FDI In Multi-brand Retail Creates Political Storm

The Opposition Parties observed a nationwide  strike (Bharat Bandh) today against a slew of policy decisions of the central government. The pronouncements badly hurt the common man. Diesel and cooking gas prices have been steeply increased and FDI(Foreign Direct Investment) in multi brand retail, which was so far prohibited, has been permitted. The UPA-II government, headed by Manmohan Singh,has been hit by several corruption scams of excessively high values, but the worst happened in the case of allocation of coal blocks. The National Auditor(The CAG) has estimated the presumptive loss of around Rs 186000 crores, bigger than the 2 G scam of Rs 176000 crores and 70000 crores commonwealth Games scam. The striking issue is that the scam took place during the period when Manmohan Singh was doubling as the coal minister also. The matter caused so much ruckus in the parliament that the monsoon session was almost wiped out. The government has since been under attack from the opposition and demands for the resignation of the Prime Minister have been growing by the day. The sudden announcement of the FDI in multi brand retail is alleged to have been rushed through only to divert public attention from the coal allocation scam (called contemptuously the Coalgate). There was strong opposition to FDI in multi brand retail from almost all political parties. The Congress, rather the Prime Minister and some of his colleagues alone have been fervent in pushing FDI in multi brand. It is an issue of significance having very wide ramifications on production, marketing, development, management and employment to millions of Indians in the unorganized sector of the economy as also the entire Small Scale Sector. Between these two exists the highest employment. The opposition to FDI from different quarters was justified. The demand for a discussion in the parliament was also justified. Ignoring these crucial considerations, the beleaguered Prime Minister delivered the shock of notifying today the permission for FDI in multi brand retail. Earlier in the day, a full page advertisement was put in the national dailies extolling the gains from FDI.

The matter should have normally been placed before the parliament, as it is an important policy decision. The Ministry of Commerce & Industry, administers the Industries(Development & Regulation)Act 1951 and the rules framed there under to implement the provisions of the Act. In view of that position, the industrial policy has been placed before the parliament from time to time. Instead the ministry has given effect to the cabinet decision through an instrument called “Press Note”. Such decisions are generally notified . When such issues are placed before the parliament, it provides the opportunity to all shades of public opinion, eliminating the possibilities of opposition through strikes and press and media. The government has offended political parties across the board and the intelligentsia in the process to such an extent that demands for the resignation of Prime Minister Manmohan Singh are growing louder by the hour. The government is shaky and unstable. It might manage a vote of confidence, but that will be devoid of the moral sanction for governance.

Why does the government want FDI? Let me quote from the Press Note itself: ”

1.1.1 It is the intent and objective of the Government of India to attract and promote foreign

direct investment in order to supplement domestic capital, technology and skills, for accelerated

economic growth.  Foreign Direct Investment, as distinguished from portfolio investment,  has

the connotation of establishing a ‗lasting interest‘ in an enterprise that is resident in an economy

other than that of the investor.

The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India makes policy pronouncements on FDI through Press Notes/ Press Releases The regulatory framework, over a period of time, thus,consists of Acts, Regulations, Press Notes, Press Releases, Clarifications, etc.”

There is another movement undergoing against the government demanding that it bring back the trillions of dollars of money kept in foreign banks by Indians illegally to avoid tax. Invitation to foreign investors is not justified in the face of that movement. Foreign countries are reported to have supplied lists of the account-holders to the government, but the government is less than ardent on that issue. I take another extract from the Press Note:

“At least 30% of the value of procurement of manufactured! processed products purchased shall be sourced from Indian ‘small industries’ This procurement requirement would have to be met, in the first instance, as an average of five years’ total value of the manufactured! processed products purchased, beginning1st April of the year during which the first tranche of FDI is received.Thereafter, it would have to be met on an annual basis.

Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per 2011 Census and may also cover an area of10 kms around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking; In States/ Union Territories not having cities with population of more than 10 lakh as per 2011 Census, retail sales outlets may be set up in..”.

The point is, if permission is granted to work out the 30% requirement of buying from the small units on the basis of 5 years’ average, the chances are that the stores will procure nothing in the first two years from the small scale units and the  buyers would get used to foreign products and once addicted will always demand those products only, dealing a death blow to the small units.

For the domestic industry regional development is imposed as a condition for permission in the name of balanced regional development and Backward Area Development. Here in FDI, it is just the contrary- stores only in big cities with population above one million. Why not send them to backward areas?

The government has been hiding more than revealing. If FDI is in public interest, why the hesitation in sharing details with the people and the parliament? It is said that it will end the menace of the middleman. Not true, because the FDI is limited to 51% in multi brand retail, which means 49% still remains with the elusive “middle man”. It is unfortunately the conservative Indian attitude to money and the wealth creators. There is no end to beggars, including for elections, even though Indian supremacists are the most vocal for Ages seeding hatred for wealth (in the name of Maayaa or illusion). All these preachers have become rich by giving sermons against wealth and the wealthy. They have also started their international trade and are reported to own islands and mansions and planes and cars and luxury liners! Carrying on the campaign in the name of “middle man” is trading in hatred against those who provide valuable services at the doorsteps in inaccessible areas, provide micro finance, have social bonding and are a part of a socio-economic system, which needed to be improved drastically. Even on this 21st Day of September 2012, the rural transport is provided by the local skills by putting into service a contraption far more useful than any transport vehicle- it is called Juggaad and runs on village roads made of dust only. The Government has failed to provide anything to the village folks in the past 65 years and will not be able to do anything in the next 100 years with FDI because of this attitude towards money and the moneyed. The leadership is thoroughly corrupt and yet attacks the creators of wealth. The Manmohan Singh government has shown no ardour for the improvement of the existing industry, though they have been publishing open letters to the Prime Minister, yet there is no let up in rising crescendo for FDI in multi brand retail. Who is this group of buddies whom the government is keen to bring under the screen of FDI? Wal-Mart is being talked about to mislead the people in believing that it is America that is behind all the pressure, but in reality it might be the persons hiding black money in tax havens like the Swiss Banks or others.

The advertisement makes tall claims of creating additional one crore or 10 million jobs by FDI in multi brand retail. The Prime Minister seems to have come to suddenly possess the magic wand, the lack of which  he has been ruing for almost 8 years now! What can be more painful than a government which has no qualms of conscience in telling lies? It also talks of benefits to the farmers and the consumers.  Let it be abundantly clear that the “farmer” will end up becoming only a “serf”. This government is going to establish serfdom in India once again. So far as the consumer is concerned, he will spend more on petrol and parking charges than save on margins. Going by the governments own claim, if everybody stands to gain, including the retailers and Kiranas, then there is absolutely no need to bring FDI, because we are told that the retailers and the middleman will not be able to fleece the consumer who will get supplies direct from the farm to the dining table. God! how to tell these economist that more than 50% Indians don’t even know what is a dining table! How can such planners be expected to produce people friendly policies?

In conclusion, the government has given proof of short sightedness in policy framing and implementation. This FDI in multi brand retail is still born, excepting for some quick conversions of black money from tax havens into white under the cloak of FDI. It will benefit neither the investor, nor the farmer, nor the retailer, nor the consumer. On employment front, it shall not lead to net additions to employment. Rather it will disrupt millions of jobs and heap miseries on those rendered unemployed due to this policy. Even the government may go and mid term elections might become necessary. The cacophony of the spin doctors will only harm the interests of the party, government and Manmohan Singh.

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