Retail FDI rocks UPA

BRP Bhaskar
Gulf Today

Barely a fortnight after deciding to allow 51 per cent foreign direct investment in multi-brand retail ventures and to remove the cap on single-brand ones, the Indian government is struggling to find a way forward in the face of opposition not only from outside but also from within the ruling United Progressive Alliance.

Parliament has not been able to transact any business for days as a determined opposition has held up all proceedings demanding discussion on the subject. Retail trade associations, backed by parties and trade unions, have organised protest strikes.

India was under pressure from the United States since long to open up the retail sector to foreign investors. American retail major Wal-Mart has been waiting at the doorstep, hoping to repeat its success in China.

The Bharatiya Janata Party-led National Democratic Alliance, which was in power from 1998 to 2004, considered a proposal to allow 100% FDI in the sector but did not go ahead with it. In his first term, Prime Minister Manmohan Singh could not take up the issue since the Left parties on whom his government depended for survival in Parliament were opposed to FDI in retail trade.

Manmohan Singh probably assumed that the main opposition, the BJP, will create no problems on the FDI issue since it had followed the path of globalisation while in power. However, it has come out strongly against the decision.

The government has spent the last few days trying to hard-sell the decision with arguments about the benefits it will bestow. It claims the entry of retail chains like Wal-Mart will create new jobs, improve supply chains and benefit consumers by promoting competition. It also says farmers and small producers will benefit from the decision as the chains will be required to buy 30 per cent of their requirements locally. The farmers will be able to sell directly to the chains and thus free themselves from the stranglehold of middlemen.

The government has received powerful support from spokesmen of commerce and industry, who view the decision as a step forward in the policy of liberalisation, of which they are both promoters and beneficiaries.

The Consortium of Indian Farmers Association has hailed the decision, saying it will benefit 600 million traders and 1,200 million consumers. However, it wants the government to make it mandatory for retailers to buy 75 per cent of their produce directly from farmers.

Large sections of the media have also lent support to the government and sought to allay fears that the big fish will swallow small ones. They point out that Indian retail chains have been active for some years without displacing small traders. One scribe claimed that the misgivings voiced when companies like Coca-Cola, KFC and McDonald entered have been proved wrong. They are now as Indian as any local company, and are contributing to the national economy, he said.

Industrial and commercial interests, however, are not united on the issue. Traders’ enthusiastic participation in the protest action shows many of them are apprehensive about the future. About 90 per cent of all Indian entrepreneurs are said to be retailers.

The government has said there is no question of reversing the retail FDI decision. However, it is in a fix as two coalition partners, the Trinamool Congress (19 seats, all from West Bengal) and Dravida Munnetra Kazhagam (18 seats, all from Tamil Nadu), have publicly opposed the decision. Without them the UPA will be in a minority.

The Trinamool Congress and the DMK do not want to bring the government down on this issue. However, democratic decency demands that the Prime Minister must acknowledge that the decision does not command the support of the parliamentary majority and pull back.

Perhaps the time has also come for Manmohan Singh to take a fresh look at his economic ideas. When, as Finance Minister, he led India into the path of liberalisation 20 years ago, the US-dominated globalisation drive was on a winning streak. The Soviet Union and its European satellites had collapsed, and China, which had switched to market economy in 1978, had registered good progress.

The crisis gripping the West underscores the undesirability of total reliance on the market, which, contrary to the assertions of the reform school, is not a free forum but one subject to constant manipulation by the rich. The rising inflation in the country is a sign of the progress of an affluent minority, not of India, as Manmohan Singh recently observed. A system that works in the interest of a minority is not a viable option for a country like India. -- Gulf Today, Sharjah, December 5, 2011.