FDI in Multi Brand Retail Sector - Discussion

[parijataka]

Gujrat like farming policy would be impossible implement in Maharashtra, even with FDI ! because heavy control of co-operative sector, which mostly controlled by NCP and Congress. Co-operative sector is biggest political tool for both congress to get farmer's vote, Maharashtra farming is highly subsidised through these co-operative sector, but most is lost in corruption. Also Maha has highest farmer suicide count. If Gujrat like farming policy can be implemented only when this co-op sector is removed !

One solution - do not vote for corrupt Cong-NCP.

 

[parijataka]

Is FDI in retail all that it is being touted to be ?

FDI in Retail - Why it is not a Magic Wand as Projected!!!

India has allowed FDI in Retail sector. It will allow big retail player to invest in India. Will that impact Indian retailers? How will it help India? Many questions. Do we have the answers? To answer these questions we will have to see the impact of FDI in Retail in other countries (but not China as products sold by these marts comes from China, so they will never be in Loss). I have tried to analyze impact in other countries. I would try to puncture all the arguments of government by the arguments which will be supported by facts.

Advantages (projected by government):

• It will eliminate monopoly by increasing competition between retailers hence consumer will get commodities at cheapest price, also it would not affect small retailers.
• Farmers will get best price of their crops as middlemen will be removed.
• India will get better supply chain system and cold storages which will help storing grain.
• There would be more employment in India.
• If a state does not want FDI, they do not need to implement it.

Contradictions:
Below are the contradictions of projected advantages:

• Contradiction to Increase Competition, eliminate monopoly and cheapest price:
• Competition always happens in players of almost equal stature at a "level playing field". Do you think India's small retailers (say of 53 cities for now) can compete to Walmart? It is not exaggeration if we compare it to a boxing match between a player of 48 Kilo weight category and other of super heavyweight category. We all know what the result would be.
• Monopoly is when a group have complete control of something. Now understand that if Walmart sells goods at cheaper prices than other retailers, consumer will go to walmart and after some time small retailer will have to stop their business. In US & Europe where Walmart or other firms came, 80% of local retailers had to shut down. When small retailers gets out, we would have no choice but to buy from Walmart. To my understanding if retail control comes in hands of Walmart from retailers, it should be called monopoly. It would not eliminate monopoly but on the contrary it will help few big retailers to monopolize.
• In 1993 when Pepsi and Coke came to India, there were more than 20 firms which were doing business in this sector. Now how many companies are there? Yes, only Pepsi and coke left. All other companies could not survive as it was not a level playing field. Now Coke and Pepsi have monopoly in soft drink market.
• Cheap Price: Consumer gets goods at cheap price when there is competition in market not when only few retailers monopolize most of the retail market. For few years consumer may get cheap price but it will happen only till Walmart get hold of retail market control.

Contradictions of "Farmer will get best price as there would be no middleman":

• A sugarcanes farmer in India sells their crops directly to sugar mills. There is no middle man but still each year respective state government has to intervene to help farmer gets minimum support price to their crops. Ain't they following the same model
• In US when hog farmers/producers started associating to Walmart, they used to get 38 cents to each 1$ they spent. After few years later when walmart dominated 80% of US retail, they get paid only 12 cents of each 1$. Worth mentioning is the fact that hog prices has remain constant in walmart stores all through.
• If Walmart helps farmers get more, why number of farmers in US has gone down to 1% from 30% when there were no walmart stores? Same is the case with countries in Africa and Europe? It is said that 1 farmer leave farming each 1 minute in Europe. Why it is happening if farming was supposed to be turn into profitable business with entry of such stores?
• It is said that walmart provides best technology and price to farmers. If this was the case then why US government gives around $200 Billion subsidy each five years to farmers in US. Even European Union, Brazil, Africa and all such countries are providing hell lot of money as subsidy to their farmers. Ideally if we go by their logic, US should not be giving even a single penny to their farmers as subsidy. On the contrary there should be more and more people would be doing farming to make money.

