Celebrate when you can’t find domestic help

Making incomes rise is more important than consecrating job descriptions

A certain Rohit Pradhan makes his debut as a columnist for UPI Asia Online, arguing that foreign direct investment in retail (‘allowing Wal-Mart to open stores in India’, in non-wonkese) won’t hurt lower income groups “provided proper policy prescriptions are in place”.

the whole issue of job losses must be put into proper perspective. India is poor because a large majority of her population is engaged in low-paying professions. Therefore, while we worry about the vegetable seller and the poor farmer, it would be prudent to remember that their income is barely enough to cover their minimum needs and that would always be so — an ordinary vegetable seller will never be able to afford even a decent standard of living. Should jobs that guarantee perpetual poverty be such a holy cow? [UPI Asia Online]

9 Responses to Celebrate when you can’t find domestic help

  1. vatsan 16th March 2007 at 14:24 #

    nitin, the biggest concern isnt job losses, but margin squeeze on farmers. The big retail chains with their mammoth size can dominate the retail and and use that to squeeze farmers. Agreed farmers are being squeezed now, and this is due to a market imperfection, if that imperfection the pressure on farmers will be lower and they will make sizable profits. If the front end is dominated by a cartel (which can be formed with 4-5 players) it will definitely put a pressure on the farmers, that is my biggest concern. It is not joblosses.

  2. Sriram 16th March 2007 at 15:30 #

    Corporate investment in agriculture would shield farmers from the whims of Indian monsoons. With access to top-class R&D and sufficient cash, they could withstand a couple of years of lean production which the individual small farmer cannot.

  3. Gaurav 16th March 2007 at 15:46 #

    Vatsan,

    I doubt it is possible to squeeze farmer.
    Farmers cause will be better served by incorporation of high tech and elimination of middle men (including state)

  4. vatsan 16th March 2007 at 18:30 #

    Gaurav, that is true initially, I am looking at the future when the cushion of the middle men doesnt exist. It can happen.

  5. shiva 16th March 2007 at 22:08 #

    Your round the corner grocery is an extremely high risk and high cost business because of the cost of money – entirely sourced from the informal sector. Interest rates are astronomical – about 2-10% per day! Margins are kept low by self-deprivation – the grocer most of the time lives apart from family or employs children who are little more than bonded labor. And because of the inefficient supply chain there is little margin at any segment of the chain and a huge burden on the consumer. Few make much money out of this caper. So a large buyer who develops the supply chain and invests capital upfront could make things better by employing these people as franchisees or salespeople. West Bengal’s supposed ‘cold storage’ revolution hasn’t helped all that much since it is state-sponsored and therefore under the control of the CPI(M) party goons who have now simply replaced he middlemen. The CPI(M) too has stepped into many areas where public investment is weak (health, education, and distribution of produce) so things don’t really change.

  6. anuj 16th March 2007 at 23:06 #

    Why is it so difficult to admit, even for some very smart people, that in order to grow, we will suffer some pain.
    anybody who claims otherwise is not being honest.

  7. confused 17th March 2007 at 02:54 #

    Nitin,

    Thanks for the plug.

    Vatsan,

    Your concern is valid however that is not the primary objection people are raising. There are opposing FDI in retail because somehow that is supposed to cost job losses which the investment by Indian companies won’t! Also, if there is proper market competition with enough players, cartel formation is unlikely. Anyway, anti-trust laws rather than banning FDI in retail is the proper way to deal with it.

    Finally, there is only so much the farmers can be squeezed. You are assuming that the only avenue available for farmers would the big retail companies. That is unlikely for a long time to come.

    Shiva,

    That’s a good point which somehow I had missed. While we worry about the kirana store owner, what about the workers he employs which are barely paid subsistence level wages. With retail creating so many new jobs, at least theoretically the worker has a better chance in the new set-up.

  8. Manu 18th March 2007 at 10:10 #

    Stop for a moment and think who is benefiting in the way the retail sector game is playing out.

    There are good arguments on either side of the fence. Some worry about job losses, others about efficient supply chains. And yet, there is a sense of inevitability pervading all discourse. Retail sector will eventually be opened to large international players. This discourse obfuscates the true economic-political drivers.

    By delaying this opening up the benefit is going to the large domestic players like Reliance and Bharti who now have plenty of time to benefit from first mover advantage and set up vast businesses before international majors can step in. Five years later, when international majors enter India, valuations of these businesses would be sky-high as they look to acquire in order to grow. Guess who wants the government to ‘delay’ the opening up of this sector?

    http://www.indiadaily.com/editorial/3220.asp

    Vatsan – your concerns are very valid, and in my opinion, futile. Look for more Indian billionaires in future Forbes lists.

  9. Manu 18th March 2007 at 10:11 #

    Clarification to the above comment:
    “Valuations for Indian businesses will be sky-high as international majors look to acquire in order to grow.”

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