Foreign Direct Investment in Indian Retail

I was thinking on various aspects of social problems from the past few years. But I failed to document the views of mine. So I thought of writing blogs regarding those issues. So I took the current hottest topic “Foreign Direct investment in retail sector in India” as a issue and writing my opinion and concern on this.
Foreign direct investment (FDI) in retail sector is direct investment into big retail stores in a country by a company located in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is done for many reasons including to take advantage of cheaper wages in the country, special investment privileges such as tax exemptions offered by the country as an incentive to gain tariff-free access to the markets of the country or the region.
As we have seen in news papers, TV news channels and in various media, majority of the people and political parties are opposing the FDI in retails sector in India. But for the common people like us know only tits and bits of the issue. So before going into the details of this issue please read the OFFICIAL release of the cabinet decision regarding FDI in retail from the following link. http://pib.nic.in/newsite/erelease.aspx?relid=77619
We know that the most of the media are controlled by politicians and indirectly by the corporates. So I usually avoid in making any decision by watching these news channels. So I choose social media is the best way of communication for the common people. So before going into the conclusion regarding this topic I want to go through each and every topic in the decision taken by our central cabinet ministry. Common man can’t do anything since we have parliamentarian way of democracy not the people’s democracy. We have to give respect and abide by the constitution of India because it’s written from us. I.e. “We the people of India”.  So I want to quote some important lines from our cabinet decision and express my views on it.
Existing policy allows foreign direct investment (FDI), up to 51%, in the Single Brand Retail Trading (SBRT) sector, is permitted, under the Government subject to the some conditions (for conditions please go through the above link of press information bureau of India). This was permitted from 2006. Example for this includes Reebok, Nike and various other brands which we are using today. They have to make partnership with some Indian companies and they can invest in retail sector up to 51%. Now our government has increased the percentage of investment from 51 to 100. This is regarding single brand retail sector. The other bigger thing is now our government is allowing FDI in Multi Brand Retail Trade (MBRT) may be permitted up to 51%. Our Govt is giving lot of reasons and rationale for liberalization. Below are some of it:

• “Leveraging foreign investment in supply chain infrastructure”

I definitely agree upon this that we lack in supply chain infrastructure that includes transportation, storage, communication network etc… We have seen that our valuable grains and other perishable food items are getting rotten in the storage provided by the government on one side and thousands of people are dying because of starvation on the other side.  Due to this wastage of food our farmers are losing money directly and indirectly. Government gives some figures that only around 15% of the amount what end consumer pays is going to our farmers from the existing retail outlet. Yes I agree upon all these things. But what I do not understand that why so called honorable government requires investment from foreign countries to improve the infrastructures in India.  Don’t we have enough money to protect our farmers?

• “Bringing supply chain Efficiencies”

Even I agree upon this thing. We have very unscientific methods of handling supply chain link for the most of the retail items. We have so many experts in handling retail supply chain links. Take advice from them. If foreign countries supply chain models are good then adopt them by modifying to our country. Leave all these things. We have best supply chain models in our country for the milk production such as Amul. Even our state owned Nandini is working in efficient way (as far as I know our state farmers are getting around Rs19 per liter of milk directly from the government). Adopt these models for other retail sectors also.
Also government gives various other reasons such as employment creation, regulation of food inflation and getting rid of various levels of middle men. Also it gives various figures in other countries regarding the advantages of the allowing FDI in retails sector. But if we google it we will come to know the exact impact of it.  Please read about the various conditions that have put on the investment from the above link.
Next let me share my views on how it impacts the farmers. Our country has been invading from thousands of years. Logically if India is not rich nobody would have come. I don’t know whether we should be proud of our richness or not, which is giving its resources to other countries from thousands of years. They come, conquer, make us dance to their tunes, and take our buck away. May be I am little become emotional but this is a fact. The monopolistic buying power of the large retailers would weaken the marginal farmer’s position, resulting in lower share of value to them, dictating of the production techniques and output by the larger retailers and destruction of diversity in Indian agriculture. The open market does not work on social service. It negotiates the best for itself so it can corner the most for itself. Big retailers and food processors alter crop selection to have farmers produce at their discretion and not by will. Corporate houses would not like to mingle with small and medium farmers because they are at a position of advantage and would strike contracts with a few big farmers thereby making the small ones succumb. FDI in retail would help only those farmers who collaborate with multinationals and accept their conditions, meaning they begin growing only those crops decided upon by their collaborators. If I am true we can visualize this situation in the movie “Mangal Pandey” where the East India Company forces our farmers to grow crops according to their needs. Initially the farmers will be paid as per their demand for their produce by the MNCs. Once the traders are gone, the farmers will be forced to sell at rates dictated to them. We are seeing the live examples of Pepsi and coca-cola how they are selling cheap soft drinks (70ps per bottle to Rs15 per bottle) very costly after they have monopolized the soft drinks market.  Retailers would push the farming community towards growing genetically modified seeds with extensive use of pesticides and chemicals which would impact land fertility intensively. Corporate don’t source from small farmers but carry out contract farming or approach large farmers. Small and medium farmers till this date approach the traditional system of mandis, retailers source from this channel mostly. The gap between demand and supply today is created by the middlemen by initially paying a higher price when the crop season begins and when the season is at its peak, the middlemen make the excuse of compensating for their losses by reducing the prices and the irony is that consumer is paying the same amount of money.What is threatening is the reduction in the number of options the farmer is left with to sell his/her crop. Foreign retailers would replicate the same practices initially by wiping out the middlemen, then the small retailers and finally the street hawkers.
Before coming to the section of giving suggestions I would like to sincerely accept that I have used WalMart to the maximum extent to get the groceries when I was there in USA. But definitely I don’t know how it has impacted the farmers of that country. If we google it we can investigate on this.
The main problem with the current status of foreign direct investment (FDI) in retail in India is that it does not provide a level playing field to other players of the domestic and small sort. Large retail is inevitable, and that is a simple truth, but there has to be larger perspective for public good which seems to be missing from this policy. The people of India come first, including those who want a better product or service buying or selling experience, and at the end of the day it is their wallets which will decide where they go.

• The present Agriculture Produce Market Committee (APMC) Act requires urgent revamp if we really want to help the rural and agricultural sectors with a better go to market scenario. This includes the infrastructure development for the storage also.
• If our government is implanting this policy there should be strict guidelines to the companies that they should not sell cheap quality goods here when compared to other countries. If they want they have to mention that deliberately.
• There should be strict policy that companies which are investing here should not have blacklisted anywhere in the world.
• The payment processing and cash management should be done through the proper channels which are under the control of Indian government. Proprietary payment processing and cash management methods of the sort that take this control out of India need to be firmly denied
• There should be complete transparency in giving the permissions to these companies and the processing should come under RTI act.
• The government should waive off some of the taxes for the small retailers (may be this is very complex calculation).

Finally we the people of India have to think which is good or bad for our country and proceed.  It’s a simple economics that they are coming to make profit here not to do any social service for our poor farmers. If they are making profit means that our money is going out of the country i.e we are earning money from our land giving that to other countries. I am confused that should I apply “vasudaiva kutumbakam” formula here or not.
Jai hind