Monday, November 28, 2011

FDI in retail debate - Part 1

By D. Dhanuraj

FDI in retail sector has been a pending decision from the Government. That too at a time everyone ditches at the Governance for the lack of direction and the reform drive. Corruption, scam, tainted image of the Government.. all are adding pressure to the Government. It is argued that any such reform like FDI in Retail can push the Government forward and shed the image of stagnation in Governance.

In India, organised retail sector is not going to be a threat to kirana shops in the immediate future as India is diverse and the Purchasing power of each family and individual vary a lot. The organised retail is a long way to get accomplished as we lack the supply chain management, ware housing, processing, refrigeration etc. They say  more than 33 million are going to lose their livelihoods as a result of this policy. I wonder how it going to be as it is not Tsunami to strike the small merchants over night. there is a trade off always in any sort of changes happening in the economic activity. The challenge for all policy makers and the economists is that of finding a suitable way to absorb these tremors. In this case, it is a trade off between 33 million and 1167 million. If we go by public choice theory, trade off will be of lager benefits to the larger population. But this does not mean that we are asking these small trading communities to go to Hell. instead , contrary to expectations, they are going to benefit as many established Indian players already commented that the most important step in this bargain is to take these small time merchants into confidence. whether it is HLL or Future group, they have already rolled out smart programs like coaching and equipping these trader community on the best practices in sales while storing their products in these kirana shops. Thus, these merchants learnt the art of selling the items in a professional way while customers in the rural areas started getting improved and quality service hitherto not offered.

All the studies show that farmers are at the losing end as a result of middlemen and lack of infrastructural facilities within the system. Politicians exploit the opportunity by declaring MSPs gauging the vote bank politics of the upcoming elections in the region. A distorted market is created banning import and export without any scientific reasons but by reflecting the paternalistic statehood. When millions of citizens starve, food grains are thrown into Bay of Bengal fortunately without causing much social unrest. No one declares hartal when the nation dumps the food grains into the ocean. why? are we not sensitive to the poor or do we lack the sensibilities? what are the reasons and what are the remedies?

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