Cheque Mate
FDI Debates
As the debate on FDI-in-retail in India reaches a crescendo, Chetan Sharma, Editor in Chief of Connect, shares his opinion on how FDI-in-retail is a welcome move that promises to improve the conditions of farmers, the economy and be beneficial for the consumer of course.

FIR has been this year’s most popular acronym given the irregularities, investigations and indictments. Now it’s FDI – Foreign Direct Investment. In the current tale of retail, FDI could easily stand for Folly, Dispute and Introspection. The government committed a folly by trying to bulldoze FDI in multi brand retail. Conviction without consultation and consensus leads to confrontation. More so, when the centre chooses to decide on a subject governed by state half of which are not in agreement. The resultant dispute has held up parliament for two weeks, each day costing 2 crores. Public money is misused. Exactly what a scam does, FIR anyone?

And now, the introspection! Should FDI be allowed in multi brand retail --Why not? Today, India’s biggest economic problem is food inflation. Food feeds all Indians and its production employs seven out of every ten. Prominent culprits are-poor distribution, poor infrastructure and rich middlemen. India is land of glorious ironies. Food rots in one corner, people starve in the other. A quarter of the produce of vegetables and fruits are lost between the farm and the table. 7 % Indian grain rots and only one in seven tonnes veggies go through cold storage, poor distribution courtesy the poor infrastructure ensure this. Taking advantage is the trader (middleman). The farmer is highly underpaid, the consumer pays high and the difference is the high profits for the middlemen. Farmers get only a third of what the consumer pays. Globally it is two thirds.  

Is FDI the only solution? Certainly not. But it can contribute a lot. For a start it would get the retail sector organised. FDI would accompany expertise in infrastructure, logistics and warehousing. Logistics these days is not limited to a country and will gradually be a part of the global supply chain. Exorbitant real estate prices have been a reality check for retail realtors. Having spent 75% of their kitty on it they are cash strapped; cheaper foreign funds would help. With 30% purchase from small Indian outfits being a must, quality manufacturing will get a boost. Crop yields will improve. The consumer will get a wider choice at a narrow margin and better quality. It would put a stop to tax evasion given most small shops sell without bills. Also, it will enforce proper weights, measures and specifications as well as hygienic and genuine ingredients.

On the financial front we need FDI. Period. Indians save far less than they  invest and import more than what they export. The weakening rupee would put pressure on our bulging $300 billion, a reason for India’s global confidence. FDI would strengthen the rupee, makes imports and fuel prices cheaper. It makes global acquisitions by Indian companies more reasonable. For its double digit growth, India finds itself short by $ 60 billion short per year.
So, why the resistance against FDI? Retail is a $450 billion dollar industry growing at 9 %. That’s big money most of it being made by the traders (i.e. middlemen) who then fund political parties. Its strongest lobby is in UP where elections are to be held next year. With FDI, the agricultural produce marketing committee (APMC) which empowers middlemen by denying farmers freedom to buy and sell and discover price, could be scrapped.  

Opponents say FDI would displace shopkeepers and create unemployment. Huh?  In fact the government states that 10 million jobs will be created and that too for the youth, who are the country’s future. Requiring skill and education these jobs will exert pressure on the education system to perform better. Yes, it may take away business from the kirana stores. These stores sure need cleaning but need not be cleaned up. The owners are now grouping to compete. Great for the consumer! Savings from cheaper goods would inevitably be used to for something else which these shops could cater to. Also, small store owners need to modernise to attract their own children to work for them. Finally, if it still results in some losing their livelihood, the government should compensate.  India was  built and freed by sacrifices. Minor losses for major gains must be accepted. Besides, in Indonesia lies evidence of minimum impact on employment, post opening up. Not to forget a bigger threat comes from on line shopping. Over the last seven months, 4000 megastores in Britain have shut down due to competition from e commerce.  
The fierce opposition and proposed restrictions may not even attract major FDI. Current investments in the permissible wholesale cash and carry business has been low, slow and shallow (only in and around Delhi/Mumbai).

Remember the movie Lagaan (tax) - Amir Khan’s Oscar nominee film depicting how the British extorted tax from farmers of pre-independent India. Now, the Indians will tax profits made by foreigners. Importantly, profits will be made after benefitting both producer and consumer. The Lagaan battle was decided by a cricket match. The Indians farmers won. This will be a win for all. The game this time will be chess which requires strategy. The government needs to educate and convince the opposition to befriend those dollar cheques. That would make it a chequemate.

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