FDI in retail: my confused view

I would like those who better understand economics to clear my perspective below, which seems to be grossly against the idea of FDI in retail.

I'm not going to argue from a socialist perspective. Also I want to keep the emotions away of small family trades disappearing and all that.

Any new business initiative or something which claims to be of that nature shall be looked at as:

1. cost of the products sold : What consumers get

2. Generation of Jobs/loss of job : Socio-economic benefit of the region

3. Cost of procuring products: What producers get

4. Impact on the region: long term impacts on nature and lifestyle

I feel that FDI in retail fails when counted against these factors (from my perspective).

1. Surely, the cost factor is something everyone bets and it likely might come through. But that is not without the side-effects on the factor 4.

2. I think the 1 crore jobs is a mighty pipe dream. The retail outlets can open only in 51 cities in the country. So, if 100 new malls are opened in every city, so 5000 outlets. If each of them employ directly 60 people (sales boy/girl, managers, maintenance, security etc) and indirectly 40 people (transportation, middlemen etc.), then we get 5 lakh jobs. The funny part is we are not at all counting the jobs that are indirectly lost due to this and also those parts which need not be new jobs (like the middlemen). I may be wrong in analysing things, but the data of 1% of the country will get jobs because of this FDI is something I just can't find a way to believe even 10%.

3. The biggest claim is that farmers will get a better deal. I doubt so. I don't think the new retailers will go anywhere beyond the existing middlemen who form the bridge between farmers and retailers. The simple reason could be that a large number of farmers are small and the retailers won't make all the efforts to go and do business with every small farmer. So the middlemen now have the benefit of buying bulk and can further coerce the price for the farmers.

While I wish I'm proved wrong, but the farmers may actually get a raw deal in this case.

Ethically, no corporates care for farmers. Did those who promoted Bt cotton in Vidharbha cared for them ? Those who now promote corn for ethanol (for US consumption) across India care for their sustainability ? So expecting that retailers will go and directly deal with farmers because of serving them is nonsense.

Technology can help in this (Agro-advisory systems like mKrishi), but that will take quite sometime in the country. But in the event of the big retailers get the go, the only way forward is to push technology to reduce the middlemen encroachments.

4. Energy consumption for storage, transportation by the retailer. Similar consumption by the consumer in traveling to and storing the bulk bought items (they are cost effective only when bought bulk).

New jobs can be created only if the retail business adds more value than just being middlemen. The only value-addition they can do is to make the consumers to buy more than what they need (which already malls are doing). It is unsustainable even in the US and for a country like ours, it is unimaginable.

Other 'good' sides to FDI:

1. The small traders mostly cheat the government: They don't give bills and probably don't pay much taxes.

2. The job sector will get organized: Child labour in small retail outlets will disappear. Also the need for literacy will be reinforced by an organized work sector.

These and similar reasons may be correct as the disadvantage of existing retail system. But for me, these are things that as a nation we have failed to solve. And instead of solving them sustainably, we are trying to use an unknown tool which doesn't anyway guarantee anything.

And I've not yet counted on the history of FDI in retail in developing countries (Brazil, Thailand) or the possibility of India becoming a dumping ground for chinese products (which Walmart readily dumps in its stores).

For a lame mind like mine, it looks nothing more than a distraction creator from a political perspective and capital accumulation to smaller groups (from economic perspective). But I would like you to correct if there is something wrong.