Walmart spent spent $25 million ’as its lobbying fee to enter #India


India’s blind fists of fury

The rage in Parliament is off target. Walmart’s disclosure of its lobbying fee in the US Senate should trigger a different debate in India, says Shaili Chopra
Shaili Chopra

December 13, 2012, Issue 51 Volume 9

Illustration: Anand Naorem

WALMART’S DISCLOSURE on the fees it paid to lobby for opening up the Indian market created an uninformed and noisy debate in Parliament. The notion that allowing Foreign Direct Investment (FDI) in multi-brand retail would be the only stumbling block for Walmart’s entry into India quickly evaporated as proceeding in both Houses were disrupted for two straight days because of this disclosure report. As the time of its entry into India gathers pace, any piece of news to do with the company is being greeted with protests.

Earlier this week, the multinational retail giant disclosed in a report to the US Senate that it spent $25 million over the past three years on lobbying, including on issues related to “enhanced market access for investment in India”. Opposition members picked on this number and stalled Parliament, claiming lobbying was illegal and accused the government of taking “bribes” for pushing Walmart’s entry into India. BJP members demanded a probe into the matter. To the surprise of many, the government agreed to an inquiry into Walmart’s lobbying practices.

“This disclosure has nothing to do with political or governmental contacts with Indian officials,” says a Bharti-Walmart spokesperson. “It shows that our business interest in India was discussed with US government officials along with 50 or more other topics during a three-month period. Naturally, our Washington office had discussions with the US government officials about a range of trade and investment issues that impact our businesses in that country and worldwide, and disclosed this in accordance with the law.”

A look at the facts will help us understand better the legality of lobbying. For a start, though it is true that Walmart did pay lobbying firms to push for retail reforms in India, it is also true that it voluntarily disclosed this information. In America, lobbying is a valid practice, a right protected under the US constitution. Therefore, to say that lobbying equals bribery is an outlandish assumption. Just because there are no laws in India regulating lobbying to influence policymakers does not make it illegal. You have laws to make an act illegal, not having a law doesn’t make it otherwise. It is wrong to say Walmart bribed its way into India when there are no facts to prove so, although it may be the right time to address long pending issues around disclosures and lobbying in the country.

How should industry or individuals in a democracy try and convince policymakers of a particular position if not by lobbying? Unlike in the US, where the constitution allows it, we, in India, are running away from lobbying. We cannot expect transparency unless we have a right to approach our elected officials on any issue, in a manner similar to groups such as the CII and FICCI, who work with the government on behalf of corporate India, and with the rest of the world on behalf of India. In the US, such groups would have to register as lobbyists.

“Lobbying is often viewed with suspicion since it is confused with fixing,” says Sunil Kant Munjal, Joint MD, Hero Corp. “If it is in the form of advocacy to wean others to your point of view, it is absolutely fine and is an accepted practice worldwide and in India.”

Walmart has been the mascot of the battle between the UPA and its political opponents, who have been anti-reform in retail, their argument being it will hurt small traders and farmers. There is no doubt that the rollout of FDI will be complex and tedious and this latest controversy is a part of it. But what is also clear is that Walmart will need to rethink how it plans to make the most of India’s push for reforms amidst growing hatred for its brand. For the BJP to translate lobbying into bribery is misleading. What they should highlight is Walmart’s investigation of its Indian officials under the US Foreign Corrupt Practices Act (FCPA). They are more likely to find some ammunition there. Instead, they are confusing the two issues.

The company has undertaken a detailed investigation of its own arm in India with regard to internal bribery charges under the FCPA. It has sacked five employees in India, including CFO Pankaj Madan, following the inquiry, and Walmart India CEO & MD Raj Jain — who has just returned from the United States — is under severe pressure to sort out the mess.

The lobbying fee disclosure is not connected to this case at all but with all the wounds suddenly open, anti big box retail segments are making use of every opportunity to show how the entry of Walmart will be detrimental to India’s economy. It, of course, helps to remember that retail is not just Walmart or vice-versa.

Says Ronen Sen, former Indian Ambassador to the United States: “Anywhere you have democratic institutions, this is a registered way of doing things.” Sen further says that Indians have for long engaged in lobbying to push their case.

