Open Forum

New Delhi, 5 December 2011

FDI In Retail

DO AWAY WITH MISNOMER

By Dr. E. M. Sudarsana Natchiappan, (MP)

There is a clear misnomer in using the economic term 'FDI in retail' as if it is Foreign Direct Investment in petty shop and merchant-grocery shops’ retail outlet. This has unfortunately happened because both the middlemen and brokers, who fix the price in India by their cartel and mandis, are cleverly diverting the common man’s opinion against the Government. 

Recall that FDI in retail was already in existence by way of Government policy formulated and implemented by the NDA-led regime, when the then Commerce Minister Murasoli Maran followed the election manifesto of the BJP. The camel was, therefore, allowed to enter the tent as it was good for the same group of traders, who were assessing that Indian made goods with a foreign brand had a good demand in the Indian market and more so if it was sold in exclusive shops.

One must understand that many of the goods are manufactured or assembled through Asian countries including India and branded under American or European corporate name. Since the products have largely been lifted from nearby production centres, their price could afford the discount which attracts the customer in the Indian market. This great philosophy was followed during the NDA regime when the prices of raw material and semi-finished materials were increased by the traders with the connivance of the Government. For example the price of steel in the year 2000 was Rs 1200 per tonne and was increased to Rs 20,000! There was no justification for such an exorbitant increase.

Simultaneously, the export price of ores, minerals and natural resources was also increased and huge quantities were exported to China. The finished products carried Indian corporate brand or foreign brand, which were in turn imported to the domestic market. It is a similar case in cotton and other agricultural products. Hence, the concession for exports and less costly imports in foreign brand helped the traders to earn more with nil investment. 

Thus, the collapse of the country’s GDP in production is the main reason for decrease in industrial production in India. The Indian corporates were more than happy to invest in China and ended up getting finished products made in factories there as the labour laws were not applicable in China.  

Then again, black marketing, hoarding and adulteration are bunch of poisons in civil society. People suffer physically, financially and pathologically due to these evils. During former Prime Minister Late Indira Gandhi's 20-point programme these issues were addressed and controlled by effective legal measures through State Governments by enforcing the Essential commodities Act, Price Listing mechanism etc. But today, State Governments are shy of taking action against these violators of law, intermediaries and brokers. Hence for example, farm gate price of Tomato in Dindukal, Tamil Nadu is a mere Rs 5, but it costs Rs 50 when it reaches the consumer in Delhi!

Additionally, the wastage of produce due to the absence of cold storage chains is huge -- the level of 40 to 60 per cent. The worst sufferers are farmers and consumers. Aware of the problem of lack of investment in cold storage chain, the Government announced very active subsidy through the Ministry of Food Processing. Sadly, there have been very few takers. However, the FDI flow will fill this gap by making the farmers’ products competitive and consumers would get the material in discount without losing nutrient content.

In certain agricultural products, the FDI will help in pre-harvesting and post-harvesting management with the help of latest technological know-how which gives assured crop and price to producer/farmer. The wastage of agricultural and horticultural products will be minimised and sometimes eliminated by better management. This applies to both small and medium farmers and will spur export of surplus produce after satisfying domestic demands. 

The big question then is why is there such a hue and cry?  Unfortunately, now days most political parties want to maintain a 'No change' attitude. This is so as they inherently feel that change will bring in new thinking and new movement which will change the 'status quo' parties. Further, it will have to face the change in the party leadership to survive. This is one of the inherent weaknesses of the visionless leadership of some parties.

In contrast, the Communist leaders in China visualised the change around the world. Hence, they calibrated their Party to meet the very changes. But in India black-marketeers, brokers, intermediaries and law violators are funding all class of political parties for creating barriers thinking that they will survive by this lobbying. But they have never thought that they are facing the tsunami of change happening around the world.

In their argument against the FDI in retail, some people cite the example of Coca Cola and Pepsi which took away the domestic producers’ market. This, however, is totally different and there can be no comparison. If every State Government had started to price water as a natural resource and tax its commercial use this could have been controlled. These companies are not bringing water from their or any other foreign country. It is tragic that Indian water is being used by putting some chemicals and sold to its own market at exorbitant prices while India's thirsty millions ask for clean water. Indeed, Mahatma Gandhi's 'salt sathyagraha' model is very much needed to fight this exploitation.

But FDI in Super Markets cannot be correlated to soft drinks since both the products and consumers are Indian, only the cold storage chain investment is in the Foreign Direct Investment. In all other aspects, the aggregator FDI retailer replaces intermediaries such as market traders, wholesaler, and sub-wholesaler, who merely add their commissions for 'nil' investment or technology or knowhow. Importantly, the other street vendors, petty and grocery shops will always be there. Clearly, loyalty to them can never be replaced by FDI because the scale of return is minimal to them as it is part of the Indian socio economic structure in-built in culture. 

Historically, India adapts to changes. The great strength of the nation of a billion-plus people is assimilation of different new thoughts, movements and transformation. India is habituated to assimilate and Indianize all such thoughts and become modern while keeping ancient culture in consonance with the world. ---INFA 

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