The state of India’s economic future is to worsen, according to Prime Minister Manmohan Singh’s government, if sweeping reforms to India’s retail sector are not made. With battle lines drawn between the kirana (small shop) owners supported by the ever wily BJP – who incidentally wanted to carry out similar reforms last time they were in power – versus the government, this singular issue has bought India to a standstill. Yet what will such reforms do to the economic landscape of Punjab?
This piece of legislation, which purportedly seems to threaten the very existence of small shops, has been compared throughout the last few weeks with the effect that such corporations had on the British high street. Yet India is not Britain, and some of the key caveats of this law include that such foreign enterprises, including Wal-Mart and Tesco, would first of all only be allowed to operate in cities of more than a million – so no Tesco in Phagwara – and would have to make a minimum investment of $100 million – so probably purpose built ‘malls’ on the edge of town. That puts to bed the fears of most in-every-nook-and-cranny shopkeepers.
In a Radio 4 discussion earlier this week, Gurcharan Das, an economist and former CEO of Procter and Gamble India, stated that India currently has a 5 to 1 mark-up ratio where for example a kilogram of tomatoes is bought in the kirana’s of New Delhi for 20 Rupees. What reaches the producer, that humble farmer, is 4 Rupees. In western societies the gap is around 1 to 2.5, and that’s what India will get if such reforms are made. So this in turn begs the question where is the difference – in our tomato case 10 Rupees – currently going? Introducing the unscrupulous middlemen. Invariably these individuals profit as the go-between, connecting the retailer and producer – and retail reform spells the end for many of them, for example, one of the caveats is that the supermarket deals directly with the farmers.
Now you would be forgiven at this point if all this talk of devious middlemen seemed a little familiar. I’m referring to Punjab in the 1970s and 1980s. In this time of perceived great religious upheaval serious socio-economic undercurrents, and indeed over-currents, were persistently ebbing and flowing – and one of these was the issue of middlemen.
These people – almost exclusively mid-caste urban Hindus – held sway over Punjabi farmers, being dictated a buying price by the government (nowadays consortiums) and making their margins on top. Take a look at the Anandpur Sahib Resolution of the 1970s: this document – a framework for a modern Punjab – talks specifically about farmers being able to deal with buyers ‘sans exploitation’. Perhaps Professor Kapur Singh, the author, was too ahead of his time. Indeed, perhaps such changes are still too ahead of their time, with the potential collapse of Mahmohan Singh’s coalition on the cards.
However, what is clear is that the move is intended to bolster the ailing economy. What it provides though, albeit almost as an addendum, is the opportunity to standardise food products, cheaper food for the poor and the opportunity to deal with farmers direct – and hey if the farmer doesn’t want to deal with a foreign multinational then he can deal with the millions of kirana’s. Who stands to lose? Only the middleman.
