Along Came FDI

Walmart (Pic Courtesy: Business-ethics.com)
Walmart (Pic Courtesy: Business-ethics.com)

The dynamics of the FDI are for the economists to explain. As for its impacts on the masses are concerned there are many opinions. For some it is the evil incarnate and on the other extreme there are those who find it to be the trade- winds directly coming from the heavens. Some talks about transparency, regulations and level playing field is heard in between. The recent decision of the Central Govt. to allow FDI in multi brand retail has given rise to an onslaught of negativity on the national consciousness. From politicians to retail traders people are lining up to declare the arrival of Armageddon. Protesters with their designer banners are on the front pages of almost every newspaper. Seems a lot of these folks suffer from some sort of Bipolar Disorder, long periods of inertia punctuated by episodes of frenzied activity. Who designs their banners anyway? They are often pretty cool. One group of very wise people went to the extent of terming it the second coming of East India Company.

For me I am again caught on the minority turf. Yes, this time I support the FDI in retail though at a similar juncture in the past I was not in favor of the nuclear deal. With regards to the latter my opposition had some traces of intuitiveness or to put it more crudely – gut feelings. Over the time I have developed a healthy mistrust of such feelings which have their source in one’s stomach rather than the brain. However, my present positive appraisal of the FDI issue is based on certain concrete measures. The benefits which are the probable outcomes of this policy have already been cited particularly by our PM, here I list a few of my thoughts on some of the demerits as cited by many experts and lay persons alike. The reasons for my opposition to these criticisms are two fold. First, some common sense driven curiosity based reasons:

1. With the persistence of a witch hunter critics have pointed to the ” deep pockets ” of the retail giants ( well the pockets in the pants of a giant are obviously going to be huge) and their hidden evil designs of wiping out the intermediaries from the trade scene. If I am not incorrect haven’t we complained in the past about the presence of a large number of intermediaries who distort the market, are bottle necks in the supply chain and obstruct the path through which the benefits of high prices could reach the actual producers?

2. Let’s assume that some of these giants eventually succeed in establishing themselves in some of our large cities say in Mumbai in the near future. Are all the consumers really going to forsake their local ‘kirana’ stores from where they can often buy stuff on credit and will be ready to travel miles of distances to and fro the nearest retail chain may be on a weekly or fortnightly basis? If yes, then then the people predicting the complete breakdown of domestic retail are nothing short of Nostradamus of modern times.

Now time to show off a little of my own reasoning abilities. Reasons based on my own reasoning:

1. In a recent article in THE HINDU one expert on the issue while breaking the Central Government’s argument bit by bit completely forgot to bring down the structure which relates to the provision of mandatory investment of the 50% of the total in back end infrastructure like cold storage etc. which according to another report in THE HINDU itself aligns with requirement of the food and grocery section of the retail trade. Another piece of data in the same report pointed to the healthy co- existence of traditional kirana along with modernretail during the last five years.

2. courtesy to THE HINDU again I got to know that the final keys are in the hands of the state governments which are definitely better equipped to analyze the local conditions and accordingly approve or restrict the entry of retail giants.

3. Now, results of some of my own observations. Mumbai can be considered a city of malls. Reports indicate a stupendous rise in their numbers during the last few years. They are now literally everywhere. However, this does not mean that people no longer need the footpath traders. Their tiny stalls can be seen buzzing with activity outside various local stations. But one has to accept that their numbers are dwindling. Why this is so? It’s not because the malls have drained their energy to compete; if anything the presence of the malls have only made their demand more acute in various sections of the population. Where is the pleasure of haggling inside a centralized air conditioned shopping mall? These footpath traders have immense capacity to compete and co exist simply because they serve a different set of needs. Their numbers are decreasing not because of their inability to compete but because they are not being allowed to compete. They are need of recognition as valid and legitimate participants of the market. Even the presence of a shopping mall causes traffic problems so why only target micro level traders.

With regards to the entry of giants the need is for more transparency, regulation and a strict adherence to the stipulated conditions. One can say that the number of cities opened can be reduced but then again this matter can be handled at the state level. However the stipulation concerning 30% mandatory procurement is a farce. It is hard to monitor and impractical to implement. Need of the hour is to bring in some modifications in the current policy through healthy debate. Demonizing of foreign companies should be left to the people who are paid to do such tasks.

Key Words  East India Company   Armageddon   Bipolar Disorder   Mumbai  Central  Nostradamus

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