Miscellaneous / Misc Case Studies.
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Autor: anton 16 July 2011
Words: 521 | Pages: 3
It contributes almost 14% to the national GDP. The organized retail sector trade is only 2%, rest 98% is unorganized. This reveals that our retail sector is underdeveloped. Organized Retail trade employs only 5.59 lakh persons (2005) where as unorganized retail trade employs nearly 3.95 crores (2004).
As our retail sector is underdeveloped large Multinational Retailers like Wal-Mart (U.S), TESCO (U.K), Metro (Germany) are trying to enter it, as they see huge potential for growth.
Wal-Mart is the largest company in the world, three times the size of its closest competitor TESCO (U.K). It is larger than the entire Indian Retail market. Its size gives it power to drive down costs in Retail and Manufacturing sector. Thus, it can drive out competition easily. With such monopoly it can drive down the wages and labour standards. It has prohibited its employees from joining any trade union. In U.S. it has destructed local small business, jobs and is washing away local production by flooding U.S. markets with Chinese made goods.
2005-2006 2006-2007 Growth
Total Import 660408.9 862301.5 30.6
Import from China 48116.7 78729.5 63.6
Table above shows that the imports from china have been increasing tremendously. This is when still retail sector is not open to FDIs. One the other hand, the Indian Manufacturing production is growing only in single digits. With this scenario, opening up of retail sector will surely have adverse effect on our local manufacturing sector. Thus, Wal-Marts entry would flood our markets with cheap Chinese goods and Lead to closer of small shops, businesses and trade. Further, this huge imports would upset the import balances. The question arises is that is it wise enough to risk the lively hood of million of Indians, especially when our economy is experiencing jobless growth as seen above?
India has such huge retail sector because of jobless growth in past decades and expansion of economy. Agriculture sector is already over crowded and both manufacturing and agriculture has low wage jobs. The most obvious option left for million of Indians is to be self employed and move into service sector retailing were the capital needed to start a business is very low. Thus, people are virtually forced into this service sector.
Retail can be considered as Ð²Ð‚?forced employmentÐ²Ð‚â„¢ sector. ItÐ²Ð‚â„¢s a primary form of disguised unemployment/underemployment. It is the LACK OF ECONOMIC OPPORTUNITIES that has forced people into self employment.
Further, only 2% of retail sector is organized and 98% is unorganized. Even in the organized sector, the number of individually owned retail outlets far outnumbered the corporate backed institutions. According to A.C.Neilson and KSA Technopak- India has the highest shop density in the world and is highly fragmented with only 4% of them being larger than 500 square feet in size. This relieves how underdeveloped our retail sector is?
This business is vital from socio economic point of view. FDI in retail sector would dislocate millions from their occupations and would definitely crowd out the domestic investment and employment. Thus, pushing millionÐ²Ð‚â„¢s below the poverty line.
Thus, there is no justification in allowing FDI in retail business in our country. Instead the government should help it to develop, as it has huge capacity of absorbing many unemployed.
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