Unfortunately, in India, lobbying as a term is still associated with Niira Radia and the 2G spectrum scam, acts to be scoffed at, proofs of the unsavoury business- politics nexus. But the truth is, lobbying is undefined, vague and controversial because we have never considered a framework for it or its scope, albeit it has existed in every sphere — corporate, government, NGOs and more. And not one party can be exempted from indulging in it.

Often lauded for his business-friendly ways, Gujarat Chief Minister Narendra Modi reportedly hired Apco Worldwide, a public affairs firm, to boost his image internationally. Apco today boasts of a client list that includes names such as former Indian ambassador to the US Lalit Mansingh, US ambassador to India Tim Roemer and many more.

The UPA had also paid a US firm to lobby for the Indo-US civilian nuclear deal. As reported by the Daily Mail in November 2012, Washington-based Barbour Griffith & Rogers (BGR) was hired by the Indian embassy to seek media interviews for Prime Minister Manmohan Singh and get Congressional resolutions passed in his support ahead of a US visit.

“What is being said reveals ignorance,” says Sen who was instrumental in the Indo-US nuclear deal. “As India’s ambassador, I have actively engaged in lobbying, wherever it was. For example, when the erstwhile Soviet Union broke up, we had to lobby for a certain point of view to influence opinion. Even during legislations, as foreign envoy, I would get into the language of the legislation and lobby to get it changed with our trade, economic and security agenda in mind.”

INDIAN TECH companies routinely hire lobbying firms to get improved visa rules passed. Reliance, Tata and Nasscom have all used the services of global firms to get a foot in the door in other markets or appointments with governments.

Does an Indian citizen have any basis for seeking answers from those who receive funds? As a nation, we do not believe in disclosure of campaign finance, lobbying funds or even any gifts received by those in office. As a result, our political class gets uncomfortable whenever there is talk of disclosing information voluntarily. Why would any politician or entity disclose that they accepted any money when no such rule makes it incumbent on them to do so?

What this debate has once again exposed is our discomfort with transparency where all institutions — government, corporations or the bureaucracy — will have to deal with an open system of discussion, debate and decision. The government should take this opportunity to seek a basic framework to recognise lobbying as a legitimate industry, which should be given due importance when policies are drafted. At the same time, we need to recognise that excessive influence of money like in the US is not desirable and hence, the need for a set of rules.

People who work in the building that hosts the Walmart Federal Government Relations offices watch as hundreds of people from several different labor rights groups demonstrate in the street below August 5, 2011 in Washington, DC. Organized by the Jobs With Justice 2001 Conference, the demonstrators called on Walmart to secure decent, living wage jobs during their attempt to build four new stores in the District of Columbia, and not to retaliate against associates who join labor organizations.

We would also do well to acknowledge that lobbyists are professionals, who possess special skills of persuasion and tact to make a point of view acceptable to those who did not approve it. So that we understand that when Walmart spends $25 million on lobbying, it is because it used the best professional help it could to achieve its objectives. Calling it a bribe is not only irresponsible, but also defamatory.

Shaili Chopra is Business Editor, Tehelka.
shaili@tehelka.com

 

#India -Holding democracy to a whip #FDI


Garga Chatterjee | Agency: DNA | Sunday, December 9, 2012

 

In the FDI debate that happened in the Lok Sabha, a particularly painful moment saw ‘Netaji’ Mulayam Singh Yadav take the name of Ram Manohar Lohia. He talked about Lohia and Gandhi. Even as he made tired statements to the effect that he opposed FDI in multi-brand retail in principle, it was getting amply clear to everyone that he and his party would walk out when the moment of truth came in the form of voting. Paralysis and hypocrisy are two conditions where one’s action is not in line with publicly-expressed wish. At any rate, they are not among the desirable characteristics of ‘people’s representatives.’ Some old Samajwadis in his contingent might have wanted to defect and vote their conscience to avoid the ignominy of being associated with either of the two conditions. But that would effectively end the parliamentary career of such people. So they followed their ‘Netaji’ out of the house. Avoidance of trouble is preferable to happiness. The Anti-Defection law drawn up by party bosses have ensured that no Samajwadi Party member of parliament or for that matter, any member of parliament of any party cannot vote in accordance with what he/she deems right. One has to slavishly follow the party diktat or lose the their membership of the parliament, unless at least a third of the MPs of a party find their spine.

