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Submitted by Adam Jadhav on
I'm glad that this post at least recognizes the serious concerns with the potential market power Wal-Mart might assume in the Indian retail sector. Certainly, there are likely to be some gains for rural famers if Wal-Mart indeed can improve infrastructure and logistics. I question, however, whether these investments would be provided as a public goods or simply private supply chain improvements allowing Wal-Mart to increase what is already likely to be lop-sided market power. If, through its investments, Wal-Mart is able to gain substantial bargaining power, those benefits to producers might be offset by declining product prices. Furthermore, the benefits from efficiency in large, Wal-Mart style retail accrue largely to corporate balance sheets (and through them investors) and consumers who can afford goods. Even if consumer prices fall, benefits are still likely to be unequally distributed. Rural producers and consumers and urban workers could see little net benefits or even net losses, while perhaps only lower-middle-class-and-above consumers gain. (Also to note: Basker only finds a net gain of 50 jobs per entry. And I wonder whether comparisons to the U.S. market hold at all, given the vast differences in retail ownership and distribution and operating margins of small shopkeepers.) Let's be clear, those MNCs who press for more open rules in retail FDI are doing so not to benefit India. They do it because they wish to better their profits. I'm not arguing India should be protectionist but it must carefully consider whom these rule changes will ultimately help.