How FDI in retail affects the “Mango Man”

FDI in retail is an example of deregulation, devoid of any safety net for its after-effects. Would the government consider the Parliament Committee report or treat Parliament with disdain? 

 
Here is a simplified explanation, sans economic jargon, to help understand FDI (foreign direct investment) in retail and what it has in store for the aam aadmi—“The Mango Man”. Let us start with an analogy.When a falling stone hits the ground its energy is converted and dissipated as heat. However, if the same stone lying on the ground is heated, it does not take off. What is the relevance of the falling stone to FDI in retail? 
 
What is FDI in retail? It means “Foreign Direct Investment” of 51%, a controlling stake is permitted to any foreign company to set up retail trade in India. Simply put, a number of foreign-owned supermarkets would sprout all over the country. At a political party rally in Delhi, the leaders extolled the virtues of FDI in retail as symbolic of the party’s reforms agenda. The phrase, “economic reform” has many different meanings depending on ideological and political leanings. 
 
One view is that between 1875 and 1975 it meant more government and since then it means less government intervention or free run for market forces. A Wall Street view says that it means, “Change for the better as a result of correcting (economic) abuses”. “Better for whom?” and “whose abuses would the reforms correct?” Did the post 1975-reforms in USA correct the abuses by financial wizards that led to the 2007–08 meltdown? A third view holds that economic reform refers to policies directed to achieve improvements in economic efficiency. Which of these did the rally leaders have in mind when they toasted the FDI reform push? 
 
Those in favour of FDI in retail painted rosy pictures of benefits such as better prices for farmers, more jobs, better shopping experience and so forth. Those against it predicted the opposite. Few had hard facts to back their arguments. It is strange that neither the government nor the opposition referred to the report of the Parliament Committee which examined FDI in retail. The Committee seems to have done a comprehensive study, examining a number of witnesses, individuals, NGOs and trade bodies, travelling around the country, studying reports and experiences of other nations and asking questions of government departments. The Committee concluded that more people would lose jobs that the number that would find work. They said that FDI in retail would destroy large numbers of small and marginal farmers. They cautioned against the probable monopolistic behaviour, predatory pricing and attendant consequences. The Committee found that unorganized retail provides livelihoods for 40 million people, that is, for about 8% of the country’s workforce. Referring to the projection of FDI in retail creating 2 million jobs, the Committee said that this was exaggerated and that this ignores 200 million people who depended on retail trade for a living. The Committee was not only critical of FDI in retail, but also of any large corporate in retail business. The Committee drew a dismal picture of the effect of FDI in retail on the “Mango Man”.
With FDI in retail, shops like this will disappear. How sad.

ICRIER (Indian Council for Research on International Economic Relations) carried out two studies, one in 2008 and the other in 2011. The 2011 study predicts a great shopping experience for consumers. ICRIER surveyed 300 consumers, in high and middle income groups. Evidently, the government relied on the ICRIER recommendations, rather than on the Parliament Committee report. Does the reliance on a private organisation’s recommendations in opposition to Parliament, have anything to do with the chairperson of ICRIER bearing the same surname as the Deputy Chairperson of the Planning Commission?
 
ICRIER’s sample of 300, from high and middle income brackets, for a population of 1.2 billion with over 40% poor, for recommending foreign investment, is questionable. In reply to a RTI (Right to Information) query on whether the government had done any study on FDI in retail, the commerce ministry replied that it had not done any such study. The reply referred to the ICRIER report and not the Parliament Committee report. The Committee’s report was not discussed in Parliament. Rejecting the Parliamentary panel study and accepting a private study report, does not augur well for Parliamentary democracy. ICRIER says consumerism promotes economic growth. The earlier study (2008) surveyed 2020 unorganized small retailers out of 6 million shops. None of the studies addressed the issue “why India requires FDI in retail?” Would it lead to a net increase in foreign currency earnings, improve India’s balance of trade? Stiglitz’s views on FDI in retail are significant. He asks, “Why India needs foreign entrepreneurs in any sector, particularly the retail?” He then talks of the power of Wal-Mart to drive down prices and suggests that they will use that power to have Chinese goods displace Indian goods. Next, he draws attention to Wal-Mart’s abusive labour practices. He asks, “Why would you want to import such practices into India?” Why indeed? The foreign retail lobby reportedly spent over Rs52 crore in India. Could that be the reason why? He also talked about increasing inequality that Indian reforms are ushering in, accompanied by corruption. 
 