Contradictions to more employment:

• Yes there would be some new employment, but if we look at the people who will lose employment, then those number will simply outnumber the new employment which could be created.
• If it would create more employment why countries like US, Europe are struggling with unemployment?
• Walmart provides only 20 lacs of people employment while their turnover is around $420 billion. Indian retail market turnover is also $400 billion but the employment created by it is more than 4.5 crores. Ain't it enough to see the truth?
• Fact of the matter is these stores eliminate more employment then they create.

Contradictions to better supply chain model with infrastructures:

​

• India already has supply chain in place. Yes there could be inefficiency in them. But it is something which we can improve. Do we need Walmart for it?
• Walmart will help improving infrastructure: Tell me, is creating infrastructure including Cold Storage is any rocket science? Cannot our government do it? First they do not full fill their duties and then they expect any other to come and fix what they could not. What silly logic. It's just a myth. Nothing of this sort will happen.

State can decide whether they want FDI:

• This is again a false thing. India signs BIPA with each country which wants to invest in India. According to article 4 of BIPA, each state of the country (which signed BIPA) has to allow foreign investor trade in their state as the local traders are allowed. National Treatment has to be provided to foreign companies hence each state has to allow FDI. They cannot avoid it at all.

Some more Facts:

• People say FDI was good in China, so it can be good even in India. Guys understand that China produces cheapest goods in the world, so products Walmart sells in China are made in China. Walmart in India would be selling China's goods (atleast 70%). How could it be good for India?
• FDI in retail can be good for India only when India produces goods at cheaper price than China and other nations. It can happen only when farmers/Industries get cheaper loan, electricity, fertilizer, infrastructure, technology, and everything involved in it. This can be done by Union Government and not by Walmart.

What do we need then?
We need a systemic revolution to improve our supply chain. Now question is can we do it? Yes indeed. Not only we can do it but we had done it. Do you remember AMUL? Yes I am talking about White Revolution. We need to follow the same supply chain and other mechanism (with some customization). Amul gives milkmen 70 paisa of each 1 rupee spent by them while milkmen associated with walmart in US gets only 36 cents (Official data). Amul's model is best in the world. No Store like walmart or no government were able to do it. We can do it yet again with help of government (for building infrastructure). I personally do not support FDI in Retail as retail in India is not level playing field for all. I believe FDI in Retail will cause more loss than profit. At the last I would like to mention that Mahatma Gandhi used to emphasize on "स्वावलंबन". We should be self-sustained and should not expect someone else to solve our problems. It will make us even weaker. At last I would like to highlight that these companies invest in India for more and more Profit and not Charity.

 

[anoop_mig25]

Is FDI in retail all that it is being touted to be ?

FDI in Retail - Why it is not a Magic Wand as Projected!!!

India has allowed FDI in Retail sector. It will allow big retail player to invest in India. Will that impact Indian retailers? How will it help India? Many questions. Do we have the answers? To answer these questions we will have to see the impact of FDI in Retail in other countries (but not China as products sold by these marts comes from China, so they will never be in Loss). I have tried to analyze impact in other countries. I would try to puncture all the arguments of government by the arguments which will be supported by facts.

Advantages (projected by government):
It will eliminate monopoly by increasing competition between retailers hence consumer will get commodities at cheapest price, also it would not affect small retailers.
Farmers will get best price of their crops as middlemen will be removed.
India will get better supply chain system and cold storages which will help storing grain.
There would be more employment in India.
If a state does not want FDI, they do not need to implement it.

Contradictions:
Below are the contradictions of projected advantages:
Contradiction to Increase Competition, eliminate monopoly and cheapest price:
Competition always happens in players of almost equal stature at a "level playing field". Do you think India's small retailers (say of 53 cities for now) can compete to Walmart? It is not exaggeration if we compare it to a boxing match between a player of 48 Kilo weight category and other of super heavyweight category. We all know what the result would be.
Monopoly is when a group have complete control of something. Now understand that if Walmart sells goods at cheaper prices than other retailers, consumer will go to walmart and after some time small retailer will have to stop their business. In US & Europe where Walmart or other firms came, 80% of local retailers had to shut down. When small retailers gets out, we would have no choice but to buy from Walmart. To my understanding if retail control comes in hands of Walmart from retailers, it should be called monopoly. It would not eliminate monopoly but on the contrary it will help few big retailers to monopolize.
In 1993 when Pepsi and Coke came to India, there were more than 20 firms which were doing business in this sector. Now how many companies are there? Yes, only Pepsi and coke left. All other companies could not survive as it was not a level playing field. Now Coke and Pepsi have monopoly in soft drink market.
Cheap Price: Consumer gets goods at cheap price when there is competition in market not when only few retailers monopolize most of the retail market. For few years consumer may get cheap price but it will happen only till Walmart get hold of retail market control.

