Allies in the current coalition government including Trinamool Congress and several members of their own Congress party have expressed a strong disagreement while the opposition has been gunning for the ruling party with the parliament paralyzed over the contentious issue since it opened for the winter session last week. ‘India's government is fooling the country about the benefits of foreign supermarkets, L.K. Advani the aging leader of the opposition party BJP reportedly said on Saturday at the HT Summit in Delhi.
"Wal-Mart may be fine for the West but Wal-Mart does not serve us," L.K. Advani, said. "We should not be envious of Wal-Mart, the former president of the BJP and leader of the opposition from 2004 to 2009, he added. Curiously, this is in sharp contrast to its free-economy stand and had pushed for this concept in 2004 when in power. "I see no reason why the government decided on FDI in retail knowing full well that a large section of people will get affected," added the politician who has often been tipped as the Prime Ministerial candidate of BJP if it wines the next general elections in 2014.
The government has rejected all demands to roll back the policy though it is likely that the implementation through the gazette may be delayed. The government is dependent on allies like Trinamool Congress but does not face any immediate threat of losing power as the leader Mamata Banerjee says it would not leave the coalition. Prime Minister Manmohan Singh says rescinding the policy will hurt the country’s image with foreign investors as Asia's third-largest economy shows signs of slowing. With the sagging Indian economy languishing currently at 6.9%, economists feel that the domestic capital may not be enough to revive it and bring it back to 9%+ that it had reached a few years ago.
According to the commerce minister Anand Sharma, about 10 million jobs are expected to be created because of the new policy, 6 millions to be in the logistics which is the biggest strength of the multinational chains from the crops to the customer.
Rubbishing the claims of the opposition that the foreign players may use predatory policies to drive out the small retailers, Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission and speaking at the Hindustan Times Summit said that China had liberalized 20 years ago and no such action had been seen there. "Relaxed FDI norms will bring in the much needed capital that will help create efficiency in the supply chain thereby reducing wastage in perishable products such as fruits and vegetables," he said, adding that there was no truth in the argument that the farmers would be cheated by the foreign players.
"FDI in retail will not create any import bias in purchases and procurements by retail companies," Ahluwalia said according to HT. "In fact, with increased foreign investment there will be rapid modernization of the entire supply chain."
The reformist move to allow global chains like Wal-Mart (USA), Tesco (UK) and Carrefour (France) to own up to 51 percent of retail and allow foreign companies to fully own single-brand retail operations has the support of farmers who feel they will get better deal by cutting out the middle-men estimated at 5 million and the strong segment opposing the reforms. According to a farmers’ association, produce that gives Rs.100 to the farmer costs Rs.400 in the hands of the consumer.
"Local retailers have been content thinking small and doing little. It's time to change that mindset by opening up to FDI in retail," according to an editorial today in ET.
The government has announced several stringent conditions like a minimum investment of $100 million and making it mandatory to buy a minimum of 30% from the SMEs. The States also have the authority not to allow these chains to set up shop. States like UP, Bihar and West Bengal have already said no to the proposed policy which is likely to get delayed but would be here to stay, with the government not willing to budge an inch.
Meanwhile, a general strike had been called for December 1 and was considered a success. Another one is slated for December 12-13 to keep on pushing the protest.
India has a total retail market of $450 billion and the foreign chains stagnating in their own countries are eyeing with lusty eyes new markets like India for expansion. The opposition also feels it may be an act akin to allowing the East India Company to enter India about 250 years ago, that resulted in the British ruling India till 1947. Reformists of course, pooh pooh the idea of economic colonization.
Supermarkets and Wine
Setting up of the supermarket chains like Wal-Mart, Tesco and Carrefour will help the wine retail market in India. They have wine-especially Tesco which dominates the UK supermarket industry, as an important part of the portfolio. Hopefully, they will start marketing soon after they start their operations in India and like other food products are expected to help bring the prices down besides improving the storage facilities. For a related recent article on how the prices can be customer-friendly by a chain like, Tesco, click
Contrary to oppositions’ claim that the move is a knee-jerk reaction to the recent inflation and slowing down of economy, the government had undertaken a massive debate for almost 4 years and unless some scam may come out of the closet in future years, the government think tanks have been working over the issue looking at various issues-including the possible political fallout.
However, it would appear that the government has failed to convince their own cadre or the allies on the benefits and the strong opposition has made the government possibly stall the decision for a while or dilute it some more to keep the opposition demands in mind. Trinamool Congress chairperson today announced that the Finance Minister Mr. Pranab Mukherjee had agreed to postpone the decision while he has said that the decision would be announced on Wednesday when the parliament is reconvened. Meanwhile, the opposition has been boycotting the parliament on the issue.
For a few of the recent articles, please visit:
FDI Retail Sweet Dream Ends
December 3, 2011