A slightly stunned nation watched mutely as the Union cabinet first cleared foreign investment in multi-brand retail last week, then let allies and the Opposition bully it into putting it off within days. Now the big question everyone's asking is: how many calls can the government put on hold simultaneously before the assembly elections in UP and elsewhere? Will its lines of communication with the 'business community' completely wear out by 2014?
The rollback—for that is what it is really—is being dressed up lamely as a nod to consensus-building. But the truth is, the government is facing a serious crisis of faith, with its ability to pursue economic reforms swathed in doubt. There are 32 bills pending in Parliament at the moment; only one of them has been introduced so far during this session. Another 23 draft bills are slotted for introduction, according to think-tank prs Legislative Research. Each bill betokens radical change ('reform') in the economic and political landscape—from food security and money-laundering to electronic delivery of services, biotechnology, warehousing, mines and minerals, nuclear energy and national highways. None of them are really non-controversial.
Yet, when FM Pranab Mukherjee announced that FDI in retail has been "suspended" until political parties and states are brought on board afresh, both the treasury and Opposition benches applauded. An embarrassing climbdown for a government seeking to rekindle hopes of reforms making a comeback. And an embarrassing epilogue for PM Manmohan Singh's career as a 'reformer'.
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That could well be, yet it would be hard for any government to find a legislation that does not adversely impact some section of society. India has 550 million farmers, and 80 per cent of them are small or marginal land-holders, most of them deeply in debt. There are less than 50 million industrial workers now. The ambitious plan is to create 220 million new jobs by 2025, but that target seems impossible to achieve.
"Whether widening roads or linking pension funds with stockmarkets or changing food security entitlements, there will be winners and losers," says Chengal Reddy, secretary-general, cifa, a collective of farmers' associations that supports FDI in retail. "The current system is also extremely exploitative of farmers, which is why they migrate to cities. At least, FDI would have given them a chance to control retail prices," he adds. Farmers groups supporting FDI in retail agree the decision comes with the risk of hoarding, just like raising the FDI cap in pensions could be risky too. But that is no reason why people should be denied a chance to choose, contends Reddy.
Experts point to the fact that the current economic situation is also very different from '08, when the government could afford to give an economic stimulus package, including a Rs 60,000 crore farm loan waiver and Rs 300 crore sop for industry, to keep economic growth on course. This time, if the Euro crisis worsens, and as subsidies balloon, indebted farmers and industry are in it alone.
The other issue is: can protecting small industry deliver India's much-vaunted 9-10 per cent GDP growth? Big players, both domestic and international, will be needed. "In India, take any business... companies never innovated till FDI and competition were allowed," says Arvind Singhal of ksa Technopak. This holds true of cars, phones and domestic organised retail, which has been accused of plucking low-hanging store-front fruits rather than investing in the supply chain from farm to fork. FDI in multi-brand retail was expected to infuse funds, bring in managerial, technical and logistics know-how to complete this retail-industry-farm chain which has so poorly served customers and farmers so far.
The irony of the situation is not lost on small industry either. Though they do contribute to a large chunk of exports, employment and GDP, only a small creamy layer of small business can be said to have "matured". "Small business clusters everywhere get the worst roads, the worst water supply and erratic power, not to mention being the most polluting," says Anil Bharadwaj, director-general of the small business lobby group fisme.
Theoretically, one could say the government could turn to doing all it didn't do till now for farmers and industry, provide cheap credit, curb middlemen margins, ensure cheap transportation and eliminate red tape. But the fact is, the one practical step it had in mind, which might have filled in some of India's infrastructural gaps, has come a cropper—and it can't even blame it on any anti-globalisation wave. "There are fringe movements like Occupy Wall Street which oppose globalisation abroad, but in India, people are anxious for change," claims ficci's Rajiv Kumar. Development economist and nac member Prof A.K. Shiva Kumar adds, "There's no anti-globalisation wave here. It is an anti-Congress wave. Whatever the political instincts behind it, the Congress doesn't seem to have consulted even its allies...that's worrying."
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But even debate in Parliament is no quickfix right now. Parliamentarians cannot even agree on whether the decision to clear retail FDI, taken by the cabinet, can in fact be debated in either house. This will not be resolved quickly, a senior Congress MP says on condition of anonymity, unless the government decides to bring FDI in through a bill.