Contradictions of "Farmer will get best price as there would be no middleman":
A sugarcanes farmer in India sells their crops directly to sugar mills. There is no middle man but still each year respective state government has to intervene to help farmer gets minimum support price to their crops. Ain't they following the same model
In US when hog farmers/producers started associating to Walmart, they used to get 38 cents to each 1$ they spent. After few years later when walmart dominated 80% of US retail, they get paid only 12 cents of each 1$. Worth mentioning is the fact that hog prices has remain constant in walmart stores all through.
If Walmart helps farmers get more, why number of farmers in US has gone down to 1% from 30% when there were no walmart stores? Same is the case with countries in Africa and Europe? It is said that 1 farmer leave farming each 1 minute in Europe. Why it is happening if farming was supposed to be turn into profitable business with entry of such stores?
It is said that walmart provides best technology and price to farmers. If this was the case then why US government gives around $200 Billion subsidy each five years to farmers in US. Even European Union, Brazil, Africa and all such countries are providing hell lot of money as subsidy to their farmers. Ideally if we go by their logic, US should not be giving even a single penny to their farmers as subsidy. On the contrary there should be more and more people would be doing farming to make money.

Contradictions to more employment:
Yes there would be some new employment, but if we look at the people who will lose employment, then those number will simply outnumber the new employment which could be created.
If it would create more employment why countries like US, Europe are struggling with unemployment?
Walmart provides only 20 lacs of people employment while their turnover is around $420 billion. Indian retail market turnover is also $400 billion but the employment created by it is more than 4.5 crores. Ain't it enough to see the truth?
Fact of the matter is these stores eliminate more employment then they create.

Contradictions to better supply chain model with infrastructures:
India already has supply chain in place. Yes there could be inefficiency in them. But it is something which we can improve. Do we need Walmart for it?
Walmart will help improving infrastructure: Tell me, is creating infrastructure including Cold Storage is any rocket science? Cannot our government do it? First they do not full fill their duties and then they expect any other to come and fix what they could not. What silly logic. It's just a myth. Nothing of this sort will happen.

State can decide whether they want FDI:
This is again a false thing. India signs BIPA with each country which wants to invest in India. According to article 4 of BIPA, each state of the country (which signed BIPA) has to allow foreign investor trade in their state as the local traders are allowed. National Treatment has to be provided to foreign companies hence each state has to allow FDI. They cannot avoid it at all.

Some more Facts:
People say FDI was good in China, so it can be good even in India. Guys understand that China produces cheapest goods in the world, so products Walmart sells in China are made in China. Walmart in India would be selling China's goods (atleast 70%). How could it be good for India?
FDI in retail can be good for India only when India produces goods at cheaper price than China and other nations. It can happen only when farmers/Industries get cheaper loan, electricity, fertilizer, infrastructure, technology, and everything involved in it. This can be done by Union Government and not by Walmart.

What do we need then?
We need a systemic revolution to improve our supply chain. Now question is can we do it? Yes indeed. Not only we can do it but we had done it. Do you remember AMUL? Yes I am talking about White Revolution. We need to follow the same supply chain and other mechanism (with some customization). Amul gives milkmen 70 paisa of each 1 rupee spent by them while milkmen associated with walmart in US gets only 36 cents (Official data). Amul's model is best in the world. No Store like walmart or no government were able to do it. We can do it yet again with help of government (for building infrastructure). I personally do not support FDI in Retail as retail in India is not level playing field for all. I believe FDI in Retail will cause more loss than profit. At the last I would like to mention that Mahatma Gandhi used to emphasize on "स्वावलंबन". We should be self-sustained and should not expect someone else to solve our problems. It will make us even weaker. At last I would like to highlight that these companies invest in India for more and more Profit and not Charity.

