UPA chants FDI Mantra for Multi Brand Retail Samadhi in India

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Nagarjuna

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Jul 13, 2010, 6:59:49 AM7/13/10
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Critique of Discussion Paper : UPA Chants FDI Mantra for Multi Brand
Retail Samadhi in India
Subject : ISSUE OF DISCUSSION PAPER ON FOREIGN DIRECT INVESTMENT (FDI)
IN MULTI BRAND RETAIL TRADING – MB-RT FORMAT IN INDIA

In line with many policy experiments in the liberalization agenda of
the ManMohan Singh era in Indian politics, this paper seems to be an
experimental achaar / pickle making of wishy washy aspirations.

It seems the obsession with social engineering and political economy
changes is being attempted in a covert manner.
The ideology of emerging market economic liberalization, based on
World Bank and IMF paradigms of GDP growth, via suitable, host
country, policy flexibility, to invite unbridled foreign investment as
the prime engine of economic change seems to be a outdated approach.
The framers of the Discussion Paper also at times seem to be
spluttering in their attempts to act as unconvincing apologists for
crony capitalism in modern India.
Consequently, one can conclude, the Discussion Paper is seriously
inadequate in the hands of the Department of Industrial Policy and
Promotion (DIPP) or the commerce Ministry without fresh thinking and
informed inputs from political stakeholders in the Indian retail,
agricultural and labour markets.

Instead of serious due diligence in the process of dialogue and policy
incentives with the diversity of political stakeholders and a critical
examination of regulatory infrastructure in developed economies,
arbitrary half truths and wishful thinking is being peddled as
economic vision for development of Indian retail sector and
upgradation of the fruits and vegetables market backend.

The BJP, the main opposition party in India and its coalition avatar
NDA, have foolishly vacated the bandwagon of non sectarian inclusive
growth.
Man Mohan Singh has redesigned the Congress Party as the sole placard
holder for the economic agenda of non sectarian inclusive growth.
This placard is however looking worn and tattered after the recent
fuel hike policy decision. The BJP is yet unable to get its act
together on the bandwagon of non sectarian inclusive growth to
refashion its political economy ideology despite its tentacles like
penetration into the visible stakeholders who are going to get edged
out in the battle for Indian retail space.
Under Nitin Gadkari, the BJP seems to be incapable of reinventing
itself to snatch the agenda of non sectarian inclusive growth from
Congress and UPA.

India will surely become an interesting place for politics once the
FDI in Multi Brand Retail is bulldozed through by UPA. Maybe the very
introduction of this policy will make the non visible stakeholders
visible and bring them to the policy making forefront, eclipsing UPA
and Manmohanomics vision. Or maybe the Gandhi family may still realize
that the Prime Minister could lead them into electoral debacle if the
BJP and the invisible stakeholders of Indian retail democracy are able
to reinvent themselves on the platform of non sectarian inclusive
growth.

The absence of BJP as a serious political contender in the policy
debate does not mean that UPA-2 cannot find the resources for a more
balanced view towards retail investment keeping in view Indian social
and economic objectives.
That this is being done in the absence of serious and sustained inputs
from stakeholders and likely social dropouts of social engineering on
a massive and national scale, whose economic impact is clearly not on
the radar of the UPA-2 government and policy making circles, is
alarming.

Migration, demographics of tropical countries, reskilling, deskilling,
labour movements, distress migrations, rural suicides, slum social
mobility in India are all unfashionable sub branches of economics and
the national statistics community when compared to issues like
globalization, power projection, economic growth models and
aspirational economics of Planning Commission and economists turned
politicians.

So while sustained studies of globalization and compulsions of
recession in industrial developed economies are still not fashionable
topics amongst the economic mandarins of emerging countries, it is
scandalous that labour and social capital are not serious bureaucratic
skills cultivated by Indian bureaucrats and economists turned
politicians or technologists turned civil administrators.

