Destruction Of Small Businesses In India As International Companies Move In
(MintPress) – Millions of Indians took the streets yesterday to protest a new law allowing for complete foreign ownership of Indian companies. Critics charge that reforms by the Singh government will allow major Western corporations to enter the Indian market, destroying small businesses and harming public sector employment. The entry of major corporations like Wal-Mart generally results in a net loss of jobs and lower wages for workers.
As giant retailers, like Wal-Mart, Carrefour and Tesco, are poised to enter the country, supporters of the law tout private sector gains and increased market competition as positive developments in the Indian economy. However, the unpleasant histories of corporations like Monsanto and Dow Chemical remain symbols of irresponsible corporate involvement, helping to foment opposition to increases in direct foreign investment.
Current Indian law stipulates that any company seeking to operate in India must have at least 51 percent ownership by Indian nationals. This law was designed to grow the Indian middle class by encouraging entrepreneurship and reducing the influence of globalization and corporate hegemony.
Small stalls called “kiranas,” owned and operated by small business owners, have a ubiquitous presence across India. However, owners of these small, independent businesses are expected to suffer with the sudden influx of corporations and foreign investment.
“If these big guys storm in and wreck what I’ve fostered for decades, then my family and I will have to resort to a different business,” kirana owner Goel, told Reuters in a recent interview.
However, some locals contend the kiranas occupy a special niche in the Indian economy because of their location outside the typical commercial centers of cities. Under the proposed law, foreign corporations would have to invest at least $100 million and source at least 30 percent of their products locally.
Additionally, the new law would restrict foreign investment to the 51 Indian cities with populations of at least 1 million people, keeping rural areas free from corporate expansion.
Those supporting the new reforms posit that direct foreign investment will grow the Indian economy while helping to bring more products to consumers. Additionally, proponents charge that the increased market competition will lower prices for Indian consumers.
However, the robust opposition remained vocal, as million took to the streets Thursday in direct opposition to the proposed reforms. The nationwide action was called by opposition parties and allied trade unions.
In Bangalore, widespread strikes brought the city to a halt as transit workers held a mass sit in railroad stations and bus depots. Other major cities across India, including Delhi and Mumbai, are bracing for similar protests which are expected to stretch into next week.
According to a forecast by the Confederation of All India Traders (CAIT), as many as 50 million citizens have participated in the action in some way. The widespread work stoppages, strikes and occupations have cost the Indian economy an estimated $2.3 billion, according to estimates by the Confederation of Indian Industry (CII).
“Today’s bandh has been disruptive for business and trade in many parts of the country. While an exact loss for the entire economy is not known, it can be estimated that almost Rs 12500 crores has been the loss to the country in terms of disruptions in production and trade,” the CII release said.
The protesters’ concerns are not without merit, as previous studies show that Wal-Mart has had a negative effect on employment, wages and the overall economic well-being of a community.
According to a study published by Hunter College last year titled, “Wal-Mart’s Economic Footprint,” when the world’s largest retailer opens a new store, communities experience a net loss of jobs and fewer small businesses.
Additionally, the report found that Wal-Mart “kills three local jobs for every two they create by reducing retail employment by an average of 2.7 percent in every county they enter.” This point is confirmed by one Wal-Mart opening in a Chicago neighborhood in 2006. The report shows that two years after a Wal-Mart opened in the area, 82 of the 306 small local businesses in the area closed.
Opposing corporate hegemony
While the new law allowing for direct foreign investment will have the largest effect on the retail sector, critics claim that unfortunate experiences with other multi-national agricultural corporations are reason to oppose the law.
The Indian government sued Monsanto for biopiracy last year, claiming that the American corporation stole indigenous Indian plants with the help of local collaborators. After stealing the crops, mostly varieties of eggplant, Monsanto allegedly planned to genetically modify the crops to create new plant varieties.
The corporation has yet to compensate farmers or the Indian government for the stolen plants. Leo Saldanha, Director of the Environmental Support Group, says that the theft is in violation of Indian biodiversity laws.
Monsanto currently holds a 26 percent share in the Maharashtra Hybrid Company in Mumbai. Under the new legislation, Monsanto could increase its share to more than 50 percent, a controversial prospect given the American corporation’s less than favorable record operating in India.
Many Indians also remember the 1984 Bhopal chemical spill that killed 7,000-10,000 residents. The Bhopal spill occurred at the Union carbide plant, owned partially by Dow Chemical, a U.S. corporation.
Following a ruling by the Indian Supreme court, Dow paid $470 million in compensation to the victims of the spill. Victims claim the money is insufficient, given the 100,000 people still suffering prolonged ailments as a result of the 1984 spill. For many who still struggle for justice and compensation, the memory of Bhopal serves as good reason to oppose expansion of foreign corporate influence in India.
Mass privatization and the charter city model
As Indian legislators continue to deregulate markets amidst intense public opposition, the challenge will be to foster economic growth while developing a strong commitment to alleviating poverty, especially in rural India.
Broad market deregulation began in India in the early 1990s. However, like many developing countries, the burgeoning private sector created a surge in middle class growth, but did little to alleviate extreme poverty and income inequality. According to Indian government measures, nearly 30 percent of the more than 1.2 billion people living in India today are living below the national poverty line.
While some areas with small, relatively homogenous populations have thrived as “charter cities,” with virtually no market restrictions and large private infrastructure projects, protesters contend that a sudden surge in foreign investment will harm small business owners and unions while doing little to slash widespread poverty.
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