Wrong to say decision on FDI not taken by consensus

The decision to allow 51% FDI in mult-ibrand retail trade was taken by the central

 government due to well orchestrated powerful lobbying by Walmart
and other multinational retail giants and pressure from their home governments,
particularly the US and European Union. Reports show that extraneous considerations

 have played a dominant role for taking the erroneous decision to allow 51% FDI in
multi-brand retail trade despite strong opposition from all quarters.
Commerce, Industry and Textiles Minister Anand Sharma has been making
misleading and false statements on FDI in mult-ibrand retail. His view of consensus

is irrational and absurd. Consensus means that an overwhelming majority agree to

 a particular idea or measure. In the case of FDI, only a small section has expressed
agreement with the decision to allow FDI in mult-ibrand retail, that too under
persuasion and threat. FDI in multi-brand retail trade has been notified much against the

sentiments and wishes of almost the entire spectrum of political parties, trading

community, farming society, and, of course, an overwhelming majority of the citizen of the
country. Mrs. Mamata Banerjee, West Bengal Chief Minister, has alleged that the
FDI decision was unveiled only to divert attention from the “coalgate” scandal
involving the government. Moreover, many experts have
questioned the perceived benefits of the so called “reforms,” particularly 51
percent FDI in multi-brand retail trade. The general consensus is that no point
in pressing for a change in policy measures (or conveniently termed as reform)
that evokes strong condemnation and disapproval from all sections--political
parties, traders’ bodies, farmers’ associations, experts and the public in
general. Anand Sharma and the other votaries of FDI
in multi-brand retail trade know very well that it will do more harm than
benefit to the people. Then, why is this hypocrisy? The following points will show
that the contentions of Anand Sharma about the benefits of FDI in retail trade

 are wrong and motivated.

       The argument that the primary producers are expected to get better
prices is unfounded. Experiences show that nowhere in the world have the
farmers who supply goods to big retail chains benefited. It is difficult to
understand how they would benefit, when the big retail players like Walmart
look for the cheapest possible suppliers. To begin with, they might offer
better remuneration, but that would be only until they are able to eliminate
traditional channels of supply. Ultimately the farmers will have no choice but
to sell to big players -- at any price. This has been the experience of all
countries which allowed FDI in multi-brand retailing. A detailed examination of
information available on the impact of allowing mutlti-brand global biggies
including Walmart, Carrefour and Tesco into countries such as Indonesia,
Thailand, Brazil, Canada, Germany, etc., indicates that they will ultimately
eliminate competition and will indulge in monopolistic practices.

The government's contention that FDI in multi-brand retail will
also create 10 million jobs is unfounded and unrealistic. For argument sake, if
the decision to allow FDI in multi-brand retail become a reality and four or
five big retail giants decide to open stores and each one of them set up 20
shops on the average in each of the 53 million plus cities, on the whole 5300
shops will be opened by them. If each of the retail shop employ on the average
about 50 persons directly, the 5300 shops put together will employ only 0.26
million persons. And equal number of persons might be employed indirectly. On
the whole, around 0.52 million persons will be able to get employment at the
best scenario.

     The retail trade in India is largely unorganised (informal).It
accounts for over 40 million jobs and 97 per cent of the total trade. It is
informal, with credit traditionally extended on trust and based on an intricate
web of relationships. Hundreds of thousands of people who earn their livelihood
from the millions of existing retail outlets may be put out of business by the
retail biggies. As employment generation in the formal sector in India has been
very sluggish in recent years, many unemployed youth all over the country have
taken to self-employment, particularly in the retail sector. These informal
retail sector establishments are successful, to a certain extent, only in the
big cities. In the smaller towns and villages retail units have a precarious
existence. These tiny entrepreneurs find it difficult to earn enough income
from their business to meet even the bare necessities of life. So, many of them
migrate to big cities in search better pastures. But only a small proportion of
them become successful after migrating to the city. The tiny entrepreneurs
suffer from various bottlenecks, particularly lack of finance. Since the
scheduled commercial banks do not come forward to render financial assistance,
they are forced to borrow at high rates of interest from private lenders and
run the business and earn a meager income. But, most of the tiny units/vendors
have regular customers, including upper-middle class and rich people. If FDI is
allowed in the retail sector, it will wipe out many of the smaller Indian
retailer chains and the small retailers like the small provision shops and the
push cart vendors, who thrive largely in the residential areas around
upper-middle class and richer sections of the society. These tiny entrepreneurs
will not only lose their source of income and livelihood, but also their honour
and prestige.

    The majority of consumers, who buy essentials from their
neighbourhood stores on credit and pay bills on a monthly basis, will also
suffer with the disruption of the traditional system of neighbourhood retail
stores. Therefore, we demand the Congress-led UPA government to reverses the
ill-advised move to allow 51 % FDI in retail trade.

     Another argument by the government in favour of FDI in retail
trade is that it will lead to deceleration of inflation in the country. It is
surprising to note that the government headed by a leading economist is pinning
its hope on FDI in retail for containing inflation, especially food inflation.
Historically there are no evidences to show that foreign investment, especially
FDI, has acted as an enabling factor for controlling inflationary pressure. On
the contrary, there are ample evidences of foreign investment causing
inflationary pressure in many countries, including India. Moreover, the
government has not explained how and in what manner FDI in retail trade will
lead to fall in prices; and how long the fall in prices, if any, will be
sustained. Is there any guarantee that prices will be stabilised and thereby
the real income of the people will increase on a long-term basis? Therefore,
the contention that it be possible to bring down inflation by allowing FDI in
retail has no credibility and validity. In fact, the FDI proposal was initiated
long before food inflation became an issue. Thus, unmistakably it has been
pushed through because of considerations other than rising prices.

      The general perception is that government has resorted to the recent measures with
a view to divert attention of the public from various scams, sandals, frauds and other
such shadow activities perpetuated during the past few years.

 Dr.C.Murukadas, Hindustan Times, Oct. 7, 2012