AAP has certainly brought about some serious turbulence in the Indian political atmosphere recently. Adopting a theoretical approach to practical problems, the party is inviting trouble in spite of having nationalistic intentions (?) at core. While there are many other issues where I believe the nouveau CM’s decisions are derived from the aspiration of short term popularity, the one I find particularly saddening is the decision to revoke FDI approval in multi-brand retail in Delhi which was approved by the preceding government. This decision, on in-depth scrutiny, proves to be regressive and can be outright detrimental for thecountry and Delhi, in particular.
India has already lost the first mover’s advantage to China which opened its economy to FDI long back in 1992. Since then there has been an increase in employment in retail and allied industries and provided the much needed boost to its socio-economic development. Thailand, Brazil, Indonesia, Singapore and Argentina also narrate of positive impacts of FDI in retail industry in the long run in spite of short lived adverse effects. With regards to emerging economy like India, linking with the global value chains through FDI brings multiple benefits like capital infusion in infrastructure and logistics, transfer of technological know-how, remodeling of largely unorganized retail sector thereby increasing tax revenues for the government, creating jobs in the back-end and front-end, improving the standard of living in rural areas by better remuneration to the farmers, arresting inflation predominant in the current market model due to predatory prices and ultimate benefit to the consumers in terms of quality of products and competitive prices. Some eye-openers regarding FDI are:
In the light of favorable policies, Delhi-NCR region alone are expected to attract investments worth $50 billion in the next 5-6 years.
It is expected that the retail industry will create approximately 1.7 mn jobs in the coming five years, inclusive of back-end and front-end.
The perceived threat to the local grocery stores and door-to-door vendors is insignificant as these elements will always be an integral part of the market because of the convenience, personalized services they offer and years of association with the consumers. None of the markets which have Dominos or Pizza huts have eliminated the local food joints.
Since the produce and raw material will be procured directly from the farmers or the producers sans the intermediaries, their profit margin will be subtracted from the overall price of the commodity. This will result in a percolating effect on the price reduction thereby arresting the inflation which is soaring towards double digits in the current scenario. Consumers will also get advantage of competitive pricing and cost benefits of bulk purchase.
In India, almost Rs 55,600 crores of natural produce is wasted ie 10% of the food grains, 30% of fruits worth and 30% of vegetables. Major reasons, other than volatile weather conditions, are inadequate storage facilities, logistics and poor distribution system. Capital investment in back-end infrastructure by the foreign retailers will help curb the problem to large extent
Even if you find these validations too theoretical and wish to ignore them, there is yet another very strong stand that openly regards the disapproval of FDI as relapsing. The decision directly hurts the country’s repute in the global markets when giants like TESCO, Walmart andCarrefour have huge plans for the country. India is a country with enormous challenges for foreign entrants and such frequent changes in criticaldecisions would only dampen their spirits and project India as being unstable in terms of economic policy making.
Indian retail sector is in a nascent stage and effective influx of capital and technology will make it robust and self-sustaining. And the percolating effects on the other sectors of the economy are vast enough to overlook. The revenue generation from this fifth largest market is luring many players to enter in spite of numerous hurdles. My earnest request to Mr. Kejriwal and AAP is not to trade the country’s future for short term popularity and vote bank gimmicks.