FDI retail boost for companies, not aam aadmi
The UPA government has stirred a hornet nest by clearing the policy of foreign direct investment (FDI) in multi-brand retail just as a start of a stormy winter session but it has triggered a bigger debate — whom it will help.
For me, one definite beneficiary would be the multi-nationals in the business of multi-brand and second could be farmers. The losers would be small retailers and consumers.
India’s huge market provides ample business opportunity for MNCS with a huge difference in farm gate and end consumer price. Definitely, the farmers will get higher price when the companies enter the business but after they wipe out the existing food commission agents, whether the same high price will be offered should be an issue of worry for farmers.
It has happened in areas where big companies have started procuring horticulture items like Himachal Pradesh and Maharashtra. The big farmers, who can produce quality by investing in horticulture gain, while the small farmers fail to compete and have to sell their produce at marginal prices.
Big companies entering the FDI business will not help the consumers as prices will remain high as companies will control the retail price. There is a fear of cartelization of prices by companies as they had done in case of horticulture produce like apples by storing the fruit in cold storages to create a fake shortage in the market. Through controlled supply to the open market, the companies have controlled the retail prices with very less in the government’s hand to check the malpractice. The danger would be bigger when these companies have control over all products.
In all this, the biggest loser will be for the India’s retailer who would find it extremely difficult to compete with the money power of the companies. The companies will enter small markets with their retail shops as happened in United States and Europe, threatening their existence.
Commerce minister Anand Sharma defiant claim that this will not happen has a few takers. He has tried to sell the policy as win-win for the country as it will create employment and check inflation. I doubt that will happen.
FDI in multi-brand retail will mean huge job losses in the existing food chain market as a parallel system will be created. So, the claim of Sharma that FDI in multi-retail will create jobs needs to be looked in this context. The BJP, which has a huge voter base among retailers, fears it the most.
What has amazed many analysts is the hurry shown by the government in approving the policy at the time when food inflation is very high, job creation is poor and the economy is slowing down. FDI in multi-retail will definitely bring foreign investment and will create rural infrastructure but its impact on economy remains to be seen.
Sharma, who has defended the government decision vehemently on television channels, had to face lot of opposition in cabinet, where his colleagues raised these issues. Another area where Sharma also erred in not holding consultation with stakeholders before getting the policy approved. Consultations were needed, as it will change dynamics of retail business in India.
The concern for the UPA government is its political fall-out in forthcoming assembly elections in Uttar Pradesh, Punjab and Uttarakhand, which has a huge farmer base which can gain or lose from FDI in multi-brand retail.