I wondered why BJP/left doesnt use this arguments in Parliament against GOI .ARE this party just opposing for shake of opposing it . ONE can think of BJP/SP/BSP and all other jhollawallas they donot have any intellectual people left with them . but with left , i thought they had people , studied in JNU and other such universities . THEN why LEFT is behaving like any other religional party . i think left is to qui-pro with gov in this dealing

 

[pankaj nema]

There is absolutely NOTHING wrong with FDI in retail

In fact millions of farmers and consumers will be benefitted

Let the wholesalers and retails come together and create
warehouses ;cold storages and introduce economies of scale if they
really want to give a better deal to farmers and consumers

Right now only the wholesalers and retailers are benefitting from both ends
ie buy low and sell high

 

[Drona]

I wondered why BJP/left doesnt use this arguments in Parliament against GOI .ARE this party just opposing for shake of opposing it . ONE can think of BJP/SP/BSP and all other jhollawallas they donot have any intellectual people left with them . but with left , i thought they had people , studied in JNU and other such universities . THEN why LEFT is behaving like any other religional party . i think left is to qui-pro with gov in this dealing

Actually to introduce FDI in retail government do not have to go through the parliamentary procedure, government has right to introduce it. I am not sure about state government's rights in this matter. But Pranab M did promise parliament (when he was in it) that decision on FDI in retail will not taken without parliamentary consensus ! which is broken now.

 

[nrj]

BJP hints at scrapping FDI in retail if voted to power

SURAJKUND: Clearing the party line on FDI in multi-brand retail, BJP on Wednesday totally opposed the move at the party's national executive being held here, in the backdrop of stiff opposition to the government's decision to bring 51% FDI in the retail sector from parties across the political spectrum.

Party chief Nitin Gadkari in his opening speech at the executive, "categorically opposed" FDI in retail, party spokesperson Ravi Shankar Prasad told reporters here.

When asked for further clarification Prasad said BJP is of the view that, "51% FDI in retail is not in the interest of the country or our own farming community." On further questions on whether the party's opposition was to the quantum of FDI that is allowing 51%, he clarified saying, "wait for our manifesto... 51 or no per cent... "

Prasad however clarified that BJP was not against reforms, but was in favour of pro-people reforms.

The BJP-ruled states have already decided to reject FDI in the multi-brand retail sector, Prasad clarified and said, "we are against FDI in retail... when we come to power the consequences will follow," in reply to a question on whether BJP will scrap FDI in multi-brand retail if it comes to power at the Centre.

Why is that BJP tries to do crazy things in desperation during all the times that matter ?

Asked about the agenda for good governance released by BJP before the 2004 General elections which said the party favours 26% FDI in multi-brand retail, Prasad said, "Leave it to us. 2004 is eight years ago. Wait for our manifesto. Gadkari categorically opposed FDI in multi-brand retail."

http://www.hindustantimes.com/India...cy-if-comes-to-power-BJP/Article1-935929.aspx

 

[Raj30]

 

[thakur_ritesh]

Can someone please clear the stand of the BJP on the banking and insurance reforms. Will like to know what their stand is on the issue. Thanks.

 

[sob]

BJP stance is very clear on Insurance and Banking reforms. Mr.Yashwant Sinha was the Chairman of the Both the Standing committees and they have given their approval, with minor amendments. The Government has not got back to them and neither have they even intriduced them in Parliament.

In case of Insurance BJP has asked the Government to increase the foreign share holding in couple of steps rather than in one go. This stand of the BJP was due to the Lehman Bros crash in the USA and also the bailout that company like AIG required.

 

[thakur_ritesh]

Sumeet,

Can you please share some detailed analysis on this. Both the perspectives, I want to do a detailed reading on it over the weekend. Thanks.

 

[Rahul92]

Dude i did not want to say this but Walmart is gonna fail i just want its investment which will bring up some work for infra companies

 

[Bangalorean]

^^ I am almost 100% sure you are right. Wal-mart will be a failure in India, but they will stick around for nearly 10 years before calling it quits. They will fail here the way they failed in South Korea.