It may not be a totally idle exercise to think how the FDI vote would have turned out if the anti-defections law was not in place, given the murmurs of discontent that exist even within the Indira Congress. The anti-defection law is supposedly a counter against horse-trading. In the period from 1985 to 2009, only 19 members of parliament have been disqualified for violating the party whip. The party leaderships don’t have faith on people winning on their ticket, partly because they know on what flimsy self-serving ground such an assemblage of champions is created in the first place. The leaderships also know that enticements of greater value may sway legislators — irrespective of the publicly stated reason of coming together as party – Gandhian socialism, Indian nationalism, Hindutva, OBC rights or whatever. At a deeper level, these are signs of crisis in the very nature of the political class — namely, the absence of inner party democracy and ideology based politics. That crisis has only deepened. Hence the need of the anti-defection law to make parliamentarians falls in line with high command dictates. This form of quasi-Stalinist centralism somehow has a long afterlife in those nations (India, Bangladesh, Kenya) where freedom of expression is also under constant threat from the government of the day. I have a feeling that it is not accidental. UK, France, Canada, Germany and USA have no such anti-defection law for their legislators.

It is important to understand what a member of parliament represents. One is not simply a ‘proxy’ for the people but a representative of the changing wishes of the people of one’s constituency. That is to say, things change and so do people’s wishes, above and beyond the programme of the party on whose ticket one was elected. Party programme cannot be the sole guide if parliamentary democracy is to be a living entity. In a first past the post system, many MPs do not win by majority but by plurality. Parties command all the representative abilities of a MP by issuing whips. This is when democracy takes a beating at the hand of partycracy.

Parties are important tools of organising opinion and force multiplication, especially across larger geographical spaces. Do people vote for a party or a candidate or both? The answer is variable. Candidates use parties and parties in turn use candidates. The Mohammedan MPs of the BJP are a fine example of this symbiotic relationship. In some cases, parties change candidates and win. In other cases, some people win, irrespective of their party affiliation at the time. Clearly parties are not the last word in a democracy. The individual representatives matter too.

In the presence ofparty-whips, voting records of individual MPs are a monotonous copy of party stances, or worse still a continuous testimony to the nature of cynical machinations that the party-head has executed. The anti-defection laws were purportedly drawn up to avoid Matsyanyay — the condition where the big fish eat the small fish. It has resulted in a system where even the minimally conscientious fish is too scared to make its opinion known by voting one’s own opinion. The anti-defection law does not penalise anyone, even the leadership, when it deviates from stated party programme. With the rise and rise of parties that have dynastic or persona-based leaderships, a different Matsyanyay is at play. Only the top fish needs to be ‘managed.’ The top issues the whip and the rest of the shoal falls in line. This surely cannot be a good sign for an aspiring democracy representing such variegated shades as the subcontinent. The anti-defection law only solidifies the false majorities of parties in a first past the post system.

Garga Chatterjee is a postdoctoral scholar, Massachusetts Institute of Technology

 

#India- How FDI in retail affects the “Mango Man”


 

MATHEW THOMAS | 07/12/2012 02:29 PM , MOneylife.com

FDI in retail is an example of deregulation, devoid of any safety net for its after-effects. Would the government consider the Parliament Committee report or treat Parliament with disdain? 

