces is the fact that the national policy gets hijacked by a vocal minority while the silent majority watches silently. It helps if the minority has considerable political leverage. This is precisely what has happened here. So who loses out if big retailers come in? The traders and middle men who account for barely 2-3% of the country’s population and who in many cases keep the prices low on the supply side and high on demand side and eat away the profits in the between. And who benefits if the retailers come in? The farmers, who account for roughly 65% of the population, because they will get paid more by the Walmart like companies as there are no middle men involved. And more importantly, the consumers, who account for 100% of the population, as they will get the same products with more variety and at lower prices!
How everyone can win
The argument for keeping big retailers out, which is small traders will lose out on their livelihood, flies in the face of logic. There are already many big retailers like Big Bazaar, D-Mart, Reliance fresh etc. in the market. If anything Walmart and the likes will have a tough time gaining a foothold in the country. Indian cities are immense with very little room for expansion. Some of our biggest cities have only enough space for 2 or 3 Walmart size stores. Not nearly enough to meet the demand. Plus on a day to day basis people will prefer to buy everyday commodities from the local stores than travel 30-40 minutes in traffic to the nearest mega store. Also Indian retailers will get a chance to study and learn better supply chain management from these foreign companies which will help them expand. These mega stores will also employ a large number of people, and tremendously improve and develop the basic infrastructure they need to function. Besides, Indian retail market is largely un-organized which not only allows many people to get away without paying their taxes but also lets child labor go unpunished. Allowing FDI in retail and subsequently improving our labor laws and land reforms will help this sector and many others get more organized.
In the name of Capitalism
Walmart started out small and then went on to become big by sheer ingenuity and constantly learning and improving to be one step ahead of their competitors. The reason they are so big is that they provide the consumers with something that others cannot. Their technique is better than everyone else’s technique. They make their competitors improve. Vilifying them for this reason is like vilifying the top ranker in the class by saying that he is so smart that he makes the laggards feel bad.
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Category: Jus Thoughts..