It is appropriate to now look at the falling stone analogy. To see the relevance of it look at two economic philosophies prevalent today. One is the “Trickle-down” variety. Subscribers to this believe in less and less of government. The market would correct itself. De-regulation is the key. Concessions to the rich would lead to investments and economic growth. This would trickle down to the poor. The second view holds that left to itself, unregulated market economies, would become so disorderly that the human costs would be enormous. FDI in retail is integral to “Trickle-down” economics. It is part of the reforms’ cry for deregulation. 
No lessons have been learned from the deregulation induced meltdown. That is why the government and proponents of FDI in retail do not bother about its effect on 6 million small shop-owners or the 50% of the farming-dependent population who would lose their livelihoods. Some of these dispossessed may find jobs in the retail supermarkets, as shop assistants or labourers. Does deregulation help them? The stone does not take off when heated because heating causes disorder. The heat energy is random, disorderly; the stone’s molecules jostle each other randomly. Hence, they cannot lead to orderly motion of the stone. The natural propensity of things is to move towards chaos. Markets are no exception. Without regulation the result is disorder. FDI in retail is an example of deregulation—thinking devoid of any safety net for its after-effects. Would the government consider the Parliament Committee report or treat Parliament with disdain? 
 
 
 
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    COMMENTS

    Ravi Patnaik

    8 years ago

    1.Consumers will suffer as the MNC shopping malls will will store high cost items to maximise their yield per sq.ft. of shelf space. Cheaper alternatives will find difficulty in competing and will gradually increase their prices. Ultimate loser is Consumer.
    2. Farm products will be procured through mega suppliers, who will hold monopoly over farmers/ producers. Mega suppliers in India, will most likely be cronies of politicians, against whom the Mango Man will have no recourse.
    3. Importing manufactured goods from low cost/ efficient economies (viz. China, Thailand)will export jobs, adding to unemployment.
    4. Profit generated will be repatriated. Also over/under invoicing thru foreign suppliers will be prevalent.
    5. Black money from India will be round tripped as FDI through cross-investments in MNC brands.
    6. Cartelisation of prices will be easy with few large players whose transactions will be out side Indian jurisdiction.
    7. As mentioned the labour practices will be as per home country of MNCs for unskilled labour. High level of mechanisation will reduce employment potential on a progressive basis.

    Ravi Patnaik

    8 years ago

    1.Consumers will suffer as the MNC shopping malls will will store high cost items to maximise their yield per sq.ft. of shelf space. Cheaper alternatives will find difficulty in competing and will gradually increase their prices. Ultimate loser is Consumer.
    2. Farm products will be procured through mega suppliers, who will hold monopoly over farmers/ producers. Mega suppliers in India, will most likely be cronies of politicians, against whom the Mango Man will have no recourse.
    3. Importing manufactured goods from low cost/ efficient economies (viz. China, Thailand)will export jobs, adding to unemployment.
    4. Profit generated will be repatriated. Also over/under invoicing thru foreign suppliers will be prevalent.
    5. Black money from India will be round tripped as FDI through cross-investments in MNC brands.
    6. Cartelisation of prices will be easy with few large players whose transactions will be out side Indian jurisdiction.
    7. As mentioned the labour practices will be as per home country of MNCs for unskilled labour. High level of mechanisation will reduce employment potential on a progressive basis.

    Ajit Pawar re-inducted in Maharashtra cabinet as Deputy Chief Minister

    Ever since the white paper gave a virtual clean chit to Ajit Pawar, the chorus for his return had been growing louder and it was only a matter of time before the nephew of NCP chief was brought back as deputy chief minister

     
    Mumbai: A week after a Maharashtra government white paper on irrigation gave Ajit Pawar a clean chit, the senior leader and nephew of Nationalist Congress Party (NCP) chief Sharad Pawar was on Friday sworn-in as Deputy Chief Minister, reports PTI.
     
    Pawar, the nephew of NCP president and Union Minister Sharad Pawar, was sworn in at Raj Bhawan.
     
    Governor K Sankaranarayanan administered oath of office to Pawar in the presence of Chief Minister Prithviraj Chavan.
     
    Opposition Sena-BJP members, which have denounced the move, kept away from the swearing-in ceremony.
     
    The dramatic announcement of resignation of Pawar on 25th September, in the wake of allegations of corruption in irrigation projects, had plunged the state's Congress-NCP government into a crisis with all other 19 party ministers offering to quit.
     
    Pawar, 53, had resigned after media reports alleged he had arbitrarily awarded irrigation contracts worth over Rs20,000 crore when he was state's irrigation minister during 1999-2009, before he was elevated as deputy chief minister and handled the plum finance and energy portfolios.
     
    The white paper, presented by the irrigation department to the state Cabinet on 29th November, had claimed a 28% increase in irrigation potential in Maharashtra in the last ten years.
     
    It was described as a status paper on irrigation and not an investigation report.
     
    Chavan had announced a white paper on irrigation would be brought after state's economic survey report said the state's irrigation potential had risen only by 0.1% between 2001 and 2010.
     
    All these years the irrigation portfolio was with the NCP.
     
    Ever since the white paper gave a virtual clean chit to Ajit Pawar, the chorus for his return had been growing louder and it was only a matter of time before he was brought back as deputy chief minister.
     
