51 per cent FDI in retail Frail UPA
The Congress-led UPA government is patting itself on the back for clearing the politically polarising decision to permit 51 per cent foreign direct investment in multi-brand retail. But it is being rapped over the knuckles not only by the Opposition parties but also by those parties that are supporting it such as TMC, BSP and SP. This shows that how fragile the UPA alliance is. In fact, Mamta Banerjee made it clear that her government would thumb down any proposal involving 51 per cent FDI in the state’s retail sector. It is worth mentioning that during the NDA regime, all allies were consulted before reaching any important policy decision. So it is evident that Congress does the dadagiri and is dictating its allies to toe its anti-people decisions. However, the major reason of disenchantment among UPA allies being that the UPA government is pushing one or the other pro-US agenda—whether it be the civil nuclear deal or FDI in retail—more so, given the collapse of the rupee by one-fifth in a few weeks, eating into forex inflows. And hence, net FII outflows seem to have compelled a desperate government to sell India’s retail trade wholesale. And this will result in twelve million community-run retail shops being in danger; and rural food security at risk. This is UPA government’s gift to the aam aadmi of the country. The protagonists of FDI in retail are advancing the argument that a mountain of money and dexterity of Wal-Mart to establish supply chain will make rural areas and farmers prosperous. It does not need rocket science to comprehend that those who advocate this view have no inkling of rural India. One should take into consideration the farms in India with those in the West. A total of 58.8 millions of small and marginal farming families, which are more than 32 crore rural people, are eking out their living on farming in India, whereas the US farm size is 250 times larger than that of the Indian, i.e. 1089 acres. Hence, the supply chain that works in the US and the West cannot be imagined here. Furthermore, the UPA I pushed the India-US civil nuclear deal in the teeth of Opposition from the BJP and communists. This time round, with the decision of allowing FDI in retail, the UPA II has come up with a persuasive argument that it will provide a fair deal to the farmers, and create employment in villages. It is good enough to provide ballast to Congress’ political rhetoric. This could possibly fetch votes for the party in 2014 more than the civil nuclear deal could do in 2009. However, the compulsions are hidden, though not completely. There has been consistent American pressure to open up retail trade. The government resisted the pressure for quite a long time until it seemed to be sinking in the rising tide of scandals. And it has used the fog of scandals to take this major step, flummoxing the Opposition in the process, overlooking the fact that there will be aggressive American presence following this decision.
The retail industry in India is of late often being hailed as one of the sunrise sectors in the economy. It has made India the cause of a good deal of excitement and the cynosure of many foreign eyes. With a contribution of 14 per cent to the national GDP and employing 7 per cent of the total workforce (only agriculture employs more) in the country, the retail industry is definitely one of the pillars of the Indian economy. But FDI in multi-brand retail has stoked fears not only of unemployment but also of creation of monopolies in the food sector. Against this background, the UPA government’s decision will toll the death knell for small retail stores across the country. Also the government has failed to consider the long-term extraneous costs that would supersede other advantages. Though refrigeration, supply chain management and better transportation will reduce costs, this is not enough. The onus will be on farmers to increase yields per acre, which will entail the use of more powerful pesticides, herbicides and fertilizers. Second, this will facilitate the backdoor entry of genetically modified crops and produce. The third and the most important thing that we should worry about is the labour problem. It could trigger a search for cheap labour, which might include child labour, to cut production costs. Hence, the ‘farmer-will-benefit’ propaganda is not true as it did not happen in the West. It seems that the decision of allowing 51 per cent FDI in retail seems more ‘skewed’ towards favouring MNCs than appeasing Indian citizens.