Here is a simplified explanation, sans economic jargon, to help understand FDI (foreign direct investment) in retail and what it has in store for the aam aadmi—“The Mango Man”. Let us start with an analogy.When a falling stone hits the ground its energy is converted and dissipated as heat. However, if the same stone lying on the ground is heated, it does not take off. What is the relevance of the falling stone to FDI in retail?
What is FDI in retail? It means “Foreign Direct Investment” of 51%, a controlling stake is permitted to any foreign company to set up retail trade in India. Simply put, a number of foreign-owned supermarkets would sprout all over the country. At a political party rally in Delhi, the leaders extolled the virtues of FDI in retail as symbolic of the party’s reforms agenda. The phrase, “economic reform” has many different meanings depending on ideological and political leanings.
One view is that between 1875 and 1975 it meant more government and since then it means less government intervention or free run for market forces. A Wall Street view says that it means, “Change for the better as a result of correcting (economic) abuses”. “Better for whom?” and “whose abuses would the reforms correct?” Did the post 1975-reforms in USA correct the abuses by financial wizards that led to the 2007–08 meltdown? A third view holds that economic reform refers to policies directed to achieve improvements in economic efficiency. Which of these did the rally leaders have in mind when they toasted the FDI reform push?
Those in favour of FDI in retail painted rosy pictures of benefits such as better prices for farmers, more jobs, better shopping experience and so forth. Those against it predicted the opposite. Few had hard facts to back their arguments. It is strange that neither the government nor the opposition referred to the report of the Parliament Committee which examined FDI in retail. The Committee seems to have done a comprehensive study, examining a number of witnesses, individuals, NGOs and trade bodies, travelling around the country, studying reports and experiences of other nations and asking questions of government departments. The Committee concluded that more people would lose jobs that the number that would find work. They said that FDI in retail would destroy large numbers of small and marginal farmers. They cautioned against the probable monopolistic behaviour, predatory pricing and attendant consequences. The Committee found that unorganized retail provides livelihoods for 40 million people, that is, for about 8% of the country’s workforce. Referring to the projection of FDI in retail creating 2 million jobs, the Committee said that this was exaggerated and that this ignores 200 million people who depended on retail trade for a living. The Committee was not only critical of FDI in retail, but also of any large corporate in retail business. The Committee drew a dismal picture of the effect of FDI in retail on the “Mango Man”.
With FDI in retail, shops like this will disappear. How sad.
ICRIER (Indian Council for Research on International Economic Relations) carried out two studies, one in 2008 and the other in 2011. The 2011 study predicts a great shopping experience for consumers. ICRIER surveyed 300 consumers, in high and middle income groups. Evidently, the government relied on the ICRIER recommendations, rather than on the Parliament Committee report. Does the reliance on a private organisation’s recommendations in opposition to Parliament, have anything to do with the chairperson of ICRIER bearing the same surname as the Deputy Chairperson of the Planning Commission?
ICRIER’s sample of 300, from high and middle income brackets, for a population of 1.2 billion with over 40% poor, for recommending foreign investment, is questionable. In reply to a RTI (Right to Information) query on whether the government had done any study on FDI in retail, the commerce ministry replied that it had not done any such study. The reply referred to the ICRIER report and not the Parliament Committee report. The Committee’s report was not discussed in Parliament. Rejecting the Parliamentary panel study and accepting a private study report, does not augur well for Parliamentary democracy. ICRIER says consumerism promotes economic growth. The earlier study (2008) surveyed 2020 unorganized small retailers out of 6 million shops. None of the studies addressed the issue “why India requires FDI in retail?” Would it lead to a net increase in foreign currency earnings, improve India’s balance of trade? Stiglitz’s views on FDI in retail are significant. He asks, “Why India needs foreign entrepreneurs in any sector, particularly the retail?” He then talks of the power of Wal-Mart to drive down prices and suggests that they will use that power to have Chinese goods displace Indian goods. Next, he draws attention to Wal-Mart’s abusive labour practices. He asks, “Why would you want to import such practices into India?” Why indeed? The foreign retail lobby reportedly spent over Rs52 crore in India. Could that be the reason why? He also talked about increasing inequality that Indian reforms are ushering in, accompanied by corruption.
It is appropriate to now look at the falling stone analogy. To see the relevance of it look at two economic philosophies prevalent today. One is the “Trickle-down” variety. Subscribers to this believe in less and less of government. The market would correct itself. De-regulation is the key. Concessions to the rich would lead to investments and economic growth. This would trickle down to the poor. The second view holds that left to itself, unregulated market economies, would become so disorderly that the human costs would be enormous. FDI in retail is integral to “Trickle-down” economics. It is part of the reforms’ cry for deregulation.
No lessons have been learned from the deregulation induced meltdown. That is why the government and proponents of FDI in retail do not bother about its effect on 6 million small shop-owners or the 50% of the farming-dependent population who would lose their livelihoods. Some of these dispossessed may find jobs in the retail supermarkets, as shop assistants or labourers. Does deregulation help them? The stone does not take off when heated because heating causes disorder. The heat energy is random, disorderly; the stone’s molecules jostle each other randomly. Hence, they cannot lead to orderly motion of the stone. The natural propensity of things is to move towards chaos. Markets are no exception. Without regulation the result is disorder. FDI in retail is an example ofderegulation—thinking devoid of any safety net for its after-effects. Would the government consider the Parliament Committee report or treat Parliament with disdain?

