Foreign direct investment (FDI) in retail trade had been a subject of intense controversy over the years. In the last two weeks in particular, the issue has been highlighted by the electronic media and in Parliament. Strange are the positions taken by different parties on the subject.
The National Democratic Alliance (NDA) under the leadership of Atal Behari Vajpayee had proposed 100 per cent FDI in retail trade. Its residue — BJP opposes a relatively modest proposal for allowing 51 per cent FDI in multi-brand retail trade.
Somersaults galore
It may be recalled that Manmohan Singh who has a certain reputation as financial wizard, had, as then leader of opposition, opposed Vajpayee’s very idea of FDI in retail trade.
It may also be mentioned that FDI has been freely allowed in single-brand retail trade like Bata Shoes and readymade clothes. At that stage, nobody appeared to bother about what could happen to the cobbler or the tailor. Now, suddenly the farmer and the corner shop have found new champions in unexpected quarters.
The debate and the voting in Parliament clearly show that it was the victory for the CBI rather than defeat for FDI.
The Swatantra Bharat Paksha (SBP) has steadfastly stood for allowing FDI in single-brand as also multi-brand retail trade on the ground that it would bring about a second Green Revolution through opening the door for non-domestic sources of finance and technology.
Poor linkages
Indian malls suffer badly from poor backward linkages between the farmgate and the market. On the way stand poised a series of marauders interested in earning their commission without making any corresponding value-addition.
Rural roads are in poor condition. Infrastructural facilities such as cold storage, pre-cooling facilities and refrigerated transport are absent. The consequence has been that Indian farm produce, which is competitive by world standards at the farmgate, ceases to be so by the time it reaches the market or the port.
Further, Indian agricultural produce has difficulty finding a place on the shelves of the foreign supermarkets because of the general ignorance about sanitary and phyto-sanitary (SPS) standards. FDI in multi-brand retail trade will provide almost direct access to the shelves since it will also work as SPS monitors or supervisors.
The experiments made in the past by several agencies in establishing supermarket networks have demonstrated that finances, management skills and advanced technology are not sufficiently available domestically.
This situation can be remedied if the Government, after allowing FDI, establishes adequate regulatory agencies to ensure that commensurate amount become available for rural infrastructure, management skills and technology.
(The author is founder, Shetkari Sanghatana and Member of Parliament — Rajya Sabha.)