Only retail can pay unskilled boys & girls decent salaries
BJP leader Arun Jaitley, presumably, was making a larger point about unemployment and the uncompetitiveness of Indian manufacturing when he was attacking the government policy of allowing FDI in retail. However well-intentioned Jaitleys arguments may have been, whats unclear is how they are related to the spread of organised retail, whether with FDI or not is irrelevant. For one, NSS data shows jobs creation has declined dramatically in the last 5 yearsemployment rate rose from 39.7% in 1999-00 to 42% in 2004-05 and then slowed to 39.2% in 2009-10. In other words, job losses have nothing to do with FDI in retail. Two, if the bulk of the annual 12 million new entrants to the workforce are unskilled, retail is the only place they can get jobs at half-decent salaries. Jaitleys contempt for an India that would become a nation of sales boys and girls doesnt take this into account, or the fact that a R8,000 job in an EasyDay is a third higher than Indias per capita income and higher than salaries in many manufacturing jobs. And, by the way, when Jaitley says retail FDI would reduce India to a nation of sales girls, is he saying retail employment will rise or fall with FDI coming in?
Jaitleys point about Indian girls selling Chinese goods in American stores is as evocative as it is provocative, but is it okay for Indian girls to sell Chinese goods in Indian stores, like a Big Bazaar? And why blame a Big Bazaar, tiny shops in old Delhis bylanes sell, if you please, Chinese lights and Lakshmis during Diwali. Whats FDI in retail got to do with this? Nothing. If Indian manufacturing has to get competitive, India needs more reforms in all factor markets, including labour. You cant have large electronics assembly lines, for instance, without top quality power, not just 24x7, but no voltage fluctuations, at 50Hz all the timethats why, for instance, the indigenous Aakashs innards will always be made in China. Keeping Indias retail fragmented, as Jaitley suggested, is a good way of ensuring a Pantaloon or a Walmart dont get a pan-Indian market share, but it wont keep Chinese manufacturers out of Indias retail market. Jaitleys was a stirring speech, but in the wrong debate.