FDI in retail? say a big NO


Professor Anupam Bhargava, The Hindu

FDI is a debt inflow or liability foreign exchange because the profits or returns it generates will have to be repatriated. Will FDI in retail, single brand, banking or insurance enhance our foreign exchange earning capacity? Do they bring technology to the economy?

There is so much of talk going around in all circles regarding FDI. Politicians, for obvious reasons, speak a language of their own, driven by ulterior motives. Most of the times, they are not even knowledgeable to understand the long term consequences of the populist measures and policies they adopt. It would be in the fitness of things if the whole thing is explained in simple and elementary terms.

FDI is Foreign Direct Investment. Direct Investment is of two types: Domestic Direct Investment (DDI) and Foreign Direct Investment. DDI is done in domestic currency (rupee in India) and FDI brings in foreign exchange.

Now, the question arises why FDI. The need for FDI is justified only in two situations – (1) when DDI is inadequate or (2) when foreign exchange is required. On the DDI front, the position as obtained in our country is fairly sound. Banks are flush with funds; the domestic savings rate is one of the highest in the world; market capitalisation, constantly on the rise, makes available investible funds; and DFIs have huge unutilised funds waiting to be deployed in feasible projects. It is gung-ho all around. Therefore, domestically speaking, there is no shortfall of funds for investment.

As for foreign exchange, it is either an asset or liability, depending upon its repatriability. If it is repatriable (i.e., to be returned or repaid in the form of foreign exchange itself), it is a liability. If not, it is an asset. This way, only three sources of foreign exchange – (1) exports of goods and services, (2) NRO accounts in banks and (3) Foreign Aid — qualify as assets. The rest are liabilities like FCNR & NRE deposits of NRIs; FDIs; FIIs and foreign exchange loans from foreign governments and agencies. For convenience, let’s call one asset foreign exchange and the other liability foreign exchange. Some people choose to call them non-debt and debt inflows respectively.

FDI is a debt inflow or liability foreign exchange. Why? Simple, because the profits or returns it generates will have to be repatriated in foreign exchange. Secondly, all the men, material and merchandise imported in the years to come will have to be paid in foreign exchange. Finally, at the time of winding up/selling off, the proceeds will flow out of the country in foreign exchange. And, it is noteworthy here, all this will end up in the outflow of foreign exchange, many times more than the initial inflow. So, every FDI is a clear-cut case of liability foreign exchange.

All the above is about the supply-side of foreign exchange. Now, let’s examine the demand side. The question is – why is foreign exchange needed at all? Based on long-term benefits to the economy, the demand for it can be classified into consumption and construction. Consumption demand is the demand for foreign exchange to import consumption items like gold, oil, tourism and FMCG — all those areas where funds are just blown. On the contrary, ‘construction’ stands for all those areas which promote exports, substitute imports, strengthen the infrastructure of the country and make it more competitive globally.

So, we have the demand for foreign exchange classified into two and its supply also into two. This can be neatly depicted graphically in a Foreign Exchange Desirability Matrix.

The table makes it amply clear that Asset Foreign Exchange casts no negative impact on the economy, regardless of whether it is used for construction or consumption purposes. However, liability foreign exchange needs to be restricted to ‘construction’ purposes, as the consequences of putting it to consumption needs are grave.