As such this paper fails to deliver a coherent basis for discussion on
liberalization of Big monopolistic retail in India on Western MNC
models. As per the current models of Western origin MNC models of
retail space creation, penetration, growth, market share consolidation
and expansion, large scale assumptions about social conditions need to
be met for big retail to deliver national objectives of GDP
multiplication and supply chain rationalization and closing of
productivity gaps.
Wishful overtly optimistic thinking articulated in such discussion
papers serves no purpose, even as alarmist scenarios about FDI in
retail are not warranted.

Such a critique is totally absent from the forwarded Discussion Paper.
It fails to test the waters of social costs to be borne by
stakeholders in Indian retail economy by a one sided projection of
economic gains from GDP multiplication through the route of Central
government led liberalization of FDI in MB-RT format in all of India.

The supposed advantages of regulated FDI in MBRT are enumerated
without conviction and more as wishful free market dogma. This is
unacceptable in the post Lehmann Brothers global banking and economic
regulatory scenario.
There are some sub issues which could easily be resolved if one had a
detailed study into aspects of MB-RT in developed economies and it is
futile to expect people to comment on these as if stakeholders are
astrologers and bureaucrats and mandarins who write such discussion
papers are patriots with best interests of the country at heart.
One sub issue : study impact of large retail stores on rural
employment
study impact of MB-LRS on local economies
study impact of MB-Large Retail Store Chains on Food Policy making,
Food Wastage, Packaging Disposal and Recycling, Net Employment Created
or decimated in a country of comparable population growth and
migration patterns to India.
Impact on regulatory infrastructure, law making and government anti
monopolistic machinery.

1. The discussion Paper clearly mentions that FDI inflow 194.69
million USD represents 0.21% of FDI inflow into the country during the
period April 2006 – March 2010.
The reasons for this “pittance of FDI inflows” merits serious
consideration and revaluation of the doctrine of liberalization
practised by the Congress Party under ManMohan Singh and its failure
to engineer social development through economic dogma.
2. There is no indication if there has been any approach from any of
the state governments for the review of policy. In the absence of
such, the case for the blanket introduction of such an abrupt U-turn
or change in policy at the national level has not been made.
3. Limitations of the present setup have been mentioned regarding lack
of investment in the logistics of the retail chain leading to
inefficient market mechanism. Again no analysis has been provided why
this failure has been presided upon for so many decades. There seems
to be a paralysis in the agriculture sector where the minister in
charge is more interested in local politics and issues like cricket to
focus on more serious issues.
Are there really no options to deal with fragmentation and linking to
distant markets ? This is a tragic comment on the priorities and
paralysis of UPA government. And then to suggest that opening of MBRT
will solve the woes of fruits and vegetable sector is absurd and like
a dying man clutching at the straws before sinking in deep waters.

Much attention has been placed in non independent studies and their
recommendations in the Discussion Paper in Section 4.0 “ Gist of
Recommendations of Various Studies “, from Pages 7 – 13
These read like a parroting out of puerile prescriptions of Crony
Capitalism in a country where stake holder rights are still not
enshrined in Industrial Law nor mechanism evolved to incorporate views
in policy making :
1. FICCI and ICICI Property Services Report February 2005
2. Center for Policy Alternatives Report
3. Mid Term Appraisal of Tenth Plan
4. ICRIER Study of 2005 – FDI in Retail Sector in India
5. ICRIER stury of 2008 – Impact of Organized Retailing on Unorganized
Sector
6. Economic Survey 2008-2009
7. Parliamentary Standing Committee on Commerce - Committee on Foreign
and Domestic Investment in Retail Sector – Again no targets, no
detailed statistics and what-if Scenarios are adequately examined.
This is shocking to say the least.

The last of these is the only study with political weightage.
The other reports seem like influence peddling reports in the service
of crony capitalism by non independent sectorals like real estate
speculators, credit multiplier agencies interested in working capital
recycling.

It seems food retailing is the segment that is most mouth watering for
the proponents of Crony Capitalism and FDI in MBRTF – Multi Brand
Retail Trade Format.
It seems that the Discussion Paper is yet another attempt of
proponents of Crony Capitalism to divert attention from serious policy
studies to rapid judgements based policy making. This is unfortunate
and tragic.