"The expectation was that FDI will give retail players fresh capital for expansion of the sourcing chain. The optimism created by this expectation will now go down slowly," says Gautam Duggad, a research analyst with Prabhudas Lilladher in Mumbai. In a note to investors, the financial advisory firm said that evolving a consensus for FDI in retail is cumbersome and will be "a drag on the sector".
"We react intuitively in India even when we must respond logically," says nac member N.C. Saxena. "I did think retail FDI would help consumers and farmers...it would be better for many than the present system," he adds. The question is not whether small businessmen or farmers can be protected—the perception is that precious little has been done for them anyway so far. The issue is how prosperous can small businesses and small farms make India: can they ensure 9 per cent growth in 2012, especially given their persistent neglect? Given the mood, few trust the government to do now what it should've done yesterday.
| ALSO IN THIS STORY |
 OPINION In worshipping at the altar of big retail, and its clinical efficiency, Britons bartered away vital nodes of their local economic and cultural life |
AUTHORS: PRAGYA SINGH
TAGS: FDI AND MNCS IN RETAIL | UPA | REFORMS | GOVERNMENT-GOVERNANCE-GOVERNMENT POLICIES ETC
SECTION: NATIONAL
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| 7/D-132 DEC 14, 2011 06:00 PM | To answer about shortage of capital point, as per recent study people are investing a lot in gold, this money can be channalised for infrastructure development if government creates suitable policy and atmosphere for investment, but as we know the only interest of government is to get the cut by distributing licenses. |
6/D-131 DEC 14, 2011 05:57 PM | @ANBanerjee So in layman's terms you are saying to sell your property to pay for your bills. I wonder how long can we do that? so after 10 more years we have to raise the cap to 100% so that we can pay our oil bill. After that what? I think it is high time we look at the economic policy which relies on consumption rather than production. If some investment is allowed in manufaturing which can boost the export or reduce the reliance on import it will be good for long term. |
5/D-136 DEC 13, 2011 09:30 PM | Is there a shortage of capital in this country? ..... There is a shortage of capital in all developing countries. That's why they are developing. Especially for India, it faces a current account deficit. which means the goods deficit (mostly oil) is balanced by capital imports. When capital stop coming the rupee falls and cost of import goes up, hence inflation goes up. If you are old enough you should remember the60's 70's and 80's. RBI can hold the fort for some time but it will run out of money as in the early 1991. Jumping up and down and shouting gora ghosts in every corner does not change economic facts. |
4/D-34 DEC 11, 2011 10:05 AM | The job figures are not realistic even if these are correct why we wish to push self employed persons in the service of foreign retailers and replace self organized retail chain with corporate controlled retail chain.We may understand the compulsion of Manmohan singh and Anand Sharma due to their mindset and WTO compulsion but what happened to our so called economist and journalist who are lobbying for these transnational corporation.We heard several programmes on TV and in one NDTV Big fight programme the corporate agent Chengal Reddy extended the unconditional support to FDI,his role on many points is dubious.From which study it is concluded the loss of 30-40% westage of fruits and vegetables at all India level, it was just a small sample study. it can not be extended as a logic for the entry of FDI in retail .There is a need of direct market controlled by farmers and consumers cooperatives and enhanced storage capacity.Our small and marginal farmers hardly have any role in the new model of FDI retail they will be out of their meagre holdings.On DIPP website the reaction of Kisan Jagriti Manch and Professor Sukhpal singh is available,which represent the farmers' concerns in holistic way. |
3/D-164 DEC 10, 2011 09:37 PM | What specious arguments!!! Even in the absence of exact figures of job losses due to FDI in retail, figures of 220 million "new jobs" are being touted. The loud noise of creating half a million jobs in 1991 was never realized! Can anybody trust that the figure of 220 million new jobs will materialize at all? So much for diruptive effects of FDI on existing jobs. Next, the 9% growth rate will continue for how many decades? Why has China chosen to opt for reduced targets of growth? Are these figures reliable at all, especially when export figures have been changed downward most smilingly without any impact on the economy or those who concocted the figures.There is no need to obfuscate issues and trick the aam admi by figures that make no sense.Last but not the least:Wasn't communism sold as aggressively for the aam aadmi(farmer, labourer, poor, downtrodden, backward, disadvantaged, Have-nots etc) as a revolution and a revolutionary "reform"? How has it ended? What is the condition of the farmer? You offer him another reform called FDI. How funny and hollow. Get innovative. Manage honestly. Be self reliant. It is possible in the globalised world (for India it has always been globalised since she practiced Vasudhevkutumbakam). FDI is no remedy but Full Disclosure of Intentions is. |
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