THE NAKED TRUTH ABOUT ( FOREIGN DIRECT INVESTMENT ) FDI

The Indian government unleashes big bang ( Foreign Direct Investment ) FDI reforms and the same have been termed as game changing reforms by all those who have sacrificed their intelligence, conscience and ability to speak for truth at the altar of ruling combine and a hoax by all those who have dumped all these positive human traits  in the basket of opposition. It is a pity that not even a single individual from amongst the total polity of the country dare put things in the correct perspective without singing the song of his affiliation.

Firstly, let us all be very clear that poverty alleviation will happen with growth and growth alone which can come only through huge investments in the next gen growth engines, namely

• Corruption mitigation and good governace
• Indian energy security
• Infrastructure and human resource development

No amount of social engineering, empowerment and redistribution of wealth can bring about poverty alleviation for these are plain and simple election rhetoric aimed solely at fooling the public at large. Sixty five years history of independent India is a mute witness to all this and the country has not achieved anything worthwhile towards the oft touted slogans of poverty mitigation, food , health, education, shelter and a reasonable human existence  for all. 

While the government widened its doors for FDI in many sectors, Arcelor Mittal has scrapped the project of a Rs 50000 crore steel plant in Orissa and Posco pulled out of a Rs 32000 crore steel mill in Karnatka. Similarly, in spite of the gates being open about a year back to FDI in retail in India, a measure that could have catapulted not only the growth story but changed the lot of millions of workers, farmers etc. no worthwhile investments have come to India.

This only shows that there is simple trust deficit and the foreign entrepreneurs are simply not willing to pour in their hard earned money on the assurances of a polity which cannot be depended upon  for their utterances and actions. The ruling polity has to understand that these players are playing with their own hard earned money and are not enjoying the grand perks and prosperity at the cost of public exchequer. Unlike the polity which can afford to be incoherent in their policies, inefficient in their actions and imbibe a couldn't care less attitude in fulfilling their promises for providing the necessary atmosphere and infrastructure for any profitable business activity, these guys want continuity, sincerity and an honesty of purpose at all fronts in the country they step in.

The naked truth about FDI is that it will keep on pouring in tonnes if Indian economy keeps on growing at 9% plus with insignificant inflation. This reality is India's for the asking if and only if India takes on the challenge of corruption, graft and black money mitigation as also providing good governance earnestly.India must understand that God also helps those who help themselves. Let India grow at  9% plus, FDI will get attracted even with the present norms of cap on FDI like flies get attracted to jaggery for if they don't partake in the Indian growth story on India's terms, the emerging Indian industry giants will swallow them in no time.

FDI In MULTIBRAND RETAIL

The Indian parliament is engaged in a hot debate on whether India should go ahead with FDI in multibrand retail or not. Various classes of people namely the Indian retail community including small retailers ( Kirana stores ), farmers, employees of Indian retailers, multi layered middlemen system and finally the consumer. Every body's aspirations are to have a prosperous and better life. This means interests of every class clashes with that of the other. Farmer will like to have maximum value of their produce, consumer will like to have maximum value for its money, workers whether in the farming sector or small retail will love to have better wages and better working environment or in other words will love to be part of organised sector and the middle men will will like to earn maximum through commission trade. It is in this confusing scenario that the country has to seek a solution for the betterment of its masses.

It is a basic fact that every individual whether belonging to rich, middle or poor class, whether from the farming community, working class, retailer community is a consumer and any means/ any policy measure that can help in lowering down the price to the consumer and simultaneously giving better remuneration to the farmer has to be welcomed. Any measure that moves the work force to organised sector from unorganised sector with better working conditions, amenities and basic perks like insurance and medical facilities has to be welcomed and not decried. If the scale of operations can help in manufacturing activity and reduce the cost to consumer in fields like automobile, telephone etc. without harming the small sector and in fact giving a big boost to all ancilliary industry and small scale industry.

In the light of this, the country must make use of benefits of scale of operation which is the only way forward to improve the standard of its masses and FDI in multibrand retail is one such measure that will go a long way in mitigating the plight of Indian masses with enormous high grade employment opportunities at all levels at the front as well as back end. Not going ahead with such an opportunity will be a retrograde step and an opportunity missed to improve upon the plight of India's poor masses.

FDI IN RETAIL IN INDIA : WHAT IS THE FUSS ABOUT?

With great difficulty and hesitation the UPA government has taken a small step in the reforms towards building a modern prosperous India. Most of the opposition parties have taken a position against this measure based on their so called political ideology which only caters to populism and vote catching rhetoric. Surprisingly even the principle opposition party which was a strong exponent of this reform when in power has shown the famous crab mentality and is vehemently opposing the measure.

