Many would have guessed that am going to write about the recent decisions of the govt to allow FDI in multi brand retail and yeah am going to write my opinion on the same.After the so called big bang reforms, FDI has become synonymous with Walmart!!!! LOL!!!! There have been rallies organised for and against the decision to allow 51% stake in multi brand retail. The decision also cost UPA II its biggest ally!! The TMC withdrew support opposing the Congress led coalition's decision. A similar decision was taken in Nov 2011, but had to be repealed due to opposition from the allies. Anyways stories apart. Let me come to the point.
There have been articles in news papers supporting and opposing the decision. Some newspapers have cited the case of Thailand and Indonesia and have said that FDI decision will swallow the local shops. One should understand the scenarios in Thailand and Indonesia were entirely different to that of India's. Thailand was the mother of 1997 Asian Crisis which engulfed the South East Asian nations esp Indonesia, Japan, Singapore, Malaysia. Thailand and Indonesia were worst affected and IMF had to step in. We all know IMF's package always comes with a heavy penalty and Thailand had no say in framing the FDI rules. Same is the case with Indonesia. So they were made to accommodate the interests of biggies like Walmart, Carrefour etc. This is not the case with India. India had no such pressures. India's retail trade is worth thousands of crores and the share of organized retail is just 4%. We have gradually tried to regulate our retail trade. We first let local super markets open up shops. Then it was the local biggies like TATA, Reliance, Future Group, Aditya Birla Group which opened their shops. The local shop traders, who feared they would lose their jobs, still have their shops open. The super markets and the local shops have co existed. Now the govt has decided to let foreign players in. One should understand, in the times of Globalization, India should align itself to the world. If she fails to do, she will be heavily penalized just like Thailand, Indonesia in late 1990s.
Also, the regulations which the Govt has framed seem to balance the local interests. India is the largest producer of fruits and vegetables yet we face acute shortage of the same leading to inflation. This is due to the fact that half the produce goes waste for want of proper processing facilities. The rule that 50% of the investments should be in back end infrastructure is a step in the right direction. It might to a great extent, reduce the wastage. Also, the biggies are allowed only in cities with over 10,000,00 of population. Also its mandatory for these biggies to procure 30% from the local markets. This is also a welcome step. One big advantage of opening up FDI in Retail is that atleast now the Govt can make money by way of taxes because all the transactions will be channelized. This might in turn let the Govt initiate a few more social sector reforms like the MNREGA. Also the most important thing is the confidence which the was lacking in the recent times. We all should understand that India's fiscal deficit and CA deficit have been sky rocketing. For every one rupee that dollar gains, India has to pay Rs.8,000 cr extra for its fuel bill. The Re has gained to RS. 52.40 against USD from a whopping RS. 57 before the decisions were made.
But there are a few genuine concerns which the govt should address. The Govt should ensure that the back end infra facilities which the biggies might bring in don't burden the farmers. The biggies shouldn't charge the farmers for these facilities. Also, we all know the mandatory 30% local sourcing clause of single brand retail was relaxed due to pressure from IKEA. Govt should also elaborate what steps have been taken to ensure that local shops and the biggies co exist. The genuine concerns which the people have raised should be addressed by the Govt. After all, we are a democracy and the people have the right to questions.
But there are a few genuine concerns which the govt should address. The Govt should ensure that the back end infra facilities which the biggies might bring in don't burden the farmers. The biggies shouldn't charge the farmers for these facilities. Also, we all know the mandatory 30% local sourcing clause of single brand retail was relaxed due to pressure from IKEA. Govt should also elaborate what steps have been taken to ensure that local shops and the biggies co exist. The genuine concerns which the people have raised should be addressed by the Govt. After all, we are a democracy and the people have the right to questions.
