Foreign Direct Investment In Multi-Brand Retail- Too Dangerous A Game
The Foreign Direct Investment in multi-brand retail sparked off a furious debate in India and the decision of the Union Cabinet which drew sharp criticism as well as support from some quarters needs to come under a rational scrutiny and dispassionate analysis. We had the interesting spectacle of all the political parties including BJP which is known for shifty stand on many issues taking a diametrically opposite stand to its original position of support a few summers back. The decision provided sufficient ammo to UPA-baiters who forged a grand alignment to frustrate the efforts of the government on this score. And their efforts were largely successful as the government was forced to abandon the idea in the face of such opposition coming even from its own allies like TMC and DMK. Let us leave the questions of opportunism or pure reason which went into shaping the respective stands of political parties and address the issue in its true light.
The first and foremost reason which - as we were made to believe - that investment which would come in the form of foreign direct investment would create infrastructural facilities like cold-chains and help preserving our farm produce otherwise wasted in the absence of them. Foreign investment in the realm of infrastructure is nothing new and eminently desirable. It is painfully true that our wastage on this count accounts for total production of a small country! And if our domestic investments are found to be insufficient, there could not be any rational argument against the entry of foreign capital. More so, when we have foreign money in our capital markets!
The second argument favouring entry of foreign players and capital and what is touted to be a blessing for Indian farmers has considerable questionable merits and has been rightly opposed by many. The protagonists have waxed eloquent on the benefits which are likely to accrue to various stake holders viz., farmers, consumers and others. Let us take the case of farmers first. In United Kingdom whose landscape is dotted with majestic supermarkets and shopping malls and the land which adores this culture, there was an advertisement issued by British Pig Association levelling various allegations of manipulation and gross exploitation by supermarket operators and similar is the line of thinking of dairy farmers of that country. So much for the love of these super-chains biggies to come to the aid of our farmers and free them from the clutches of middlemen! Are we not going to replace one set of exploiters by another!
Now coming to the more significant issue of the kind of influence that these supermarket chains which are owned by big multinationals and transnationals. There is a history of these business houses muscling their way into international markets by forming powerful lobbies. It is not clear at this point if these retailing giants would be allowed to source their supplies from various European or other countries where agriculture is highly subsidized activity and if that be so, these can easily coerce Indian farmers into selling their produce at a price dictated by them. Agricultural and farm subsidy is a very big and contentious issue which is yet to be resolved in WTO round of talks. A likely scenario would be putting Indian farmers against farmers of these countries. There might be attempts to introduce Genetically Modified foods which is another contentious issue. There might be attempts to dictate patterns of crops. As these supermarkets mainly cater to the needs of the upmarket of city-slickers, a tendency to grow basic grains less and more of the demands of cities and metropolises.
There is glib and smooth talk of foreign direct multi-brand retail would ensure elimination of middlemen, fair price to farmers and lower price for ultimate consumers! Going by experience, it looks like a surreal picture painted so rosy! The presence of multinationals in other sectors has not been an unmitigated blessing in India. Their method of capturing markets has unethical overtones. First, they resort to manipulative pricing to drive their small competitors away or simply gobble them up to eliminate competition to emerge dominant entities and finally establish their rule over consumers to extract price of their ask!
The most serious objection to the entry of these houses in retail sector is on the ground of massive unemployment that it is likely to entail. Perhaps India belongs to those most underdeveloped countries which practices discrimination of the worst when it comes to employment. While organized sector which hardly employs a small percentage of total workforce entitling them to all kinds of cushions, a vast majority is left to fend for itself without any social security. Thanks to the pay commission bonanza, the government employees are an elite class of workforce. In a scenario like this, the government has simply no business to destabilize the lives of 22 crores Indians who eke out a living as small retailers spanning across all nook and corners of the country.
A fair reading of the points raised would make it amply clear that contrary to what is being bruited about by the incumbent government, the entry of foreign capital in retail sector is fraught with dangerous consequences keeping in mind the stakes of so many quarters. We must free ourselves from some of our illusions and delusions both.
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