The main advantages of this measure were discussed in FDI in retail in India : A step in the right direction and its direct and indirect contribution to the fiscal health of the country cannot be undermined. However India as a country has to take a call on few basic postulates of Growth of the Indian economy and mitigation of poverty. Unless and until polity takes a forward looking stance on major policies Indian poor will remain poor and a neglected lot.

• The first and foremost step in the right direction will be aiming at bringing in majority of Indian workforce in the organised sector with a shift from daily wage workers to regular employees in the quickest possible time so that they also start living a meaningful life with a better work place environment, medical care and retirement benefits. Such things can happen only when the scales of operation of every business whether in manufacturing, service industry, retail or construction industry are increased manifolds. FDI in retail and encouragement to Indian organised retail with strict adherence to employer employee relationship is definitely a game changer in this direction.
• A farmer is a producer of goods no doubt, but is he not a consumer. He produces say five items but consumes hundreds of other everyday requirement items and is going to be doubly benefited through higher prices for his produce and at the same time getting his everyday requirements at cheaper prices.
• Industrialisation, automation and large scale operations in any field are cost effective and ultimately result in lowering down of prices of products. These processes and operations have not harmed any country on this globe and there is no reason or truth that they will harm the Indian citizenry. In fact the woes of the advanced countries and their economies emanate from over doing of social security and unfavourable demographic mix . The Indian polity will do well if they foresee all this and succeed in not letting the country ultimately fall in this trap.

The Indian rulers and polity will do a service to the nation if they become a little forward looking and try to spend their energies in putting every Indian worker in the organised sector with proper policy decisions and legislative measures wherever required instead of harping upon the rhetoric of retrograde vote catching slogans.

FDI in RETAIL in INDIA: A STEP in RIGHT DIRECTION

The government of India has at last woken to the need of some policy reforms and has started with the FDI in retail and aviation which do not seem to fall in line with the vote bank politics of almost all the opposition parties of the country.Let us be reminded that many of them fought tooth and nail in seventies and eighties of the last century against mechanisation in farm sector, computerisation of the workplace including banks, railways etc. etc. by saying that these steps will increase unemployment. Today also we are no different and most of these parties who only believe in redistribution of already created wealth for bringing in prosperity rather than propelling wealth creation.Recently an article titled FDI in retail: made in united states has tried to project a lop sided picture of FDI in retail and this forms the basis of resistance by the opposition polity of the country who are only looking for some vote catching matter to fool the gullible citizenry of India.
Retail activity in a market covers following areas

 Fruit & vegetable sellers – Sells fruits and vegetables.

 Food stores - Result of bakery products. Also sells dairy and processed food and beverages.

 Non-Vegetable Store - Sells chicken and mutton.

 Kirana I - Sells bakery products, dairy and processed food, home and personal care and beverages.

 Kirana II - Sells categories available at a kirana I store plus cereals, pulses, spices and edible oils.

 Apparel - Sells men’s wear, women’s wear, innerwear, kinds & infant wear.

 Footwear - Sells men’s wear, women’s wear, kid’s wear

 Consumer durables & IT- Sells electronics, durables & IT products.

 Furnishing - Sells home lines & upholstery.

 Hardware - Sells sanitary ware, door fitting, tiles.

 General mechanize - Includes lighting, stationery, toys, gifts & crockery.

As it is the so called organised retail in the country is about 4-5% of the total retail. The interest of the retailer and employee always go against each other.  The footwear, apparel, consumer durables and IT, furnishings,hardware etc are part of the so called Indian organised retail, organised because of the fact that they just have sales tax number and not because they have employees rather than servants whose interests are taken care of through provident fund, medical insurance and other benefits due to an employee. Any good governance should aim at increasing the organised sector, be it a retailer or an employee.Incidentally retail in India is of the order of Rs 23000 billion (2,30,000 crore) and its contribution to the Indian budget  is  negligible but the contribution to black money is significant.These were discussed earlier in FDI in retail in India:why so much of opposition. But the Indian polity with all self professed concern for the poor man is working feverishly not to reduce this unorganised sector.

The talk about desruction of all the  Kirana and mom and pop stores along with 12 million retailers and 40 million employees is grossly over hyped and incorrect simply because its penetration in the Indian economy will be very very small.

