FDI in Retail and Functioning Parliament

It is a good news that government of India has agreed to allow debate on the topic of FDI in retail followed by voting. It is heartening that opposition parties have agreed to let the parliament function. Government had allowed 51% ownership of Foreign Direct Investment in Retail business. Although it was a policy decision, most opposition parties claimed they are opposed to the decision. So opposition wanted to debate the issue in parliament followed by voting on the issue. Government refused debate and voting because they feared losing. Moreover, government ally Trinamool Congress (TMC) quit government making an issue with the policy decision claiming it to be antipoor. At the present time, it appears that government has managed to persuade some of its allies, like DMK, SP and BSP. These parties have agreed and / or abstain in case of voting, albeit grudgingly.


Many people think that FDI will put small grocery stores out of business. This will lead to large scale unemployment. However, it has been seen that in many Indian states the large retail stores are unable to compete. It is correct that multinationals have much deeper pocket. They can last much longer than Indian players. However, even multinationals have to set up lot of backend infrastructure before they can start a meaningful operation. Moreover, India is a vast and heterogenous country. We have widely different socioeconomic levels. While middle and upper middle class may get the benefit of big stores, vast number of poor people will still go to neighborhood stores. Besides, neighborhood stores give credit, they give home delivery and many of them carry almost all the brands. So there is very little chance of an efficient corner store going bankrupt. Besides a huge country like India will never go one way completely. Our shopping habbits, our household economics etc are very different from what is practiced in the West. Very poor people will never be able to buy one week or months supply of food in one go. It is also believed that cost of food is likely to come down and farmers are likely to get better price. In many other countries also these stores are operational and economies have not really got affected.
So why oppose the decision? One is not surprised that TMC opposed the decision. TMC wanted an exit route from the beleaguered UPAII, that was plagues by corruption charges as well as accused of mismanagement of economy. As a result economy was sliding, subsidy burden was increasing and government had to reduce subsidy by raising price of cooking and transport fuel. These are antipeople policies, but TMC cannot be party to such decisions. So they exited. It is also not surprising that Left parities opposed the move. In general Left has great antipathy to free market economy and anything related to United States. Smaller parties like BSP and SP did not want to look obviously antipoor. So they wanted to sit on the fence and watch what others were doing. However, it was surprising that BJP led NDA had opposed FDI in retail. When such stores by Indians players are already operational in BJP ruled states like Gujrat and Madhya Pradesh. BJP ally Shiromani Akali Dal (SAD) also wants FDI in retail. Bharti – Walmart is operating in Punjab. Besides government has assured states that it is upto the states to implement the provisions of FDI in retail.
It seems most enterpreneural states have either FDI in retail operational and want more. On the other hand, states with poor culture of enterpreneurship do not want FDI. Some others just want to sit on the fence and watch what others do. Finally, government should have taken all parties along by informing them and consulting them as partners. But minister of commerce, is an arrogant person, and often his version of events are not accepted by his party colleagues let alone opposition. Hopefull, dust will settle down, government will get FDI passed, parliament will function and India will be the gainer.

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