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Posted on 24 November 2011 |
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| CURRENT AFFAIRS |
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LIBERALISATION |
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Cabinet approves 51% FDI in multi-brand retail
BJP says foreign players will ruin service sector, self-employed retailers and result in unemployment
Iftikhar Gilani
New Delhi
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Wal-Mart was the first foreign firm to set its wholesale shop in Amritsar
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The Cabinet cleared 51 per cent foreign direct investment (FDI) in multi-brand retail on Thursday paving the way for global retail giants like Wal-Mart and Carrefour to enter India. The Cabinet also cleared 100 per cent FDI in single-brand retail.
As expected, the Bharatiya Janata Party (BJP) said that allowing FDI in retail sector would kill small traders. Opposition leaders Sushma Swaraj and Arun Jaitley in a joint press conference inside the Parliament House building said that such a policy would be disastrous for India ruining the service sector, self-employed retailers and causing massive unemployment in both service and manufacturing sectors. The government is arguing that international retail players should be allowed to create cold storage facilities and chains to help the farm sector.
In a separate statement, senior BJP vice-president and former Himachal Pradesh Chief Minister Shanta Kumar decried the Cabinet move despite the warning of the Standing Committee of Commerce Ministry, which he headed twice. The Centre’s logic that the government and the Indian companies are incapable of supplying farm products to consumers resulting in loss of Rs 50,000-60,000 crore is laughable, he said. "The government is unable to deliver many services. Will it take foreign help in delivering them?" he asked.
"Are you going to hand over our food supplies to foreign hands merely because governments (Central and state) have failed to create cold chains? Why can’t the same be done by the governments," Sushma and Jaitley asked. “Yes, India needs infrastructure for carrying farmers’ produce to consumers in the most efficient and cheapest manner, but it should not be done by riding on the back of international players as they will play no role in building roads—both rural and urban—or generating power," they added.
The BJP stalwarts further said that India buying nuclear technology or any other technology not available indigenously was logical, but it would be ridiculous if a nation that wanted to lead the world looked to foreign players for running even its retail trade. Pointing out that the Indian economy was now dominated by service sector, accounting for 58 per cent, they said that there were enough domestic retail chains—both small and big—and allowing FDI into this segment would spell doom the domestic retail sector, which is growing.
Slamming domination by a single company, Sushma and Jaitley said, "Fragmented markets cater for consumer choices in a better way and offer more options. Consolidated markets make the consumer captive. No one player should be allowed to dominate the market.
Allowing foreign players with deep pockets results in consolidation. It will end competition and cause loss of jobs, both in the manufacturing and service sector. These jobs will be lost in the name of eliminating middlemen. Jobs in the retail sector will obviously be lost. Jobs in the manufacturing sector will also be lost because structured, international retail makes purchases internationally and not from domestic sources."
The BJP leaders pointed out that this experience had been felt in most countries which have allowed FDI in retail as "international retail players buy products at lowest prices and sell them at highest prices indulging in predatory pricing, which initially eliminates competition and eventually creates monopolies”. “It will only result in our food chains being controlled by foreign firms.”
Sushma and Jaitley asserted that comparing India with China, which had allowed foreign players, was illogical since unlike India, China had a predominantly manufacturing-based economy and was the largest supplier to Wal-mart and other international majors. "China generates huge number of manufacturing jobs by being a supplier. It obviously cannot say ‘no’ to these chains when it supplies products to them. India, on the other hand, will lose both manufacturing and service sector jobs," they added.
Iftikhar Gilani is a Special Correspondent with Tehelka.com.
iftikhar@tehelka.com
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