There is a lot to be said for big retail to come to India, but we cannot simply be taken in and mimic something which is being pushed down our throats because those who make the policy appear to not have the faintest clue on how retail really works in India
If there were clear answers in black and white to the question, there would really be no need for any debate on the issue, but the truth is that it is simply not that simple. On a philosophical and emotional level, the answer could be that any form of foreign participation in a domestic market is rife with dangers of the colonialism sort, but in this day and age, while the core concept of being wary of foreign dominance may still be true, the fact remains that there are plenty of ways to ensure that it works on a win-win basis for all concerned.
The main problem with the current status of foreign direct investment (FDI) in retail in India is that it does not provide a level playing field to other players of the domestic and small sort. In addition, it appears to take a rather naive and simplistic view on certain aspects, which like myths being repeated, tend to become urban legends. On the other hand, no country can afford to take on an isolationist approach.
As this writer sees it, with a holistic view of the subject and not just based on jingoism of the “burn down the malls” (right view) and “bad for farmers” (left view) sort, but on rational evaluation of larger issues, there are some points which need to be straightened out. Large retail is inevitable, and that is a simple truth, but there has to be larger perspective for public good which seems to be missing from this policy. The people of India come first, including those who want a better product or service buying or selling experience, and at the end of the day it is their wallets which will decide where they go.
But at the same time, the government, with the policy as outlined above, cannot sell the baby with the bath-water, and make things worse. Some suggestions:
1) The present Agriculture Produce Market Committee (APMC) Act requires urgent revamp if we really want to help the rural and agricultural sectors with a better go to market scenario. This, along with rapid introduction of the goods and services tax (GST) as well as ease of inter- and intra-state movement of foodgrain, agri products and fresh produce, would do more to improve matters, as well as do wonders for our economy in a variety of ways—most of all in terms of controlling prices as well as reducing storage and transit losses.
2) The policy shown above makes a case that “brands” by big FDI retailers need to be carried across borders without in any way making it clear that the quality of those brands needs to be same across borders, too. As of now we see that with these manufacturers and retailers there is one lower quality for sale in India and there is a better quality for sale in developed countries—case in point being soft drinks, processed foods, confectionery, electronics, motor vehicles and others. If anything is by way of a different quality for India for price or other reasons, then let it be clearly marked as such.
3) Specifically in the case of packaged and processed foods, the policy does not say anything about adherence to best case scenarios in terms of labelling of ingredients and avoiding misleading marketing ploys, thereby leading to a situation where outright dangerous products are foisted on Indian consumers. The amount of product detail available for consumers in developed countries must be matched for India, too. India cannot become a vast chemistry lab for processed foods or anything else.
4) More empirical data needs to be provided on subjects like “improvement in supply chain”. India is the country where the passenger rail ticket deliveries, fresh hot cooked food by dabbawallas and diamonds as well as other precious stones by angadias have set better than global standards in supply chains, so the same standards need to be quantified and applied to those seeking 100% FDI in retail. It is not too much to ask for them to match the Indian standards—unless those who made the policy are ashamed of our prowess.
5) The investments in retail by the FDI route, when they come, should come only through a short-list of recognised tax adherence countries. The misused option of FDI coming in through known or suspect tax havens needs to be blocked—firmly. Likewise, full disclosures of the strictest sort need to be made on who the investors are—again, these cannot be suitcase corporate identities hiding behind consultants and banks in shady tax havens or other countries. Unlike what happened in, for example, airlines, Indians need to know who is investing and from where. And in case there are legal issues, then we need to know who the faces are who will go through the Indian legal system, unless those who made the policy are ashamed of our legal system.
6) The payment processing and cash management as well as tax adherence part of this industry, both in terms of procurement and sale, need to be through the Indian banking system. And by fully transparent methods, so that float as well as control remains in India at all times, as is the case in developed countries. Proprietary payment processing and cash management methods of the sort that take this control out of India need to be firmly denied—the FDI retailer needs to be on a level playing field here with other Indian domestic retailers—insistence on co-opting RuPAY needs to be part of this policy.
7) Since such huge benefits are being provided to these FDI retailers by India, it must be imperative that these large retailers subscribe and adhere to the RTI Act of India 2005 from day one, along with their first application. This will be in addition to all other requirements that other large retailers in India, like government controlled Canteen Stores Department (Armed Forces), Super Bazaar (ministry of urban development), central government and state government co-op stores, Khadi Bhandars, state emporia and others adhere to—including best of breed hiring policies.
8) It appears that the policymakers subscribe to the view that more wastage is generated by the present retail system in India and that FDI will reduce wastage. Bearing in mind the huge problem that developed countries have with handling wastage especially of the packaging sort, it will be necessary to quantify this wastage from the outset itself, instead of propagating further the myth that the Indian system generates more waste. And then control the said wastage, again, by defined means.
9) Supermarket design in India should be defined in such a way that fresh food and produce needs to be in front, unlike in other “big box” shops where it is right at the back or hidden along the sides, forcing people to walk through row after row of packaged and processed foods. This is very important if FDI in retail really means it when they say that they wish to bring the farmer’s produce to the customer with minimal transaction losses in between of the multiple middlemen sort.
And finally, most importantly,
10) The “big box” FDI model in retail cannot be the reason to do away with the small shopkeeper earning his livelihood on the peripheries of the traditional marketplaces. The big retailer will have to, as policy, provide for space as well as timing to set up options like weekly ‘haats’ and “farmer's markets”, either in parking lots or in specially designated stalls set aside for this.
