Fact-Checking the F.D.I. Debates, Part Two

Wilson Ring/Associated Press

Parliament's debates about foreign direct investment in retail have ended (at least for now), with both houses voting to support the United Progressive Alliance's move to allow big, multi-brand foreign chains like Wal-Mart Stores into India. But questions about what impact this move will have still linger. Here's a closer look at some of the more controversial statements made about the issue in Parliament. (Read part one of our fact-check.)

Foreign Direct Investment in Retail Will Create 4 Million Jobs

Anand Sharma, Minister of Commerce and Industry: “The entry of foreign retail giants would create 40 lakh direct jobs.”

Verdict: Very unlikely.

Source: The Parliamentary Standing Committee on Commerce report on the subject of Foreign and Domestic Investment in the Retail sector.  “At present unorganized retail provides employment to more than 40 million people, which accounts for 8 percent of the total employment. Many of them are not well educated. Projection of corporate retail to create 2 million jobs is highly exaggerated, ignoring the 200 million people, depending on the retail sector likely to be rendered jobless.”

(Also, Wal-Mart's 10,000 stores around the world employ only 2.2 million people.)

Foreign Direct Investment in Retail Will A llow Farmers To Get Higher Prices For Their Produce 

Kapil Sibal, Minister of Communications and Information Technology: “The purpose of the policy is that the farmer should get a higher price than he gets in the mandi (market). Only 15 to 17 per cent of the market price goes to the farmer.”

Verdict: Mostly true, according to a report created by The Indian Council for Research on International Economic Relations called “Impact of Organized Retailing on the Unorganized Sector”.

The study finds:

- Farmers benefit significantly from the option of direct sales to organized retailers.

-Average prices cauliflower farmers are paid when selling directly to organized retail is about 25 per cent higher than sale to regulated government mandis.

-Net profits for farmers selling directly to organized retailers is about 60 per cent higher than that received from selling in the mandi.

-The difference is even larger when the amount charged by the commission agent (usually 10 per cent of sale price) in the mandi is taken into account.