Now, why should we go in for liability foreign exchange, like FDI, at all, if it is not for any export promotion, import substitution or any capacity construction purpose? Well, if we indulge in the luxury of blowing liability foreign exchange on non-developmental consumption items, we’ll end up worsening our foreign exchange debt position (we are already in the doldrums with mounting pressure on our capital account of balance of payments, owing to increasing deficits in our balance of trade account year by year).

In fact, until we have any project/avenue in hand which will, in times to come, yield foreign exchange more than its repayment schedule warrants, the inflow of liability foreign exchange should be outrightly avoided.

The service sector is comprised of marketing (wholesale and retail), banking, insurance, civil aviation, education, tourism, medical & health, telecommunication and software, etc. All these fall either in the construction category like education, medical and health, telecommunication and Software or consumption like marketing, insurance, banking and tourism.

Incidentally, in marketing, there is nothing like technology. It’s all about consumption, where the sole elements are Brand and Supply Chain Management; again nothing basic or infrastructural or technology enhancing. Further, the question arises — will FDI in sectors like retail, single brand, banking or insurance enhance our foreign exchange earning capacity? A big NO. Do they bring technology to the economy? Again, a big NO. Hence, FDI in ‘consumption’ sectors deserves to be outrightly rejected. If it is not, it would simply mean the government is not working in the interest of the economy, but is unscrupulously catering to vested interests.

Importing technology

They say, had FDI not come in, our automobile, telecommunication, aviation, banking and many other industries would not have reached global standards. I would say that instead of allowing foreign capital to set up shop here, the country should have used foreign exchange to just import technology, if needed; and set up the same industries with domestic capital. No liability foreign exchange; no profits going out of the country; domestic consumers getting the same products; and the fruits of exports being reaped by domestic firms and not foreign — all the way a win-win situation for us.

But, being blind to the undercurrents, we instead allowed foreign firms to set up bases here, milk the domestic market and carry back huge profits. The foreign exchange that flowed in by way of FDI was blown in consumption areas like gold and oil.

In the ensuing debate, lots of comparisons are being made with the U.S., the U.K., China and Japan. The question is: are we at the same level of development to indulge in the luxury of comparing ourselves with them?

With no apparent gain for the economy in the long-run on the table, there cannot be a more foolish act for any country than inviting foreigners to set up shop on its own territory. First, it is a clear signal of allowing them to reap profits here and take them back. Second, it is telling the world, loud and clear, that we, by ourselves, are incompetent and inefficient. If a foreign entity pushes for entry in the economy, it will still make sense. It wants to expand its market and reap profits. But what is the compulsion for a host country to insist that a foreign entity come and set up shop here?

Historically, no economy has ever developed on foreign capital. In the industrial revolutions of various nations, the crucial factors that have been instrumental are (1) indigenous mobilisation of resources, (2) domestic technological development and application (3) strategic management and (4) support from the governments, mostly to ward off external pressures. Cases of foreign investment are few and far between.

Let us keep in mind that foreign exchange is both a boon and bane, to determine which each of its inflow needs to be individually assessed for its costs and benefits, before allowing it.

(Professor Anupam Bhargava, a PhD in Management, is a former AGM of SBI. He is now Adviser and Research Guide at Rajasthan Vidyapeeth (Deemed University), Udaipur. Email: anupambhargava58@gmail.com)

 

India–Caste control & FDI


The opening of the retail market for foreign entrepreneurs has invited sharp reactions from several quarters.

The main argument against it is that the livelihood of millions of small shop owners would be seriously affected as they would be handled by global marketing giants like Walmart and Tesco.

According to the opponents of foreign direct investment (FDI) in multi-brand retail, the small marketing sector will be devastated and this would lead to massive unemployment and hunger.

And the supporters of FDI argue that the inflow of foreign funds would create a lot more jobs and the small shops would suffer only marginally.

I, for one, welcome FDI in retail even if it would disrupt the chain of small shops as that is appreciable from the point of view of the likely social change it will bring about.

Certain systems are so well-entrenched in this country that a serious shake-up is long overdue.

For one, if we look at the caste-wise presen­ce of people in the groce­ry (kirana) shop system that is spread over villages and urban areas, the locally entrenched baniyas and marwadis control the major chunk of the grocery business. In these shops, as a rule, they do not employ those from the lower strata of society.

