Friday, December 28, 2012

FDI –To kill middle man or middle class?

It is just 6 PM only but pitch dark outside. The entire North India is celebrating Deepavali and the sound of crackers and cold wave penetrating into ears and body. My evening walk land up me at a local market where millions of porcelain Lakshmi and Ganesh idols, made in China are flooded. Last month only I blamed US for getting its flags from China, but now the elastic purchasing power of middle class welcomed these Chinese products in Deepavali. Even the crackers could not divert my attention from the cute idols, thanks to the FDI. What is FDI? Is it something to be scared of or a phobia induced by something? Foreign Direct Investment (FDI) is direct investment into production in a country by a company located in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. FDI is done for many reasons including to take advantage of cheaper wages , special investment privileges such as tax exemptions , as an incentive to gain tariff-free access to the markets or the region. This is contrast to FDI in portfolio investment in the securities of another country such as stocks and bonds. Like every issues, political parties agrees to disagree for all issues. And there is no national consensus on allowing FDI in retail. Supporters of FDI push it as a much-needed policy drive that could arrest the economic recession, bringing in not only foreign funds but advanced technology and expertise, create infrastructure, offer better prices to farmers, generate ancillary industries ,create millions of jobs, and what not. However, majority of Indians, being skeptic, consider FDI as something like end of the world and will wipe out small farmers and traders, results in job losses and will wide open gates for cheap goods from countries like China, adversely impacting Indian industry. While both arguments have some legality, the two sides err on the side of extremes. FDI in retail is not an unmitigated disaster as projected by some, nor a magic rod leading to instant economic growth. If allowed with professional care and safeguards, it is in the country's national interest to allow FDI in retail. The both side are partially true only. I remember, two decades back, when I was employed in Bangalore, I’d to travel 2-3 Kms to just make a telephone call to my home which we cannot imagine now. Opening up the telecom sector to foreign investment has brought a communication revolution that embraces everyone. We make the advantage of this giant leap to canvass against the very same policy which brought telecom revolution. For decades, Indian roads have the privilege to see just 2-3 types of scooters and four wheelers. Similarly, there was the long wait even for outdated scooters and cars. When Pizza Hut, Domino's, McDonald's, KFC and other such international brands were allowed, there were stiff opposition and they were highlighted as anti-people and anti-Indian enterprises. We were told and in turn we conducted campaign that the local Haldirams, Bikanerwalas, Nathus ,Bengali sweets etc will soon vanish. Presently All these Indian companies have multiplied their outlets, spread their production line, upgraded their packing and presentation, and are doing exemplary business and many have Indianised their products also. Where else in the world would other than Connaught Place you find a McDonald burger with paneer and potato patties and coriander sauce? Even in a small city like Trivandrum we find Spencer’s, dominos etc. Have they wiped out any indigenous companies? Have they brought reduced business to any margin- free markets? While many starve, millions of tonnes of grain become rancid for want of adequate storage facilities. Ask how farmers in Punjab feel when their produce is not picked up and lies unsold. Can they negotiate higher prices? When the mercury rises, fruit don't last more than two days. Why we can’t find a solution till date? Recently we have seen series of raid in food outlets in many parts of Kerala.This includes shops in private, foreign and government sector. Who is to blame? FDI in retail or the shop owners? No one should underestimate the creativity of ordinary hawkers and small grocery owners. They know how to reach out to their potential customers. Today, in many areas of Delhi, vegetable vendors present their carts, laden with fresh stuff straight from the farm, as early as 6:00 am and this helps many joggers to pick up their daily requirement of vegetables from these vendors. Small grocery shops realize the value of home delivery; small stores also reduce a rupee or two on most items. This demand-and-supply relationship will remain unchanged in spite of the entry of big wheel like Wal-Mart. Even without FDI in retail, more than half of electronic and electrical items, machine tools, hardware, fittings and sanitary ware, lights and chandeliers etc sold in India are made in China. The Government can ask FDI to undertake R&D for better and higher-yielding seeds, build connecting roads, set up a chain of warehouses, cold storages, food processing plants and create green belts in the vicinity of stores as also schools, hospitals, sports and recreational facilities for their employees. The list is endless. Anyone claiming that FDI in retail will not create jobs is being dishonest. If there is a will, there is a way. Now its high time to think of the benefits of FDI. It will kill the middle men and not the middle class .At the same time we should understand that FDI retail come to India to make profit and not to donate money or achieve the good will. They should be allowed to make reasonable profit within the laws and frame work and in return we get more job opportunities and diverse products. I’m not overlooking the fact that when coca cola was banned in India in seventies, it gave opportunities to a number of indigenous drinks. This has given opportunities to many companies to improve their products also. Those who staunchly argue against FDI may please examine what effort done by authorities to boost up the market of coconut or even coconut farmers, who are lucky if at least five rupees is obtained. ? Mega stores of FDI in retail can also co-exist with small traders, grocery shops and corner vendors; they will attract customers from different sections, as has been the case in the restaurant business. Those raising the trouble against FDI in retail are the same persons who opposed FDI in the telecom, automobile and restaurant sectors. We had seen the same faces when computers and television came to this country, but with only one difference: there was no TV channel to air their discussion against it. I am writing this article with a hero pen made in China which costs about twenty in Bengali Market. Its presence has no way affected the sector, but only the FDI-the Fear Dominated Indians.