FDI- the much awaited & debated policy change

It has been almost 20 years now, when the government of India has opened the door for the foreign investors and business to foray in to the India market. Manmohan Singh, the then finance minister of country announced the policy of allowing the foreign companies to invest in the country. With this decision, Indian business has started feeling the taste of growth and also, the government’s decision was applauded by all country mates. But now, again with the passage of time, the same person who has been applauded for bringing the economical reforms in the country is under immense pressure to prove his merits of allowing Foreign Direct Investment in Retail Sector.

The decision to allow the FDI in retail sector is being contemplated since 2002 by NDA government, but now when UPA government has taken the decision to allow foreign business to grow in the unorganised retail sector; it is being severely criticized by the oppositional political parties (NDA). Government has propagated the reform in the retail sector, but from past 7-8 days of Parliamentary sessions, there is no feasible consensus for FDI proposal by the government. I cannot understand one thing about our political parties that why they always want to politicize the issues? Is Indian politics so dumb that no one is communicating the benefits and losses of FDI? If FDI in retail sector is much awaited regime, then why it is debated?

Benefit to farmers?

Government is saying that with the 100% foreign investment in Single Brand retail, the retail stores will directly procure from Farmers, but government has not highlighted that despite of direct procurement, farmers need intermediate channels to deliver the vegetables and fruits. If intermediate channels will be created, the pricing issue will again erupt and push inflation because if we see historical data on India’s inflation the average rate of inflation has been around 4.5 to 5%, and looking to the current situation, there cannot be possibilities of inflationary pressure taming down its trend. In 2003, government has also allowed the procurement of vegetables and fruits from farmers in an illusion that farmers will be at benefit, but the actuality is different. To gain the vote banks, government has given loan waivers to debt trapped farmers to support them financially to reduce the suicide cases amongst farmers. But, if we see the data, Rs. 72000 crore loan waiver has not boosted the agricultural produce. By providing such futile waivers, government is paralyzing themselves into the national debt. In most parts of India, farmers are only getting benefits because of the escalation in the land prices. So, government should not say that FDI in retail will improve the lives of farmers.

Job Opportunities?

Job opportunities will be created according to the government, but I feel the statement of government spoke person is murky. Hypothetically considering that FDI will create jobs in the country, but who will they employ? What educational background the companies will seek at? Do we have that many educational institutes who can create good retail professionals? If we have a rough look on the unorganized retail which constitutes almost 90% of the retail business in the country, but mostly owned by in-adequately educated people. So, can mammoth retailers provide them job? Ultimately, government will again slip down in the Human Development Index because of probable increase in unemployment. Though, government is focused on creating opportunities for Youth but they should also not be oblivion towards mid aged groups. If government wants to allow foreign currencies through such economical reforms, then pragmatic policies must be framed for a balanced economy.

Decision of allowing Foreign Direct investment in the retail should again be contemplated also by considering the corporate view points about the same because probably the decision to welcome more foreign exchange can hamper the slow growth rate in the manufacturing sector and service sector and there are chances that the decision to allow foreign investment may eat away the small scale industries & farmers. The floor limit for FDI is also big that government can bring good amount of foreign currency in the economy through this route.  DIPP should play an active role to ease the issue meticulously because if government fails to recognize the benefits and losses, then there are chances of our economy can witness adverse effects.