Monday, December 3, 2012

FDI in India - My perspective

Hi All,

It’s been 28years since the tragedy of Bhopal Gas, but the victim families have been fighting for justice till date. They were still agitating for basic needs like safe drinking water...isn't it the least that any government can do to pacify the people for their 2 decade long suffering??? What kind of system are we in?? Wake up Chauhanji as you near the election year.

Amongst the 13 Prime Minister's that our country had throned, Dr.Manmohan Singh is undoubtedly the highly educated politician. He had held the posts of economic advisor, reserve bank governor and finance ministry very effectively and handled the economic crisis in a best possible way for which he had won great accolades throughout the world. But a PM's chair is never a cake walk even for the man who had witnessed decades of political reforms. He has been criticized for the lack of strength in decision making, inability to curb scams and scandals, lack of active & independent strategies etc; But, when he tried to reinvent himself by making a stern decision, perhaps more as an economist rather than a prime minister, we oppose him. When as an economist, his reforms were able to successfully lead us out of economic crisis in 1991, why not now?? His decision to lift the cap on FDI was opposed by all the opposition parties and the parties within the UPA too.
Allowing the FDI in India has turned out to be another reason for the political parties to fight. The argument that says FDI is going to ruin the small scale businesses in India is more of a myth. I have a very valid point to mention here. According to me, FDI will not ruin but improve many sectors of the economy. The first and foremost is the investments that these foreign retailers make in our country, secondly the farmers will be benefited by selling their harvest directly to these foreign retailers unlike the current selling procedures which are of least help. The norms that’s these foreign retailers set for a product to qualify their requirements will give a better quality product to the consumer. This perhaps could create a competition for a better quality item at an appropriate price.
For example, the Walmart which stands top consistently in the Forbes listings because majority of the products sold by Walmart are relative to the quality and pricing. The price in Walmart is comparatively less than other retails, but the quality is never compromised. The fact that Walmart purchases most of its products from China can also be sidelined in our case. Our government can set regulations on purchase & manufacturing policies to curb this practice. Once regulations are set, as per the demand, there is a good possibility of increase in manufacturing units. All of which will contribute to more employment opportunities.
In the USA, where giant retails have been ruling the roost since decades, there are complains that this system is killing small scale farmers. This is fairly true because US market system does not have good no.of corner shops. Even in remote places its unlikely to find corner shops. This is a difficult scenario for both farmers and the customers as well. For every small thing that you need, you have to make a trip to the huge retail stores sparing half a day in buying a small list of stuff that you need without diverting to the things that you don't need. Probably Americans are very much used to these retails that it isn't an issue to not have a corner shop at every street corner. 
But, in the UK there were many corner shops, almost at the end of every street corner just like in India. Many grocery shops, meat shops, fast food shops that co-exist with the big retails in the high streets. Also there are street side veggie grocers who sell small harvests on a day to day basis. And, the retails have set up express shops which are like the corner shops at high streets. But, everybody have their own market. Irony is that, in spite of so many attractive offers the giant retails make, the fresh grocer who sells on a day to day basis gives a tough competition.
Our market system is more or less similar to the UK market. We have many retailers, street side vendors, super markets and we have 1.2 billion people to be catered for. So, the advent of FDI in India will not kill small businesses but will open a new door for those deprived farmers and will serve the middle class better. On the otherhand, space is a big concern for these giant retails, so they cannot set up a store in every street corner. Hence the small business that you see will remain more or less the same and may be better if they compete in quality and price. Bad business strategies will also be knocked off. All this works well, provided proper regulations are set in terms of the purchasing & manufacturing policies. Otherwise, the already declining economy may have to face disasters.  
In my opinion allowing foreign retail will bring revenue, jobs and apparently some good reforms in the country. Our local markets will be cautious regarding the prices and quality will be better. Not the FMCG alone, but clothing and furniture will also face a challenge to enhance their produce and supply at a reasonable pricing. This is almost like a reverse reform these business owners crave for quality, the look to buy the best from their sources while demanding for a reasonable pricing and the sources will demand their manufacturers to give a reasonable product for the price paid, thereby the manufacturer gets an alert. This entire process will act like a cycle and goes back hitting the government in due course of time to bring strong reforms in economic policies, price change etc., This may not be an overnight success. Any policy for that matter needs to taste some bitter experiences before shaping up into a model. This is certainly a reform with a vision by the man whoz known as a master mind in economic reforms. It’s just that the political parties are smartly trying to woo the voter against this or too dumbly opposing a great change.