For FDI in retail, simple things like more roads and power and direct buying from farmers will yield better results
Prasanna Mohanty | December 7, 2011
The logjam over FDI in retail, and its eventual ‘holdback’, was neither unexpected nor probably unforeseen. Pause for a moment and revisit the circumstances under which this policy (51 percent in multi-brand and 100 percent in single-brand) was announced. The matter has been in public domain for years but the union government sprang a surprise on November 24, a couple of days into the winter session of parliament. By then, the opposition had paralysed parliament over several issues – home minister P Chidambaram’s alleged involvement in the 2G scam, statehood for Telangana, safety of Mullaperiyar dam, corruption, black money, runaway inflation, economic slowdown and so on. On top of it, Anna Hazare was threatening to fast again if the Lokpal bill was not passed in this very session. The FDI policy didn’t bring normalcy to parliament but it certainly diverted focus from more pressing issues. That probably was the intent anyway, given the slapdash manner in which the move was made.
Read update on all-party meet: Par logjam ends, govt puts FDI decision backburner
One doesn’t really need an ESP to foresee the holdup that followed. Those who pushed through the decision in the cabinet were very much part of the party (the Congress) that created a ruckus when the NDA made the first move to bring FDI in retail in 2002. They may blame the BJP (which led the NDA then) for changing its stand but the Congress (which leads the UPA) is equally guilty of the vice. What made them suddenly find the panacea to all our economic woes in FDI? Commerce and industry minister Anand Sharma is claiming that FDI in retail will add 10 million jobs in three years, the opposite of which his party was arguing with equal conviction in 2002. His government also sees many other benefits – improved back-end infrastructure facility, new technologies and better marketing facilities leading to better prices to both the producers and consumers. In short, it will be good for growth and bring inflation down.
Had Sharma and his colleagues taken a closer look at the ground realities, they would have realized their folly. Poor infrastructure does lead to a huge loss of fruits, vegetables and food grains. Middlemen do corner a larger pie of the price consumers pay. The mandis, even those run by the government, do work through touts who rig prices to deprive farmers their dues. Fresh investment and new technologies would do a world of good to the sector, true. But do we need FDI to solve most of these problems? Even Sharma, who is championing the cause, is not sure. He is asking the states to amend their respective Agriculture Produce Marketing Committee (APMC) Act so as to ensure ‘direct’ purchase from farmers. But he never explains why in spite of this law in existence since 1960s, the state agencies continue to buy through touts. He never explains if Walmarts and Tescos will lay our roads and generate electric power – the two major hurdles in movement of farm produce, from the farm to the cold stores, mandis and markets. He won’t talk of inter-state tax barriers that shoot up price and lead to a bizarre phenomenon - surplus in one state co-exists with scarcity in another.
Visit Punjab and you will find potatoes rotting with no buyers while a kilo costs more than Rs 10 in Delhi. Let us not forget how prices come crashing down and neighbourhood markets get flooded with agriculture produce every time the government raids the mandis. So, what are we looking at Walmarts for? To bring us some trucks and carts and set up a few cold stores? And how is Sharma so sure of a FDI flood when the international scenario is so bleak and our FDI outflow is more than the inflow at present?
It is not our case that FDI is bad or useless. The point is we can and must do a few things to change our fate. It is a lazy government that thinks of and banks on FDI to solve all our problems.
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