FDI in Retail: Who Gets Benefited?

Government had to suspend the policy reform of permitting FDI in multi-brand retail, even though it was with a number of conditions safeguarding the local players. Almost all the opposition political parties opposed it because it might take away the means of livelihood of the 15+ million local small retailers and street hawkers. The politicians from left to right spoke the language chosen by the trading community.

But more surprisingly, neither Sonia Gandhi nor Rahul spoke strongly in favour of the reform in fear of its effect on voters in the impending assembly elections. Manmohan Singh as usual didn’t take any proactive steps. The Congress couldn’t even sell the idea to its own allies.

As usual, we, Indians and also our politicians copy every step from America and what Americans do. The opposition copied the idea of opposing the big companies in retail exactly the way some Americans did against Wal-Mart. A group against Wal-Mart came out with some amazing data showing the death of local shops because of the arrival of Wal-Mart. However, many studies conducted by reputed schools of management and some universities proved it to be wrong. ‘Wal-Mart has no statistically significant impact on the overall size of the small business sector in the United States.’.

I knew leftists such as Sitaram Yechury would oppose the reform but I was amazed to hear Arun Jaitley and BJP opposing FDI just for playing the usual role of opposition politics. Jaitley not only claimed that the FDI in retail would cause serious loss of jobs, but also asserted that it would not help Indian farmers or manufacturers in getting better prices or larger market through export. Jaitley was not ready to accept the claims of Mukesh Ambani that ‘farmers will receive more for their produce, while consumers pay less, and that 30-40 percent of the fruit and vegetable crop, which currently goes waste, would miraculously be saved.’ And it was not only Ambani but many including Raghuram Rajan, Prem Shanksr Jha and Jagdish Bhagwati wrote and spoke why Indian must go for FDI in retail. But Jaitley wanted the opportunity time and that would come when his party would be in power. Perhaps no logic was good enough for those in opposition.

Why didn’t the politicians take a rational view considering the benefits for all the stakeholders? Why didn’t they side with the action that benefits the most? If one puts it in number as someone estimated, it is is a face-off between the interests of the 40 million people employed directly or indirectly in the retail trade in the country and the 120 million consumers in the 53 cities with a population of over a million, where retail outlets with 51 per cent FDI are being allowed to set up shop. And naturally the consumers are in majority. And they would certainly be benefited with FDI in multi-brand retail.

The fear of loss of jobs of those engaged in local kirana stores is just a bogey. Wal-Mart and other big stores would not go beyond few big cities.

I am also sure that with the presence of MNCs in retail just as in auto sector, the small and medium manufacturers, artisans, craftsmen might allure MNCs to market their produce in their global outlets without the present intermediaries who fleece a major cut. Can Mr. Jaitley answer if without Pepsico and McDonald India could have produced potatoes of the quality good enough for French fries?

But will the politicians also oppose e-commerce that is growing exponentially? SA Aiyar writes in his column that ‘during the Thanksgiving season this November in the US, 39% of consumers said they bought goods mostly through the internet, against 44% who mostly bought from brick-and-mortar stores and hypermarkets.’ In India too, e0commerce is growing at 40% annually, and the market expected to top RS 46,600 crore or perhaps more by the end of 2011.

I agree with Gurcharan Das that Democracy won but the people lost. ‘Consumers have lost a chance for lower prices; India’s farmers have lost the prospect of higher returns and millions of unemployed rural youth have been denied jobs and careers in the modern economy.’

Surprisngly some new supporters of FDI in retail have appeared in Dalit political commentator and columnist,, Chandrabhan Prasad and Dalit scholar Mr Chittibabu Padavala. Though late, now Rahul Gandhi too is talking in favour of FDI in retial and its benefits to the farmers.

Let us wait for UP election to be over and Let us see what happens to the opening of FDI for multi=brand retail in India. However, I am shocked only with the way the government moved and the opposition particularly BJP reacted.

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