Even in urban areas, when they need someone to supplement the role of their family members, caste comes into play.

They make sure dalits are kept out. The OBCs do have some space in the baniyas’ scheme of things, though this business is mostly run by family and clan members. They are, I noticed, casteists to the core.

One major character of the Indian retail market was or still is that it historically practised untou­chability vis-a-vis da­l­its.

The shudras, though not untouchables, were not supposed to engage in the retail business of essential food items in ancient and medieval times.

Even now, this rule applies to dalits. If a dalit opened a retail shop in a village, those from the higher castes would not buy things from the shop.

From village upwards, the baniyas (komatis and marwadis in An­dh­ra Pradesh) have, over generations, established their hegemony.

Rice, pulses, oil, turmeric and even salt were considered Hindu items and only a baniya was ex­pected to sell them in the village settings.

Meat, fish, ropes and other thi­n­gs were considered “un-Hindu” and were ne­ver sold in these sho­ps. Leather goods were completely banned and were sold by those cast­es and communities that manufactured them.

The fact remains that at the production level, even the Hindu goods, as raw materials, were/are produced by shudras and dalits only. Even at the milling and grinding level, they were/are at work.

But, once they reach the baniya shops as finished products, these commodities become untouchable for the communities that produced them.

In a baniya shop, these articles are considered spiritually pure but once sold to shudras and dalits, the same articles become impure.

This vicious cycle continues. In the process, the shop owners become kuberas (rich). As a result, a huge amount of black money gets accumulated and in many cases they bury that we­a­lth underground, whi­ch historically was kno­wn as guptdhan.

This process un­der­cut the growth of in­di­genous industrial de­velopment, in as far as that this buried wealth was not being re-invested.

The wholesale busine­ss of groceries used to take place mostly from urban settings and it us­ed to be completely un­der the control of bani­yas.

Till we attained In­dependence, the right to do business in retail and wholesale market was vested on the basis of the Varnadharma ideology.

The entry of Muslim tra­ders changed the caste-based trade relationshi­ps in some urban centr­es, as the Muslim tra­ders were not concerned about the caste or religious background of buyers and se­llers. But their influence on the Indian retail market was limited.

The baniya businessmen and Bri­tish officials colluded to sustain the Hindu market and tried to checkmate the expansion of Muslim trade in the co­u­ntry during the colonial period. However, it was the Muslim traders who initiated the process of decasteising market relations.

That process, however, was slowed do­­wn during the colonial and nationalist pe­r­i­ods. Indian nationali­sm did not play a very positive role in this respect.

In Independent India, market relations have substantially expanded. But the caste controls of markets survived dramatically.

The emergent capitalist growth also shared its bed very well with the modern mode of Varnadharma.

The emergence of Mahatma Gandhi, with an anti-industrialisation theory, saw to it that varna relations did not face odds in the market.

For, if the baniyas lost their control on the markets, they would have become unemployed and looked for different ways and means of survival.

But the Gandhian nationalism protected them with a shield of Varnadharma in the market. Though his emergence as an unchallenged leader created tension between brahmins and baniyas, that was overcome very soon. Between them, they accommodated and adjusted well.

Till the liberalisation process began in 1991, the Indian retail market was choked by caste controls and a lack of liberal creativity in the business structures themselves.

Hopefully, if the FDI in retail liberalises the caste-controlled ma­r­ket, a new relationship would begin to unfold in the Indian market system.

It is important that foreign investors res­pect the social diversity principle in the retail market and employ SC, ST, OBCs too in their chain of shops at least up to 50 per cent. That will create a business-experienced human resource base among these communities.

If the FDI system has to survive, it is imperative that a lot more money flows into the hands of the toiling masses. So that they too can become buyers in these shops.

The system of money transfer and MGNREGA resources, coupled with the new-found jobs in the market, might hopefully revolutionise their lives. In the process, if a few baniyas see their own exit from the market, that does not matter. Let the FDI come.

The writer is director, Centre for the Study of Social Exclusion and Inclusive Policy, Maulana Azad National Urdu University, Hyderabad