Their infra will be up for grabs at ultra-cheap rates then. Reminds me of the dot-com boom years, when people kept laying more and more and more fiber optic. When the bust happened, all that fiber optic was lapped up for rock-bottom, and caused a connectivity revolution in the world.

 

[Rahul92]

It had failed in S.korea,Brazil,Germany

 

[Rahul92]

Let me give you top 5 reasons why walmart will fail in India
1) Out of City Limits

Everywhere in the world including US, all Wal-Mart stores are located at-least 10 kms away from city center. The area of this stores is approx. 51,000 to 250,000 sq. feet. Most of them on an average 1.5 lakh sq feet. Considering that such sizes are not feasible in city centers they are located away from city. Where it is cheaper to set up shops. Since most Americans own cars, they go out and purchase the same on an weekend and get themselves supplies for every month.

Well considering that, in India, most of cities have sky rocket real estate prices, the only place where Walmart can set up such large scale formats is out of city center. The way it is doing in wholesale JV with Bharti. But a very small percent of Indians own car, thereby reducing down a huge percent of buyers who would like to flock to this huge discount retail shops. A recent visit by one of reporters to Walmart Bharti in Punjab revealed that though the retail buyer liked the pricing of wholesale shop, they found it too far off from the city and worth the extra efforts every week. There by when they setup deep discount shops targeting at retail consumers, will they be able to travel long distance?
2) Everything under one roof:

The idea of Walmart is to have everything under one roof, from farm's produce to do-it-yourself kits for plumbing or even a refrigerator. The model is "jo dikhta hai woh bikta hai". So when a person comes to buy one thing he ends up buying more.

But in India when was that you went up buying everything at one stroke? Does an average Indian buys grocery and other stuff at the same time?
3) Personal touch:

The most critical reasons for Indians to buy from a specific "kirana" store is the personal touch. The owner of the Kirana store generally knows every customer and has a personal touch with the customer. At the same time the owner of the kirana store goes a step ahead to please the customer. Though Walmart has its own way of customer service, it cannot beat the personal touch of the Indian marwaris who sell at the local "kirana stores".
4) Home delivery And Credit:

The biggest advantage of the Kirana Store is the provision of home delivery of all the goods that you order a day before. And you generally enjoy a good credit period with the "kirana" store with out interest. Most of the times the credit enjoyed by customers range from 1- 2 months and sometimes even as high as 3-4 months. Additionally, this credit is completely interest free. Whereas in bigger stores you have to pay up front or via credit card. Where interest rates can be as high as 3% per month on Credit cards after service tax.

Considering the same when one has to travel a distance and make a purchase in large quantity then it surely need a deep pocket, which only higher middle class or the well salaried class in India has.
5) Idea of buying a month's Supply:

The whole idea behind Walmart business model is to buy the goods which one may require over a period of month and buy it in wholesale, without needing to go to kirana stores. But one must also remember that Americans and westerns use lot of canned food, thereby having a mental capacity to buy vegetable or even meat, store it for a period of time and then consume it.

As oppose to that Indians mostly avoid eating anything which is stale for more than 2 days. And also are the one who are not comfortable with eating from canned food.

Well though there is scope for Walmart in India to succeed, but its overall success will remains mediocre.

Why Walmart may fail in India?

 

[Rahul92]

Well every one may say cheap rates can do the trick Let me give you a recent company you guys must have known uninor yes that 1/2 paise per sec it's the cheapest service provider but how much success did it get It was the biggest Foreign investment loss for TELENOR According to my knowledge Walmart is going to face same situation

 

[Raj30]

Fatcat obsession: We need reform for India Uninc, not India Inc | Firstpost
Fatcat obsession: We need reform for India Uninc, not India Inc

by R Vaidyanathan

Prime Minister Manmohan Singh, in his address to the nation on 21 September, has clearly enunciated the need for reforms to achieve the desired economic growth and not go back to the situation obtaining in the early nineties. Unfortunately, his focus is on reforms which are dictated by US business interests and supported by local crony capitalists. The latter occupy a small space in our economy but their voice is loud since they control all major media and have effective lobbies in Delhi.

