FDI in retail will take years to be useful
Prasanna Mohanty | November 25, 2011
At a time when a minister gets slapped for high inflation and the government faces daily flaks for doing nothing to bring the prices down for three years in running comes the hoopla over FDI in multi-brand retail. The cabinet, in a late night decision on Thursday, cleared 51 percent FDI in multi-brand retail and raised the bar in single-brand retail to 100 percent. This step, the government tells us, is being taken to help both the small farmers and the consumers on the plea that more FDI in retail will mean more investment in retail infrastructure, like cold store chains, new technologies and better marketing facilities for agriculture produce.
All of this may be true. Let’s hope it is. But even in the best case scenario, it will take years before the actual FDI flows in and several more years for the promised infrastructure and marketing facilities to materialize. A general business practice of playing it safe and taking immediate advantage of the market ( in this case by going in for packed food and readymade garments) before actually getting down to developing new infrastructure would suggest that the hopes being generated around the FDI in retail may not be something to look forward to in the short term. The inflation would, therefore, have no reason to pull back in the interim.
What would seem logical for the government then is to attempt something that would bring respites in the short term, say a couple of months or more, but decidedly not a 5 or 10-year plan that the FDI promises to be.
Moreover, the ham-handed manner in which the cabinet has gone about clearing the FDI policy points to an uncertain future. Though the issue has been pending for a long time and has decidedly been in the public domain, see how seriously it was taken up for a meaningful dialogue or debate in the country. Two of the Congress allies in the government, the DMK and Trinamool Congress, not only opposed it in the cabinet, they paralysed parliament the next day. The opposition parties of both left and right persuasions too lend their support to the DMK and Trinamool Congress.
Meanwhile, the media may not have taken up a strident posture either way, but provides a general feel-good picture that would please the policy makers and the corporate entities that stand to benefit. Phrases like “retail revolution”, “coming soon: world’s top retailers” and narratives like “you will soon be able to walk into a mega deep discount store run by global retailers…” to describe FDI in retail would make it seem something better is happening and should be lapped by the rest of the country.
Politicians are good at selling dreams that often don’t materialize. Look at the nuclear pact with the US on which our prime minister bet his office in 2008. Not one single unit of nuclear power has been generated three years down the line. Can we really afford to wait for 5, 10 or 15 years before the retail revolution takes shape?
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