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«Published Annually Vol. 6, No. 1 ISBN 978-0-979-7593-3-8 CONFERENCE PROCEEDINGS Sawyer School of Business, Suffolk University, Boston, Massachusetts ...»

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The unorganised retailers were asked about the impact of organised retail on their business. The impact was assessed separately for those who did and did not have an organised retail outlet in their vicinity. Of the 254 unorganised retailers, 130 had organised retail outlets in the vicinity. Of these, around 40 per cent pointed out that they have been negatively affected by the presence of organised retail outlets due to increased competition, but 80 per cent of them also faced competition from other unorganised retailers. Some unorganised retailers pointed out that the impact of organised retail was positive as the number of customers in their location had increased, leading to an increase in business. They argued that loyal clientele and personalised services such as sale on credit have helped them face competition. Only 23 per cent have experienced a decline in their profits since 2007. Of the 124 unorganised retailers who did not have organised retail outlets in their vicinity, only one said that he was adversely affected by organised retailers. Of the 254 unorganised retailers, only 5 per cent said that shops were closing due to competition.

When the retailers were asked about their future prospects, around 43 per cent of the unorganised sector retailers were uncertain about their future prospects, compared to 15 per cent in the organised sector.

–  –  –

The impact of FDI in retail is widely debated in India, primarily due to its likely adverse impact on employment in the unorganised sector. Given the large size of the unorganised retail sector in India and the lack of a formal data collection mechanism, it is difficult to quantify the impact of FDI and retail modernisation on employment. An equally important aspect of modernisation is its impact on quality of employment. By comparing employment in organised and unorganised retail outlets, the study found that the organised sector has higher potential for employment generation. The quality of employment is better in the organised sector as they have a corporate set-up and professional management, they follow labour laws and working hours and holidays and job responsibilities are clearly defined.

Globally, most people with a higher secondary diploma (after 12 years of schooling) get absorbed in the retail sector, but in India the level of education required in organised retail outlets is higher. The educational qualifications of employees in the unorganised sector are low as it does not require special skills. Hence, unskilled workers can easily be absorbed by this sector. However, in the long run this may not benefit the country, since there is limited scope for training and upgrading skills. Salaries in the unorganised sector are lower. This will adversely impact per capita income, purchasing power, poverty level and human capital development.

Although most employees in the unorganised sector would like to work in the organised sector, the skill levels required by the unorganised and organised sectors are different, which makes it difficult for employees to transition from the unorganised to the organised sector.

Most unorganised retailers do not seem to be adversely affected by retail modernisation, while employees seem to have benefitted in terms of pay and quality of employment. This finding questions whether it is appropriate to link the retail FDI policy to loss of employment in the unorganised sector.

Conference papers © Knowledge Globalization Institute, Pune, India, 2012

–  –  –

Given that the quality of employment and future job prospects are better in the organised sector and there is strong willingness among employees to work in the organised sector, the Indian government is and should continue to focus on generating employment in the organised sector, while minimising the adverse impact on the unorganised sector. Instead of banning FDI in multi-brand retail, the government can allow FDI in multi-brand retail in a phased manner, starting with 49 per cent. This will create more employment in the organised sector in line with the government objectives and will give time to the unorganised sector to adjust to the changes and upgrade their skills. Since the survey found that foreign retailers offer higher salaries, overall salaries in the retail sector are likely to improve.

As retail modernises, there is likely to be labour demand in the modern retail sector. To enable the unskilled workers to get employment in the organised sector, the government can focus on specific training programmes in collaboration with organised retailers on a public-private partnership model. The government can also work with management and labour institutes to design appropriate academic courses and training programmes to facilitate skill development in retail. The government can initiate labour and other reforms that will enable organised retailers to employ workers on a rotation basis. This will help to generate more employment.

–  –  –

AT Kearney (2010), ‘Expanding Opportunities for Global Retailers—2010 Global Retail Development Index’.

http://www.atkearney.com/images/global/pdf/2010_Global_Retail_Development_Index.pdf Basker, E. (2005), ‘Job creation or destruction? Labour market effects of Wal-Mart expansion’, The Review of Economics and Statistics, Vol. 87, No. 1, pp.174-183.

DIPP (2010), ‘Discussion Paper on Foreign Direct Investment (FDI) in Multi-Brand Retail Trading’, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India.

http://dipp.nic.in/DiscussionPapers/DP_FDI_MultiBrandRetailTrading_06July2010.pdf Guruswamy, M. et al. (2005), ‘FDI in India’s retail sector: More bad than good?’, Economic and Political Weekly, Vol. 40, No. 7, pp.


Hazra, S. (1991), ‘Employment in India’s organised sector”, Social Scientist, Vol. 19, No. 7, pp.39-54.

Jenkins, R. (2006), ‘Globalisation, FDI and employment in Vietnam’, Transnational Corporations, Vol. 15, No 1, pp. 115-142.

Joseph, M. and Soundararajan, N. (2009), Retailing in India: A Critical Assessment, Academic Foundation, New Delhi.

Ministry of Labour and Employment (2010), ‘Annual Report to the People on Employment’, Ministry of Labour and Employment, Government of India, http://labour.nic.in/Report_to_People.pdf Mukherjee, A. and Patel, N. (2005), FDI in Retail Sector: India, Academic Foundation, New Delhi.

NSSO (2010), ‘Employment and Unemployment Situation in India, 2007-08’, NSS 64th Round (July 2007–June 2008), National Sample Survey Office, Ministry of Statistics & Programme Implementation, Government of India.

Papola, T. S. (2006), ‘Employment Trends in India’, Institute for Studies in Industrial Development, New Delhi, India http://isid.org.in/pdf/EmployTrenz.PDF Reardon, T. and Gulati, A. (2008), ‘The Supermarket Revolution in Developing Countries: Policies for Competitiveness with Inclusiveness’, IFPRI Policy Brief.