If we look at the structure of our economy, we find that nearly 20 percent of GDP is contributed by the government and another 18 percent comes from agriculture, which is also in private hands. The corporate sector, which gets a regular audience with the Prime Minister, accounts for just around 15 percent. The rest, which include partnership and proprietorship firms (called non-corporate businesses), constitute more than 45 percent of our GDP. (Source: National Accounts Statistics, CSO-2011).

In the US, the share of corporate business is more than 75 percent in GDP.

In India, the share of non-corporate business even in the manufacturing sector is nearly 50 percent.

As for services, which includes sectors such as construction, trade (wholesale and retail), transport (other than railways), hotels and restaurants, real estate, and other services (professional), the share of the non-corporate sector is more than 70 percent; these activities are the fastest growing activities with more than 8 percent compounded average growth rate in the last decade. These are the drivers of our economic growth.

Reuters

In savings, households contribute more than 70 percent of our domestic savings — and domestic savings is the prime driver of our investment and growth. In the case of savings data, households include the non-corporate sector.

What this means is simple. The main thrust of our reforms should be focused on our non-corporate sector, but this is the sector that faces the twin devils of credit starvation and corruption (the result of unchecked inspector and permit raj). Even though the non-corporate sector is fastest growing, its credit needs are not met by the banking sector but by private moneylenders and their cost of borrowing is as high as 5-6 percent per month — that is, around 70 percent per annum.

The share of the non-corporate sector in bank credit, which was nearly 60 percent in the early nineties, has come down to 36 percent in 2011, showing a consistent decline. The share of the corporate sector has gone up from around 30 percent to 44 percent and that of the government from 10 percent to 20 percent.

In other words, the most productive and growing sectors of our economy are starved of bank credit, forcing them to depend on moneylenders and other non-bank sources. The crony capitalists who default on bank loans get a larger share of wasteful lending. The solution to this problem — of credit starvation in the most dynamic sectors — is to create a separate body to monitor the non-bank financial sector and free it from bureaucratic clutches.

Not only that, the non-corporate sector also pays huge sums as bribes — sometimes as high as 10-15 percent of its gross turnover. So the misery index of small and medium businesses in India is a combination of interest rates and bribe rates — which comes to an annual rate of nearly 80 percent.

This misery index needs to be tackled and reforms should focus on alleviating this anti-business skew instead of worrying about whether Wal-Mart should enter India or not. Wal-Mart, in its search for new markets, needs us more than we need it.

For the India Story to rebound, the reforms we really need are in the areas of commercial taxes, road taxes, entertainment tax, excise duty on liquor, urban land ceiling regulations, the Shops and Establishments Act, laws governing educational and medical institutions, money lending regulations, stamp duty, food and adulteration laws (involving municipalities), water and drainage regulation, and the registration and contract laws.

These regulations pertaining to activities in which the non-corporate sector dominates and are partly in the realm of state governments. There is a need to have an inter-state council meet only to focus on reforms in all the above mentioned areas instead of just being obsessed with FDI and FII and pink paper concerns.

We do not want to have basic and more path-breaking reforms – in fact, we do not even discuss it – because they are not "sexy" enough and do not appeal to the audiences of the business TV channels and the chambers of commerce. Actually, FII and FDI sources have always contributed less than 10 percent of our investments, which are largely driven by domestic savings. Yet we think giving more incentives to foreign investors will solve all problems. That is not a sign of free market thinking, but a sepoy's sellout to global capital.

Until and unless we focus on reforms at the state and lower levels, we are not going to sustain our growth rates. We must come out of our focus on the big corporate sector — the Sensex economy — and focus on the sectors that really create jobs and growth. Our corporate sector is only an "item number" in our economy, full of glamour and oomph, but there is less substance below.

We as a nation have the uncanny ability to focus on the inconsequential and immaterial and waste lots of time and effort on them. We even have the gall to criticise those who point out these hometruths as Swadeshi loonies or even Luddites.

Delhi-centric reforms can only benefit fatcats and not the most productive sectors and engines of our economic growth — namely India "Unincorporated". They are struggling to get adequate credit at reasonable rates of interest and have to deal with corruption at the lower, and less controllable, levels in our system. What India needs is to reform our reform process itself to focus on the real India and not the India which the Yankees and Yankee-minded reformers are imagining!

