Wal-Mart's Indian Diplomacy

Wal-Mart comes wearing Bharti sari
ND Batra
From The Statesman

I was buttonholed the other day: If China is not afraid of Wal-Mart, why should India be? Irrational fear; may be, of another East India company setting foot on India?

When small things aggregate, they bring about great changes. The world’s biggest retail giant, Wal-Mart sells almost everything and at the lowest prices, providing low and middle-class people affordable access to goods which would have been otherwise beyond their monthly budgets.

Small entrepreneurs are the backbone of the Indian economy and they need to be exposed to the challenges of globalization and organizational innovations of Reliance, the Tata group and the Aditya Birla group, Bharti-Wal-Mart, Carrefour (consider its plan for opening an environmentally-friendly green supermarket in Beijing in 2008), and others. Fortunately due to the burgeoning middle-class unafraid of using credit cards, the retail space in India is expanding rapidly and giant retail stores like Wal-Mart would partly grow from within in joint ventures and some would come with FDI in different forms and shapes.

If India’s $250-300 billion retail market grows at the same rate as India’s GDP (8-9 %) modern retailing must emerge to satisfy the demand of the growing middle class. The government allows 51 % foreign direct investment (FDI) to companies that sell goods through single-branded stores. Through its Bharti franchise, Wal-Mart has found another passage to India and opened doors for other international companies. India is not only “a huge organic growth market for Wal-Mart,” but also a fast growing outsourcing market, with expected $1.6 billion merchandise export to Wal-Mart’ stores this year. But that is nothing what Wal-Mart buys from China, ($28 billion according to some estimates), and has created myriad entrepreneurial opportunities by establishing a most modern supply chain system. That could happen in India too.

There is a genuine apprehension that small shopkeepers and intermediaries would be adversely affected by the arrival of the global retailer, as it has happened in many places in the United States where many mom-and-pop corner stores have shuttered down and others are struggling to survive. “The High Cost of Low Price,” a documentary by Robert Greenwald showed the seamy side of the retail giant, including the denial of health coverage to employees, exploitative wages for women and the elderly, ethnic and gender discrimination and many other not so legal practices, for which ultimately the taxpayer bears the burden.

The Indian Left should focus its attention on not only how Wal-Mart treats its employees but also whether India could be another outsourcing hub for the hungry global giant with 2000 worldwide stores, including 66 in China (plus another chain of 100 Trust-Mart stores it plans to buy for a $1 billion deal). The retailer is able to do so by buying massive quantities from inshore and offshore sources and hiring people at low wages, mostly women, and that may be of some concern to Left political leaders in India. In the long run such business practices of global companies may have greater impact upon the world than terrorism and natural disasters. As Nelson Liechtenstein, professor of US labor history at the University of California, Santa Barbara, wrote in the Globalist, “Wal-Mart rezones our cities, determines the real minimum wage, channels capital throughout the world — and conducts a kind of international diplomacy with a score of nations.”

In the United States it keeps overheads low by hiring mostly female workers at wages much less generous than it pays to its male employees. In 2001, six women sued Wal-Mart for discrimination. Six women snowballed into more than a million current and former women employees who in a class-action suit charged that Wal-Mart paid less and gave fewer promotions to women than to male employees.

In the land of presumed equality, that was a serious accusation and had become a public relations disaster. And the U.S. District Court Judge Martin J. Jenkins found that the plaintiffs did “present largely uncontested descriptive statistics which show that women working in Wal-Mart stores are paid less than men in every region, that pay disparities exist in most job categories, that the salary gap widens over time for men and women hired into the same jobs at the same time, that women take longer to enter management position, and that the higher one looks in the organization, the lower the percentage of women.”

Gender and race-based discrimination is an unacceptable practice in American society; and that’s how it should be in India, whenever a foreign company is allowed to do business.

This is however not the first gender-discrimination class-action suit against corporate America. Home Depot, Texaco, Coca-Cola, Public Super Markets and many others were hit with class-action suits for discriminatory employment practices and paid millions of dollars in settlement.

Legal and humanitarian precedents set in the United States should be followed whenever Wal-Mart and other multinationals come to India, where local companies too should have no choice but to offer competitive opportunities to their female employees at par with what they offer to males, which should another benefit of globalization. These should be the terms that political leaders offer to Wal-Mart (which should be more than wearing an Indian sari and bindi on the forehead) wanting to do business in India.