Thursday, December 1, 2011
FDI IN RETAIL = TO HAVE OR NOT TO HAVE = HOW MANY INDIANS LOSE BUSINESS?
FDI IN RETAIL
Ø Without an iota of doubt, we do need lots of FDI into India – that too, from friendly countries such as USA, UK, Russia etc. Investment in India by these countries and in these countries by India will go a long way in cementing ties with them and in helping each other. Friends understand us. Friends won’t pull us down. Friends need to grow – and grow along with us - and we must be glad to involve in their Growth – and of course, vice versa.
Ø Do we need to invite unbridled FDI from ‘NOT SO FRIENDLY’ Countries also - into India? I think, we need to be careful in respect of such FDI. Such FDI can choke us in crucial and critical times. And, if ever we will have crucial and critical times, we are more likely to have them - because of these not so friendly countries. As it was in the past. There has never been much mutuality even in trade and business between us and these NOT SO FRIENDLY Countries. But, their fast growth in Indian manufacturing and business is already a factor that India must examine very critically - to avoid any future problems.
Ø In what areas is FDI from any country NOT WELCOME at all? (i) Areas where there is potential for huge loss of Jobs – because of such FDI (ii) Areas where there is likely to be huge loss of Indian entrepreneurial skills and spirit (iii) Areas where, in times of war, internal turmoil or some emergency – the country from which FDI has come can choke our economy – by precisely using the FDI outlets as its economic weapons. These are a few examples. Like this, we can and we must evolve adequate safety valves while permitting FDI.
Ø We need to have such safety measures. We cannot afford to have FDI which takes away huge number of Indian Jobs; especially Indian entrepreneurial skills and spirits. This is so even in respect of FDI from Friendly countries like USA, UK, Russia etc. This is precisely the reason why FDI IN RETAIL does not fit into our economic interests.
Ø It is conceded even by the protagonists of FDI IN RETAIL that around 40 million retailers are likely to be affected while 122 million consumers are likely to be benefitted. Consumers should be the king, therefore permit FDI – is their argument. This is an extraordinarily spacious argument. If 122 million people are benefited slightly – are we to deprive 40 million others, of their present livelihood? This does not seem to be a good argument for FDI in Retail at all.
Ø The East India Company had reduced us into clerks in the same way as will FDI in Retail. The EIC had at least increased the Jobs in India tremendously! The EIC had not taken away the existing Indian Jobs but created new ones. That was some consolation. But, FDI IN RETAIL will take away existing Jobs!
Ø Let us clearly understand – that a Factory worker or a worker in any retailer’s shop (like Wal-Mart) is not going to be an entrepreneur. He will be a worker. But, today’s Indian Retailer is a budding Entrepreneur – trying to grow on his own skills – despite all the problems posed to him by the Politician, Police, Rowdies and so on. He needs all of India’s help to grow into an efficient, honest entrepreneur. What India needs is – Indian equivalents of Wal-Mart, KFC and so on. What we need to do is – to encourage the Indian Entrepreneurs, small and Big. We must not reduce them into servants.
Ø FDI Biggies like Wal-marts etc can employ hardly one 1 percent of those displaced by them. The problem is – like in most cases, India will never know how many people are losing their business because of FDI in Retail. India has no accurate statistics of its unemployed and underemployed persons.
Ø The simplest assumption must therefore be that - all the business gained by Wal-marts etc – is business lost somewhere in the Indian home grown retail sector. In other words, if we say that about $450 billions of FDI will flow into RETAIL sector, this is the amount of Indian entrepreneurial skill displaced in this sector. Also, if we assume that the total consumption expenditure remains the same – the amount of business done by Wal-mart etc is approximately equal to the business lost by the Indian Retailers.
Ø For example, let us look at a few sectors. Big Jewellers in India had grown very fast in various cities in the last 2 decades. Simultaneously, most small Jewellers either closed their shops totally or are left with minimum customers. This is some thing, all of us can see from our experience. If that is the case with Indian Big Retailers, will it not be the same with Big Foreign retailers? There are several such examples in India itself.
Ø We need – and we definitely need - an EFFICIENT, HONEST, ECONOMIC, INDIA RETAIL sector. About this, there can be no two opinions. Displacing the INDIAN RETAILER by a Foreign Retailer is however, no meaningful solution to the RETAIL sector’s problems. It is also not a meaningful method of inviting FDI in big numbers into India.
Ø There is no doubt that there are many inefficiencies in the Indian retail sector – and many efficiencies in the Wal-marts etc. But, we must correct the inefficiencies and lack of transparency in the Retail sector and promote greater efficiency and honesty in this sector. Therefore - 2 things must be acknowledged by all of us.
Ø (1) There is a huge need to make our retail sector, more efficient, more honest and more service oriented. The retail sector must also create a strong and growing economy in India, on its own strength. It needs to be freed from the shackles of Politicians, Police and Rowdies. But, simultaneously, it must come under strong regulators – like TRAI or SEBI. Secondly, this sector needs to be more honestly complying with Sales Tax and other taxation provisions. Thirdly, it must adopt modern packaged, pure, healthy, selling and buying practices for almost all of its products –without any adulteration. India must also create efficient transportation, storage and other needed arrangements through the co-operation of the retailers.
Ø (2) There is no doubt, a huge need to attract FDI from friendly countries like US, UK Russia etc into India - in many, many sectors that are crying for such Investment. Defence equipment manufacture is one such sector. If there was one reason why many Great, ancient Indian Kings lost their battles to foreign Invaders, it was due to the GUN. The lack of it by these Indian kings and its possession by the Invaders-was the one and only reason why India lost many battles. Defence technology and preparedness is not an area that can be left to chance. We must attract the best of defence technology – but always from friendly Nations - and ensure that the technology is promptly acquired by India. Aviation is another. Advanced scientific and technological studies is another. India must aim to produce Nobel laureates in science, technology, medicine and so on, in India, very regularly. After Sir C.V.Raman, we have not produced even one – in India – and this shows our lack of planning to upgrade Indian skill sets to that level within India. There are many sectors for which Indians have abilities but not facilities. Give them the facilities, through any investment, Indian or foreign.
Ø At the end – one has to admit that Wal-mart, KFC etc are great organizations. There is always a temptation to see a Wal-mart store in one’s own city, in India. But, that temptation itself sounds the warning bells for Indian Retail system. We can have their presence in some way in India, in the Metros, without affecting the Indian Retailers in any Big way. That needs a lot of circumspection – but must be possible. As they say – there is always the third alternative, which makes both of us, right and both of us, Beneficiaries.
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