Certainly, there is a lot to be said for big retail to come to India, but we cannot simply be taken in and mimic something which is being pushed down our throats because those who make the policy appear to not have the faintest clue on how retail really works in India. The concept of big retail is inevitable, in some ways it is already there, but the way this present policy has been structured appears to be a sell-out of the worst sort—designed to destroy the nation’s core competencies in trading.
It will be a shame, as well as a major electoral issue, if the present policy is permitted to proceed along its current path. Because it is wide open and visible that it appears that the present retail FDI policy of the present government is to try and make big retail the only port of call for both seller and buyer. That, most certainly, spells death for the country’s independence.
Telecom minister Kapil Sibal had asked the Department of Telecom (DoT) to evolve guidelines to reduce the element of its discretion while deciding penalty for violation of licence conditions and make the process as scientific as possible
New Delhi: No more penalties will be levied on telecom operators till reasonable procedure is evolved, telecom minister Kapil Sibal has said, a move that will give big relief to the industry, reports PTI.
“I have passed an order that no fine will be imposed henceforth till such a time we evolve reasonable procedures for imposition of fine. If the government fines Rs50 crore, then people will go to court, nothing comes to the government, not useful for anybody,” he said at an award function of a popular business television news channel.
Mr Sibal had asked the Department of Telecom (DoT) to evolve guidelines to reduce the element of its discretion while deciding penalty for violation of licence conditions and make the process as scientific as possible.
As of now, the DoT has been levying maximum penalty of up to Rs50 crore for all cases of violations of licence conditions.
Mr Sibal said irrespective of whether penalty was imposed or not, there would be complaints filed against the department.
“...If somebody does not impose penalty... complaint will be filed where they will say look you have been bought over by such and such person...When files come to me, if I reduce penalty, then complaint will be filed that the minister has been bought,” he said.
“So in this environment, don't blame the government alone ...there is an environment of suspicion...in that context it is difficult for a bureaucrat to deliver,” he added.
Mr Sibal’s reply came in response to telecom czar Sunil Mittal’s question asking the government to take a balanced view of maximising revenues and industry’s well-being.
“...My department has the right to impose penalty and it goes from Rs0 to Rs50 crore. It is always Rs50 crore...I have written to officials in my ministry to decide, write reason for record, why penalty should be Rs50 crore” Mr Sibal said at the function in Mumbai.
“And therefore, you must evolve guidelines to decide what the penalty should be for violation of rules.... Let the government evolve the guidelines,” he added.
The minister had earlier said “mindless imposition of maximum penalty in each particular case would send a wrong message to the industry and dampen the fragile environment”.
It would be needless litigation and delay in realisation of penalty, the minister had said.
“A sharp downward revision in the forecast for the mining index from 4.4% to 3.2%, manufacturing sector from 7.5% to 6.9% and electricity from 9% to 8.7% has led to a further decline in our GDP forecast for this fiscal from 7.9% earlier to 7.8%,” CMIE said in its monthly report
Mumbai: Leading research firm Centre for Monitoring Indian Economy (CMIE) has scaled down its gross domestic product (GDP) forecast by a notch to 7.8% for this fiscal from the earlier forecast of 7.9%, reports PTI.
“A sharp downward revision in the forecast for the mining index from 4.4% to 3.2%, manufacturing sector from 7.5% to 6.9% and electricity from 9% to 8.7% has led to a further decline in our GDP forecast for this fiscal from 7.9% earlier to 7.8%,” CMIE said in its monthly report here.
Earlier, the Reserve Bank of India (RBI) had also reduced its forecast for real GDP growth sharply from 8% to 7.6%.
Rating agency Crisil has also revised its growth estimate from 7.7%-8% to 7.6%.
“The data releases continue to bring in news of an economy that seems to be in trouble. The index of industrial production growth has slowed down to 2%-4% and the wholesale price index-based inflation growth has remained riveted to 9.5% in spite of sustained efforts by the RBI to rein in inflation by raising interest rates,” the agency cited as its reasons for the sharp downturn in the economic growth.
“The persistent fall in the IIP (Index of Industrial Production) and the high inflation rate almost seem to suggest that the economy is headed towards stagflation,” it warned.
However, this is clearly refuted by the robust growth in sales of companies, which grew by a handsome 25% in the first half of the year.
Sales of manufacturing companies adjusted for inflation indicates that the IIP under-estimates growth in the manufacturing sector by about 33%. In the first half, the real sales of manufacturing companies grew by about 9%, indicating robust demand for industrial goods, it pointed out.
Profit margins of the corporates have declined because of an increase in raw material cost and interest rates, but these are still robust and way above the low margins seen in the years 1999 to 2002, the report said, adding the net profit margin of the listed non-finance companies fell to 6.4% in June 2011, but between March 1999 and December 2002 they never touched 6%.
The performance of the corporate sector is sharply at variance with what the two principal official statistics- the IIP and the inflation seem to indicate, CMIE said.
Growth in corporate sales indicates that consumption demand continues to grow well. Kharif sowing this year was higher than last season. Agricultural production is expected to grow by 2.9% after a robust 6.6% growth last year. This again, indicates robust domestic consumption demand in FY 11-12, CMIE said.
The lack of availability of coal has pulled down the mining index and has also led to thermal projects getting delayed. This has pulled down the electricity generation forecast. Consequently, the outlook for industrial growth has moderated substantially, CMIE stated.