    As the Congress-NCP dispensation appeared on a shaky ground following Ajit Pawar's resignation and Sharad Pawar had to fly into Mumbai to bring things under control, the NCP boss had made it clear that the former Deputy CM would continue to be the leader of its Legislature party.
     
    The NCP boss's right hand man and cabinet colleague Praful Patel had said the deputy chief minister's post will be kept vacant, indicating he would be back once the white paper "cleared" him.
     
    Meanwhile, Opposition BJP and Shiv Sena yesterday reacted sharply to the impending reinduction of Pawar and demanded that he face a probe by a Special Investigation Team.
     
    "If he has guts he should be ready for SIT probe. If he is proved innocent, then he should come back in the cabinet with respect," Khadse had said.
     
    He alleged that the Chief Minister was bringing Pawar back under ally NCP's pressure.
     
    "It is really unfortunate that Chief Minister Chavan who calls himself clean has to re-induct Pawar due to NCP's pressure," Khadse said.
     
    Speaking to reporters after his swearing-in ceremony, Ajit Pawar claimed that he was not indicted in the white paper which was presented by the state government on November 29.
     
    "Nobody asked me to resign from the post of Deputy Chief Minister. I gave the resignation so that people should not think that I was involved in drafting the white paper," Pawar said.
     
    He also claimed that a lot of work has been done on the irrigation front.
     
    Meanwhile, reacting to questions on PILs filed against him in connection with the alleged irrigation scam, he said, "The way in which PILs are filed in the courts, the Prime Minister, chief ministers and other ministers won't be able to work and they will have to remain out of office."
     
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    FDI in retail: Opposition motion defeated in Lok Sabha

    With SP and BSP members staging a walk out, passing the motion for FDI in retail was a piece of cake for the UPA government

    The United Progressive Alliance (UPA) government on Wednesday survived the attack from Opposition over foreign direct investment (FDI) in retail. The motion brought by the Opposition was defeated in the Lok Sabha. Out of total 471 members present in the House, 253 voted in favour while 218 opposed FDI in retail.

    Members from both Samajwadi Party (SP) and Bahujan Samajwadi Party (BSP) both outside supporters of the government staged a walk out, thus reducing the numbers for the UPA government to win the motion.

    Government has neglected the interest of farmers and small traders by deciding on FDI in multi-brand retail, SP chief Mulayam Singh Yadav alleged after his party's walkout.

    "We walked out because the government has neglected the interest of farmers and small traders," he told reporters.

    Asked why SP MPs walked out instead of voting against the motion, he said "this was the party's decision. The party has decided to stage walk out rejecting the move."

    When it was pointed out that SP's decision has helped the government, he said "whatever the party has decided we do that exactly."

    Expressing concern over the fate of farmers and small traders after FDI in retail, Yadav said the "interest of five crore small traders and 20 crore farmers and their families were sacrificed by the government's decision. That is why we have walked out."

    Hours before the vote, the government sought to create a wedge among parties opposed to opening the retail sector to foreign companies, asking them to realise the politics of BJP.

    "The question is not FDI as the decision to implement it is on the state governments. If the states have to decide, what are we deciding here. The only thing to be decided here is to support or oppose BJP's politics and condemn it," Parliamentary Affairs Minister Kamal Nath told reporters.

    In reply to a poser on UPA's outside supporters SP and BSP opposing FDI in multi-brand retail, he said, "Speaking against FDI is a separate issue, because they can be against it. But I request all political parties to vote against the politics of BJP...it will be demonstrated in the voting on Wednesday. They will be defeated today," he said.

    Earlier, his deputy Rajiv Shukla said government was in touch with various parties for their support.

    "We are in touch with all (parties). We have requested them to support us. FDI will not hurt the interests of farmers or small traders. In fact, it will help them," Shukla said.

    While both SP and BSP had opposed FDI on Tuesday during a debate on the issue, they had not made it clear whether they will support the motion.

    BJP leader Sushma Swaraj had asked the two parties to support the motion, saying their fears that the government could fall were "unfounded."
     

  • User 

    COMMENTS

    M G WARRIER

    8 years ago

    Coalition politics, in a situation where any political party in India growing into a size to muster single-party majority is very remote, is an unavoidable evil. But, any game should have pre-decided rules and changing rules mid-way should be avoided. To make things more transparent and credible, political leaderships at national and state levels should work out some formula which will ensure coalitions formed before any election from panchayat to parliament should remain in tact till the subsequent election. Once it breaks mid-term, mid-term elections within six months of such ‘break’ alone should be the alternative before political leadership. But, who wants stability, continuity or a transparent conduct of ‘political business’ or ‘business of politics’ which happens to be the prerogative of certain families across the nation? In this case, what happened is, representatives of majority members of parliament spoke against FDI in retail in the form UPA II wants to introduce it and their views did not transform into votes!

    Dev

    8 years ago

    .

    UP politicians are the bane of India.

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