Sunday, 25 November 2012

Wholesale FDI in retail - Does harm national interests

The UPA -II Government is keen on bringing the FDI in multi brand retail in this winter session of parliament. Opposition parties oppose this with many a reason ranging from politics to personal to people's well being. Let us leave off the personal reasons opposing the FDI, but look at political and well being reasons as they are important for an informed decision on such a key issue.

First off, let us look at the arguments for FDI in multi-brand retail and check how acceptable they are.

Free market competition works – and real people benefit. Enormously, Competition delivers the most goods and services at the best prices to the greatest number of people. It creates better, more efficient companies and gives buyers more value. That’s the magic of the free market.

If this is the case, why in the US the leading and ideal free market economy, wealth of a mammoth size is concentrated with a very few people? Why cannot the real people benefit from the free market competition? Or can only those who have benefited be considered real people? 

An additional eight to ten million jobs will be generated in India through direct and indirect employment through organized retail.

This is where the skulduggery lies in. They say 8-10 million jobs will be generated. How many people will be employed to perform these jobs? For example, if a store manager is asked to manage the supply chain and inventory, which is quite common place in India, we have one person doing 3 jobs. Theoretically 3 job s were brought in, but one person is doing it for a much lesser pay. 

 If large retailers, whether domestic or foreign, directly source through farmers, realizations will go up for the farmers. India can attain huge savings by merely improving the supply chain. 

Pretty questionable claim. Large retailers if source from farmers directly will go only for their preferences, like Pepsico does in the case of potato farming. Right from the seeds to the modus operandi would be theirs. Farmers will be like coolies. Profit will be the motive and food habits will ultimately be dictated by the large corporations. With the world moving towards organic agriculture, rolling out red carpet to the MNC in such a way is not wise.

The supply chain claim is also dubious, since the Government is not interested in the improvement of the infrastructure. If the private players get into put up the infrastructure, they will be charging the users for every paise spent and that will ultimately shoot up the transport cost with the consumers ending up bearing the brunt. This may also result

The quality of the service will improve with the international standards followed by the MNCs and large local corporations. 

Impossible to happen. Mom and pop shops in the nation serve the local community and they are small in size and have the advantage of knowing their customers personally. The kind of personalization the mom and pop shops offer can never be matched by the large corporations.  

It will actually create employment than displace people engaged in small stores.

Our own small entrepreneurs however small will lose their ground and will end up working for some big corporations. Thus we kill the entrepreneurial spirit in the nation and following suit with the MacCaulay method of generating obedient employees/servants.

The argument of fair competition is a farce given the facts of WalMart's conduct in Mexico. Grabbing forest lands, opening store against sentiments of locals in a monumental place of religious/cultural importance were a few to mention. 

Before it puts a firm step in India, Bharti Walmart is under cloud of corruption charges and has ended up suspending its top people, CFO & the whole legal team, pending conclusion of enquiry in the USA pertaining to its conduct world over, following the Mexican mess up.

Walmart is also under an investigation by the Enforcement Directorate, which is probing whether Walmart flouted the foreign exchange regulations when it invested about $100 million into the holding company of Bharti Enterprises-owned Bharti Retail Ltd.
The argument that Honda, Merc and BMW etc  have not killed Tata Motors also conceals half of the truth. What happened to the Premier Automobiles, Hindustan Motors, Standard Motors etc? They are banished.

But retail business is a very different ball game altogether from selling cars and aeroplanes. It directly affects the whole lot of buyers and sellers, so instead of taking a studied economic decision doing justice to the market economy or the socialistic system of economics, we need to take national interest as a prime and primary factor to decide on this issue. 

With national interest, it is better to go for organic farming than further damaging the land with chemical pesticides and fertilizers to start with and get the local groups of small traders strengthened through perfect infrastructure and favourable policies. It is the countrymen who matters since they generate economic activity and thus income and employment locally, not the businessmen from far off country who aims to make money and take it away.

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