The FDI circus act

I admit to being stumped by the whole foreign direct investment in retail issue -- by the reactions, by the various theories and postulations and mainly, by myself. The small "commie" part of me (surely we all have one?), is worried about large-scale MNC shenanigans.u00a0

The capitalist part of me (substantially larger than the commie part but not overwhelmingly so) is satisfied that competition will lead to better good and services and there will be more jobs. The socialist side of me hopes that the evil middleman will be eliminated. And the practical side of me knows that the chances that I will abandon the local kirana store for a giant retail conglomerate are about zero on ten. The reason is simple: I don't have a car and refuse to lug heavy packages for miles. Why give up a home delivery advantage?

The thing is, having allowed foreign brands to enter other sectors, how can one really put up artificial barriers in others? Are farmers benefiting under the current APMC system? We already have Indian supermarket chains operating in several cities and towns -- are they morally superior to international chains and will therefore keep local grocers alive? Does consumer choice play any role here? What are the safeguards to stop the sort of industrialised farming which has destroyed US agriculture and even split the organic farming brigade? Let's ignore the political hoopla for now -- and it is just that, a circus act.u00a0

The Left will oppose FDI because it contains two very dangerous words - foreign and investment. Any money which does not come from China is clearly an imperialist plot to conquer India. The BJP wanted FDI in retail in its election manifesto when it thought India was shining and didn't in 2009 when it discovered that it was not (lost both elections anyway).u00a0

It has to support its main vote bank -- petty traders with Hindutva leanings -- but is also in favour of large capitalists, so is in a clear bind here. The middle-of-the-road Congress is trying to prove that it still has relevant ideas, cares for the country, is not letting reform and policy decisions lag and is not in a lame duck situation -- tricky problems all.u00a0

The little parties are hopping from puddle to puddle, hoping they can spawn somewhere and multiply their reach. Who for instance trusts Jayalalitha or Mayawati except their followers? Mamata Banerjee doesn't know whether to turn left or right which is why she's meandering sometimes and careening wildly at others.

So where does this leave the farmers, small retailers and consumers? The answer appears to be -- in a muddle. Farmers we know are being fleeced by middlemen and none of the high prices we pay go back to them. Most large retail chains negotiate directly with farmers thus eliminating middlemen and increasing farmer profits.u00a0

But they also force farmers to grow what they want and this can have a very adverse effect on biodiversity. Local shops may not be affected in the short-term but eventually, they will feel the pressures. But as aspirations rise in India, more people will want choices and a first world lifestyle. Protectionism has not really helped us develop and nor has it helped the underprivileged to get a better deal.

It may be wiser to cut out the political drama and look at this in a pragmatic manner. What are the mistakes other economies and other countries have made? What are our unique social and cultural that need to be shielded or encouraged? If we had better development and implementation of social upliftment policies would this argument be redundant? And most important of all, who's going to be making how much money?

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