The author is Professor of Finance, Indian Institute of Management Bangalore. The views are personal and do not reflect that of his organisation.

 

[cloud_9]

Not sure about the sucess of Walmart but you can sell a product for $3 in Asia even though it sells for $1 at Dollar Stores/Crazy Clark's.........just print a American/Australian/UK flag on it

 

[Yusuf]

India's FDI retail saga: From Wal-Mart to Agarwal-Mart?

India's FDI retail saga: From Wal-Mart to Agarwal-Mart? - TOI Mobile | The Times of India Mobile Site
WASHINGTON: "I actually did vote for the $ 87 billion (war funding) before I voted against it," was a line that destroyed John Kerry's Presidential campaign in 2004. He could never live down the flip-flopper reputation after opponents simplified his statement to "I was for the Iraq War before I was against it." Subtle nuances and elegant explanations, not to speak of a possible change of heart after things went south, were lost in the verbal melee in an atmosphere where you were either "for it or against it."

Something similar is happening in the debate in India about foreign direct investment in the retail sector, in which the American superstore Wal-Mart has become the figurehead. You are either for FDI or against FDI; Wal-Mart is all good or pure evil. Look, look...says one distinguished opposition leader now in his twilight years, even Americans (or New Yorkers) are against it. Of course, some Americans are against Wal-Mart; many are for it. Many Americans are also pro-outsourcing. And anti-globalisation. And pro-China. And anti-China. It's never black and white.

In fact, as the popular Facebook-era metaphor goes: It's complicated. As someone who divides his time between U.S and India, here's my $ 0.02, or Rs 1.06 at the current exchange rate, about the FDI/WalMart debate: I am against Wal-Mart in America, and for Wal-Mart in India. How's that for a $ 2.00 Made-in-India flip-flop — or "double standard" as a colleague put it? I am also mostly vegetarian in the US, but have no problems eating non-vegetarian in India. And there's a connection between the two.

The simple explanation for all this is the U.S and India are at different stages of market economics, especially in the in production, distribution and marketing of food produce. The US has made some awful mistakes in embracing its current food cycle, the same way it has erred espousing a mindless automobile revolution. So while adopting the "good" that FDI retail/Wal-Mart can offer, there is no compelling reason for India to follow the U.S model to the T; it need not make the same mistakes. Call it retail revolution with Indian characteristics, if that is possible.

Let's break it down with examples by first looking at the "good" that the proposed retail revolution can bring into India, some of which has been articulated by ardent votaries of FDI. First off, it will improve supply chain logistics, including cold storage, and broadly bring India further in tune with 21st century western style market economy. It will save the 30 per cent wastage of perishables that we have been moaning about for 30 years. Of course there is always the question about whether it is better to eat fresh produce never mind the wastage, or whether to can the waste and eat preserved food. We'll come to that later - the simple answer could be it is better to eat something than nothing at all....

Initially at least, the so-called FDI revolution in retail will provide better prices and returns to farmers through better yields, productivity, and distribution. It could also offer more choice, better quality, greater uniformity, improved display and packaging. All this is not a given and will not necessarily improve your health or quality of life. In fact, it could be the other way around. Here's how it has panned out in America.

The corporatization of the food chain has its upside -- and downside. Farmers are coaxed -- or forced -- to improve yields, attain the kind of quality and uniformity that corporate interests demand, and as a result may get more remunerative prices, at least in the beginning. But it also edges out the small and marginal farmer, vastly reduce farm labor (with increased mechanization), and result in mediocre but commercially viable produce.

In fact, this prospect brings home the very malaise that more "advanced" western societies are starting to realize and wanting to avoid or reverse. This is where you want to continue buying from the neighborhood push-card vendor in India who's bringing in fresh produce to your doorstep from a local grower rather than the retail chain with its stock of mass produce whose provenance and vintage is unknown. This is where more and more westerners, at least those who can afford it, are switching to shopping at farmers market with local produce even though it is much more expensive than supermarkets.

