The principal argument for 'FDI in retail' is that the deep pocket and know-how of the multinational supermarket chains (read Walmart) to establish supply chain will make rural India and farmers prosperous. One needn’t be a connoisseur to discard this argument to dustbins. This only showcases the 'Impotence' of the Govt, to be relying upon Walmarts and Carrefours to develop our agricultural infrastructure.. SHAME!! After 65 odd years of independence, do we really need MNC's to install cold storage facilities for us..? Cold storage chain is neither a proprietary technology nor rocket science. Is it not sheer sheepishness..? Read on.
Let us not favor our country’s food security to be outsourced to foreign giants who are nothing but crony capitalists struggling with a slowing economy, with huge investable capital which is otherwise non-deployable. I am not saying they are wrong, as they protect their interest, shouldn’t we be protecting ours? They can operate for loss and can afford a gestation period of even 10 years or more before they break-even, now that is a good enough period to ‘wipe off’ the competition by eliminating all the marginal players. And the so called “organized retail” players will be bought off, if not washed off.
I would wish to remind what Pepsi and Coke did to our domestic beverage industry. All the local bottle manufacturing companies were acquired by these giants, empty bottle supplies were refused to the local players, the soda bottles in circulation were bought and crushed, fridges were given free of cost to all shops and forced not to stock any local brands, a few best selling brands like gold spot, thumbs up were acquired and killed despite huge popularity and demand. Is this is what you call as “market expertise”..? my foot, isn’t this bloody unethical crony capitalism? Pepsi and Coke broke even after I don’t know how many years, may be it took them decades, can our players afford that..? Take it from me, the same will happen to Indian retail & food chain if the Walmarts, Sears and Carrefours are let in.
Yet another huge threat, the market will be flooded with cheap Chinese products as the FDI clause allows them to source 30% from anywhere in the world and need not necessarily be sourced locally, there will be no mechanism to track how much is being imported, I wouldn’t be surprised even if 70% is sourced from China, that will be a huge blow to our already struggling domestic SME’s. The need of the hour is reforms in manufacturing sector to nurture local Entrepreneurship and SME’s, if not nurture, at least don’t kill them for heaven sake. Again you might argue why can’t we compete with the multinational giants, remember, you must first ‘live’ in order to compete.
Many argue the point that since we have already allowed big local players like Reliance, TATA and Birla, why should we really oppose foreign players. Read on.
The homegrown supermarket chains does not control the food distribution chain unlike the foreign giants who propose & intend to. Moreover, Domestic retailers source domestically whereas international retailers operate on the principle of buying internationally at the cheapest cost (read china).
Traditionally self-employment has been the largest source of bread earning in this country. Agriculture and retail are the largest job providers in India especially, rural India, has the UPA Govt proposed any credible plan for alternate source of employment for the millions self employed in Retail Industry..? Has the UPA Govt initiated manufacturing sector reforms to make sure that we remain competitive vis-à-vis China (so that the Multinational retailers may source domestically)..? once all this is said and done, we may accept 100% FDI in retail, why just 51%.
Now let us consider the economic consequences. In India, agriculture has been operating as a perfectly competitive market. In economics, perfect competition implies a market where there are innumerable number of buyers and sellers. In a perfectly competitive market like that of agriculture, everyone is a price taker and no one is a price maker, which essentially means that the market decides the price of the goods produced and not any individual buyer or seller. Say if the multinationals are allowed to take stock of our agricultural sourcing and food chain, farmers will be forced to sell their entire proceeds to the cartel formed by a handful of foreign retailers, eventually farmers will be forced to cultivate what the MNC's want them to.
After installing their godowns and cold chains, they will have absolute control over agricultural procurement & marketing, and they will no more be price takers but 'price makers'. In a nutshell, the perfectly competitive agricultural economy will be disrupted to become an oligopolistic market, where the cartel becomes the price maker and consumers will be price takers (similar to oil marketing companies, I am quoting this example since there are a handful of companies selling oil, whereas there are large number of consumers). The entire management of the food economy will be in the hands of a few wealthy retailers like Walmart, Sears, Carrefour. In a country like India where we have marginal farmers and population exceeding a billion, (which is ever growing), we simply cannot afford our food economy to be managed by multinational retailers who are only concerned about 'private profits'.
Traditionally self-employment has been the largest source of bread earning in this country. Agriculture and retail are the largest job providers in India especially, rural India, has the UPA Govt proposed any credible plan for alternate source of employment for the millions self employed in Retail Industry..? Has the UPA Govt initiated manufacturing sector reforms to make sure that we remain competitive vis-à-vis China (so that the Multinational retailers may source domestically)..? once all this is said and done, we may accept 100% FDI in retail, why just 51%.
Now let us consider the economic consequences. In India, agriculture has been operating as a perfectly competitive market. In economics, perfect competition implies a market where there are innumerable number of buyers and sellers. In a perfectly competitive market like that of agriculture, everyone is a price taker and no one is a price maker, which essentially means that the market decides the price of the goods produced and not any individual buyer or seller. Say if the multinationals are allowed to take stock of our agricultural sourcing and food chain, farmers will be forced to sell their entire proceeds to the cartel formed by a handful of foreign retailers, eventually farmers will be forced to cultivate what the MNC's want them to.
After installing their godowns and cold chains, they will have absolute control over agricultural procurement & marketing, and they will no more be price takers but 'price makers'. In a nutshell, the perfectly competitive agricultural economy will be disrupted to become an oligopolistic market, where the cartel becomes the price maker and consumers will be price takers (similar to oil marketing companies, I am quoting this example since there are a handful of companies selling oil, whereas there are large number of consumers). The entire management of the food economy will be in the hands of a few wealthy retailers like Walmart, Sears, Carrefour. In a country like India where we have marginal farmers and population exceeding a billion, (which is ever growing), we simply cannot afford our food economy to be managed by multinational retailers who are only concerned about 'private profits'.
What we brand as ‘unorganized retail’ contributes a mighty 40% to the services GDP which is 60% of the total GDP. These people are community entrepreneurs who make their livelihood without any dependence / help / support from the Govt, not even Bank credit and yet contribute 40% to the services GDP!! Is it not criminal to brand them as “unorganized”. .? I am sorry, I don’t buy that.. I know I would be alone on this, what can I expect from a society where even the word ‘Local’ is synonymous to ‘Cheap’!!
Jai hind.