• Villages and towns below 1 lakh have a population of more lest than 900 million and are bound to cover 80% of 12 million retailers and 40 million employees comprising of the following categories and will be totally  unaffected by FDI in retail as big ticket retail stores have not been allowed to operate there.
• Even in larger cities, where these stores will come in peripheral areas, presently only about 2-3% customers will be in a position to use the services of these mega stores because of limitations of personal transport, capacity and capability to store even a week's requirements.

 Then why go in for FDI in retail:
It offers many advantages, namely

• A 10% mega store retail which may become a reality in the coming 15 years offers

1. Rs 23000 crore of business which will abide by all the taxation rules of the government
2. Bringing about 0.2 million employees into the organised sector with all the accompanying  benefits of giving them better remuneration, working environment and social security.
3. Better earnings for the farmer and less rates to the consumer.

• Apart from these direct advantages it offers certain grey area advantages which mean a lot in India's march to progress.

1. Big boost to back end infrastructure like storage facilities including cold storage thus reducing the losses of farm produce
2. Improvement in logistics of perishable and other commodities and allied infrastructure.
3. Lowering of current account deficit directly and through feel good factor thus strengthening rupee. A 10% strengthening of rupee will reduce oil import bill proportionately and lower fiscal deficits thus helping in easing out inflation.
4. Any capital inputs to the retail sector will upgrade India's  realty sector directly. 

In fact FDI in retail is a step in the direct direction and offers a win win situation in all aspects of economy. For this to happen the wise polity of the country should stop resorting to vote catching rhetoric and act in the interest of nation and common man.

FDI in RETAIL in INDIA:WHY SO MUCH OF OPPOSITION

The decision of government of India to allow FDI in retail business has been the focus of so much of commotion inside and outside parliament. Whereas the government is certainly to be blamed for the timing of the decision particularly when more pressing and rewarding issues like fight against corruption, graft and black money, setting our electric power generation industry in order and increasing the pace of infrastructure development which need immediate attention. The opposition parties are just playing petty politics for short term gains and nailing the government with larger ulterior motives by instigating their vote banks with half baked truths. Interestingly the main opposition i.e. BJP was the original exponent of the idea of FDI in retail in India as early as the year 2000.
To day's call for keeping all shops and Kirana stores closed by various unions is motivated by reasons known to them only, for their businesses have not suffered in metros where large retail stores are already existing and are selling goods at substantial discounts to maximum retail price mentioned on these goods. The politicians who have taken up their cause have never raised an eyebrow on avoidance of various government taxes by this sector and its huge contribution to the black money generation. They have never taken up the issue of the wages, working conditions and benefits that are the right of all employees working in these stores. Their concern for workers and nation are simply deplorable.
To day Anna Hazare, a highly respected Gandhian leader who has taken up the issue of corruption in India on his shoulders and awakened the Indian masses for a war against corruption, has also jumped into the fray with  his objections to FDI which are out of sync with the modern concepts of globalisation.

FDI in RETAIL in INDIA: A CORRECT PERSPECTIVE

The total retail industry in India is of the order of Rs. 2.3 lakh Crores and 95% of it comprises of normal Kirana shops, mom & pop stores and about 5% of organised retail sector. The latest government decision to allow 50% FDI in retail is seeing a lot of resistance from the opposition parties as well as some of the constituents of UPA. This action of government will add a small percentage to the organised sector of retail Still the contribution from normal Kirana stores will be in excess of 90%. It is hard to understand the rhetoric of employment opportunities getting reduced as a result of this and it appears to be similar to the fears that were raised when decisions on computerisation of government departments, LIC and banks was taken a few decades back. In fact more job opportunities of a different kind and higher order will emerge which will give all the benefits of employment which accrue from organised sector employment, to our youth.
Any capital inputs to the retail sector will upgrade our back end infrastructure, logistics capabilities and  realty sector directly and benefit the employees involved in giving them better remuneration, working environment and social security. The unorganised sector of retail is a major contributor to black money through excise duty, sales tax and income tax avoidance. Big retail outlets will help reduce this tax avoidance and contribute to the tax kitty of the country.
Those opposing this step are playing petty politics and are in fact working against the interests of their major vote bank of poor citizens of this country as the farmers will be deprived of getting better value of their produce and small time Kirana stores of getting cheaper goods from wholesale mega stores. In fact they are only resorting to mud slinging and slogan mongering for it aids them in cornering the government for immediate political gains. If we don't take decisions that will bring about major changes in our work force capabilities, say from unskilled to semi skilled and finally to skilled one, we are not going to add to their's and country's earnings. The dream of becoming a prosperous and developed nation will never become a reality.