Impacts on :
Food Security
Food Prices
Food Waste
Farmer Incomes
Cropping Patterns
Land Treatment
Employment Potential
Packaging Materials
Energy Diversion

It is puerile to think that the Tescos, Carrefours and Walmarts are
desperate to lend a helping hand to an Agriculture Ministry of a
country headed by a minister more interested in the politics of
CRICKET.

The bias against farmer incomes evident. No attention paid to
likelihood of further decreasing farmer bargaining power. In fact
government, with its policy of compulsory levy, is the last resort for
squeezing farm gate prices further to assist food chains.
Farmer incomes have been stabilized only due to EU and American
subsidies. One wonders what steps Indian government is proposing for
subsidizing Indian farm produce.

One gets the feeling it is an essay written by some bureaucrats in a
hurry to dash into the air conditioned environs of a retail shopping
mall as a diversion from having to write an essay in South Bloc, on
the instructions of political masters.
On how the Carrefours in Paris, Tesco in London and Dublin, Marks and
Spencer are desperate to align the Indian food chain along rational
principals imagined by economists desperate to upgrade indian food
chain efficiencies.
Forced to write an essay on the supposed conglomeration of all round
advantages to consumers, food producers, food chain value adders,
warehousing facilities providers, logistics specialists from cold
countries desperate to move lumbering frozen food caravans through the
dusty roads of Punjab hinterlands to Bangalore and Chennai.
The pipedreams of economists on social engineering mission in India,
through the superficial route of central FDI approvals to MBRT from
France, UK and US, reveal the hollowness of economic prescriptions for
development of Indian fruits, vegetables and horticulture sector or
food industry.

As for the supposed ultimate benefits to consumers not mentioned in
the discussion paper is that, at last one will have air conditioned
shopping malls and clean elevators and shining glass windows to stare
into to get away from the oppressively long power cuts in non metro
India and the heartlands where Indian public continues to eke out a
miserable existence far away from the air conditioned chambers and
offices of New Delhi mandarins wearing white linen trousers they
picked up cheap on the last foreign jaunt to Singapore, Hong Kong or
Dubai retail shopping heaven.
So does this Discussion Paper seriously advance the debate on
transforming the Indian retail landscape from peddling worn down
arguments advanced by retail consultants and their more dignified
elder cousins, the ideologues of crony capitalism to a vibrant,
competitive landscape of value addition from urban to rural India ?
I am afraid it does not.

Possible advantages : The upper middle class section of Indian
population which can get visas to experience retail shopping in
foreign countries may be persuaded to increase domestic consumption
rather than make foreign country shopping jaunts.
Some low skilled jobs like shelf stacking, merchandising grocery and
manning checkout counters and security jobs of preventing retail theft
will be created which will take the pressure away from government of
failing in creating industrial and manufacturing employment avenues
for poorly educated urban students looking for their first job in a
labour market experiencing glut.

Conclusion : No Indian economist worth his imported Dandi salt or for
that matter his locally manufactured Cambridge or London School of
Economics salt would wish that upwardly mobile urban dwellers of
Indian nationality should be deprived of their chance to take off from
Indira Gandhi International Airport Terminal 3 or that the retail
arbitrage involved in the commerce of Wimbledon cotton towels
manufactured in Gujarat or the cool linen trousers manufactured for
Marks and Spencers in the sweatshops of Okhla and Noida being
available for purchase only in Paris, London, dubai, singapore,
Shanghai or New York. The politician inside the economist would surely
want the VAT to be collected by the Indian government and contribute
to the tax receipts of Pranab Babu.

One is puzzled what exactly has changed so soon after the Honorable
Parliamentary Committee Report as to merit a Discussion Paper in
preparation for the wholescale reexamination of the question of the
supposed benefits of Retail FDI to the farmer in Vidarbha or Mrs
Kalawati of Rahul Gandhi fame ?

Maybe Indian Retail Democracy still has some lessons to teach to
economists. Let us prepare for an interesting political landscape in
the years to come, when we have the figures of the much hyped net
foreign investment inflow into food backend technologies and logistics
of Indian food industry.
Regards,
Nagarjuna
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