FDI in retail sector

Will demolish domestic trade,
generate unemployment
By Gopal K. Agarwal

Down the line the whole reform process has lost its focus. The process of reforms should be development of domestic economy by liberalizing and removing bottlenecks for the domestic industries and then opening it up to the international competition so as to increase efficiency and ultimately benefit the consumer. At present major government decisions seem not to be driven only by economic reforms considerations. But they are motivated by vested interest demands and for attracting foreign capital.

Recently UPA Government announced allowing 51% investment to foreign companies in retail outlets meant exclusively for single brands. This will witness a flood of premium brands like Chanel, Nike, Gucci or Reebok etc into our country. Government claim that this step will not hurt small retailers/shop owners in the country as they already operate on multi-brands is not correct because internationally there are many brands which sell multi products lines. The major harm will be in the sense that it will lead to dislodging of small shop owners and potentially generating large scale unemployment in the country.

UPA government has not come out with any clear policy as to how is it planning to protect the interests of domestic shop owners. The government should have first allowed domestic players to explore and invest in any sector before opening it up for international players. The government owes an explanation to the nation as to why it has not given ample time for the domestic players to explore this segment so that later on they can have full advantage of opening up of the sector to international players.

Agriculture ministry has also announced its intention to open FDI in agriculture and food processing industry which seems to be uncalled for at this stage. Before going in for it, there are several infrastructural developments needed in the domestic agricultural and rural sectors. Government has not taken any steps in this direction. How can we open it up for international competition before we make our domestic industry strong enough to face international competition? Government decision will simply kill domestic industry. Secondly, international community has not fulfilled its commitments under WTO to remove direct and indirect agricultural subsidies in their countries. Unless this is done we should not allow them access to markets in India.

Down the line the whole reform process has lost its focus. The process of reforms should be development of domestic economy by liberalizing and removing bottlenecks for the domestic industries and then opening it up to the international competition so as to increase efficiency and ultimately benefit the consumer. At present major government decisions seem not to be driven only by economic reforms considerations. But they are motivated by vested interest demands and for attracting foreign capital. The process creates sudden demand and price inflation, which helps the government to sustain an image of booming economy. The process simply means selling domestic resources to foreign players.

Government has ignored the fact that along with its demolition drive of small establishment, the opening up of FDI in retail sector will break the very backbone of the domestic shopkeepers. Both these actions together point to a sinister game plan of the government to benefit international investors. Many malls are being constructed by influential politicians, this demolition process will only force people to buy space in these malls.

(The writer is a member of BJP Central Economic Cell)