So why is it produce cheaper (or will eventually become cheaper) in the supermarkets, you ask? Because the economies of scale make big chain produce much cheaper. They also have deeper pockets to suffer initial losses and eliminate competition, as Wal-Mart has demonstrated in many countries.

What modern retail in the west has done is introduced food produce not just on an industrial scale but on an industrial quality too. And this is where my "prefer vegetarian in U.S but okay with non-veg in India" choice kicks in. That massive ten-pound pack of chicken breast at dirt cheap price...we really have no idea of its origins or vintage. Wait...we do have a rough idea. It was raised in a massive chicken farm owned by a corporate monopoly in methods and circumstances that will make you puke. Chicken (or cattle) that are cooped up in the dark, medicated, and force-fed continuously so that they attain maximum weight in the minimum time with minimum movement and metabolism. That's how corporates maximize profit. In India, you still have to the option of seeking out the healthier free-range or home-grown chicken, fresh locally grown- or sourced vegetables and fruits. You could be saying goodbye to all that (or at least end up paying much much more) with the FDI fiesta.

On a recent trip to the great American outback, your correspondent saw visual evidence of what this corporatization and industrialization of food production - widely seen as inevitable once the retail FDI gates are open - can do to the landscape and population. Thousands upon thousands of acres of farmland, typically owned or leased by corporates or large farming interests, grew bounteous harvests of corn (even in a drought year). This was not the corn, the "bhutta" from the push cart vendor that you eat with relish. It is mostly genetically modified, tasteless, industrial-grade rubbish that is aimed at maximizing yield. When it is not used as animal feed, it is turned into corn syrup which is used sweeten almost everything you see in the supermarket, including that sugary soft drinks you guzzle.

The result is all too visible in much of the U.S., nowhere more than the heartland of the country, where people come in large, economy size, with consequent health issues (obesity linked diabetes and heart disease). Much of this comes from eating cheap, low-quality, industrial grade food -- from mass-produced breads and meat. There are few places in the world is where food available as cheaply (relative to income) as America. Till a couple of decades ago, Americans spent up to 15 per cent of their income on food; it is now below ten per cent and still dropping. It is now an accepted fact that the poorer the state in America, the more obese people are, because they are eating cheap, mass-produced food of the kind offered by fast-food chains. That dreadful burger and pizza and cola that you are wolfing down from the retail assembly line...it's the cheapest and the worst kind of food you could be eating.

So here's the equation. If you allow the kind of retail revolution that has overtaken America, you could end up consuming cheap, low grade, mass-produced, industrial quality produce. Of course, it is easy to sniff down at all this from the high vantage point of those who have money in the pocket and the luxury of choice. But what about those with limited means who cannot afford to spend as much on fresh produce as corporatization of the food chain takes hold? So should be just reject the American/western way and stick to our current way, as many of those opposed to the Wal-Mart way are recommending? Then what happens to the farmers who seek better market access and greater returns, who want to eliminate waste and spoilage. Isn't FDI retail lucrative for him -- at least to begin with, before predatory practices set in. Which way should we go? Will we, to paraphrase John Kerry, end up being "for it, before we turn against it."

The answer, without it sounding like a cop-out, is to embrace the middle way. We need all the systems and logistics that FDI retail will bring, but we need to tweak it to make sure we don't go the American way. In some ways we should be reassured by what has happened already: the arrival of American retail food chains such as KFC, McDonalds, and Pizza Hut, did not destroy Indian eateries or Indian eating habits. We took the best practices from them, and today many Indian food outlets have the same look and feel of their western counterparts while continuing to serve the Indian palate. So the arrival of Wal-Mart may just herald the birth of the Agarwal-Mart.

 

[Zebra]

If GoI allow the multinational companies like Wal-Mart that they can import nearly what ever they like to sell in their Indian stores.

If the Indian companies also wants to import the same kind of products to sell in local market, then GoI will allow them also to do so?

OR

Only multinational and FDI companies will import it and others Indian companies are not allowed!

 

[Drona]

in other thread, "'Perfect storm' that shook PM Grim alert, bitter pills" . Kelkar panel suggested some "prescription",

Did Kelkar Panel mention "FDI in retail" as a remedy to save economy ?