Conference papers © Knowledge Globalization Institute, Pune, India, 2012 Sarma, E.A.S (2005), ‘Need for caution in retail FDI’, Economic and Political Weekly, Vol. 40, No. 46, pp. 4795-4798.

Singh, S. (2010), ‘Implications of FDI in food supermarkets’, Economic and Political Weekly, Vol. 45 No. 34, pp.17-20.

UNCTAD (1994), ‘World Investment Report: Transnational Corporations, Employment and the Workplace’, United Nations.

http://www.unctad.org/templates/webflyer.asp?docid=1056&intItemID=2431&lang=1&mode=downloads Conference papers © Knowledge Globalization Institute, Pune, India, 2012

–  –  –

It is said that the globalization process is changing faces of many economies in the world but at the same time many challenges

are posed due to the process. The ILO Report [2004] about the impact of globalization on the development of India stated that:

in India there had been winners and losers, the lives of the educated and the rich had been enriched by globalization, but the benefits had not yet reached the majority and new risks had cropped up for the losers –the socially deprived and the rural poor.

In India growth is showing increase -6% per annum since mid 1980s and over 8.5% in last few years. But this has not reflected in poverty reduction. The poverty had declined from 36% [1993-94] to 28% [2004-05]. It means poverty reeuction is only 0.8% per annum, which is very low. Poverty is widespread in India, it is estimated to have third of world’s poor in India. The World Bank estimated that 41.6 percent of the total Indian population lived under the international poverty line US$1.25 per day.

Planning commission of India has stated that 27.5 % was living below the poverty line in 2004-05 [household consumer expenditure criteria] as compared to 36% in 1993-94 [Economic Survey of India-2009-10]. Thus poverty in India is widespread and it is predominantly rural in nature.

Major determinants of poverty are lack of purchasing power attributable to lack of productive employment and considerable underemployment, inadequacy of infrastructure, affecting qulaity of life and employability etc.

It is well accepted that access to financial resources is key to overall development of the people. Without economic resources it will not be possible to achieve the economic development. Access to finance by poor and vulnerable groups is a precondition for poverty reduction and social cohesion. Financial exclusion is one of the interlinked causes leading to poverty in India.

Financial inclusion is one of the contemporary issues in finance. It is one of the challenges of the emerging new economies to ensure that poor are brought in the main stream. The Eleventh Five Year Plan [2007-12] envisaged inclusive growth as one of the objectives It has noted that the economic development has failed to be sufficiently inclusive particularly after mid-1990s.

The Indian economy though achieved a high growth momentum during 2003-4 to 2007-08 could not bring down unemployment and poverty to tolerable levels. Agriculture is the major sector giving employment to half working capital is growing just at the rate of 2% per annum. Urban –rural devide is very evident. The rural areas are not integrated and it has no assurance of equitable and inclusive growth. Further large section of the population remained outside of the sphere of basic th health and education facilities. Hence the 11 plan document tried to restructure the policies in order to make the growth faster, broad based and inclusive by reducing fragmentation of the society.

The recent Human Development Report-2011 has rightly said that Human Development is the expansion of the freedoms and capabilities people have to lead lives they value and have reason to value. It further says that people are both the beneficiaries and the drivers of human development as individuals and groups.

To make the people beneficiaries and drivers of human development it is necessary that they are financially included. Financial inclusion is a need of the present time to make the development more inclusive and ensure that every one has access to resources to develop their own path of development.

Financial inclusion is widely disucssed concept at the world level and variety of efforts is done for financial inclusion.

To undertand the need of financial inclusion it is necessary to understand first what is financial exlcusion and who are excluded and then review the efforts of financial inclusion especially in India.

Generally the financial needs of poor are not in huge amounts. They do micro savings which will support them when they need or have to do some consumption expenditure in the period of uncertainity. They need saving facility so that it could serve them as a support in case of emergency. Deposit and payment services are also required and provide them some security. The mirco enterprises or the small self employment activities run by poor need mostly working capital which is again not huge amounts.

Insurance services which are suitable to their needs are required.

What is Financial Exclusion?

Exclusion in simple term means denial of access to reosurces available in the community or society. It also means that some sections of society are not allowed to contribute to economic growth and can not take benefit of economic growth. Financial Exclusion is lack of access by certain consumers to appropriate, low cost, fair and safe financial products and services by mainstream providers. Thus people lack access to financial services which are as per their needs, which will not incur much cost to them and which are offered without exploitation.

Who are Excluded?

The financially excluded groups mainly include marginal farmers, landless labourers, oral lessees, self employed and specially those who are having small enterprises in unorganized sectors. Other group is minorities and socially excluded groups likes Scheduled Cates and Scheduled Tribes and other minorities, senior citizens and especially the women largely do not have access to financial services.

Besides population sections there are certain regions in India where financial exclusion is prominent like central, north east and Eastern Sates are largely financially excluded.

–  –  –

Unless we understand the extent of financial exclusion the need for financial inclusion can not be traced. Various estimates are available which give idea about financial exclusion. The estimation is done from different perspectives. One way of judging the financial exclusion is number of farmer households having outstanding loans from institutional and non institutional sources in cash or kind having a value of Rs.300 or more at the time of transaction.

th  NSSO 59 Round Survey in 2003 on ‘Indebtedness of Farmer Households’ used above said perspective. The findings are very shocking. 51.4% per cent of farmer households were found excluded from both /formal and informal sources.

 Out of total farmer households only 27% had access to formal sources of credit and majority of this group had borrowed from no-formal sources. All together 73% per cent of farmer households had no access to formal sources of credit.

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