Despite the protestations and arguments across sections of the nation, the Government has allowed FDI into multi-brand retail. To add insult to injury, the conditions imposed on entry seem to make a mockery not only of the dissenters but also, more importantly, of the original arguments made by the Government while committing to this policy.
The conditions at present fall into two categories, the ridiculous and the impossible. The ridiculous conditions are the two concerning the level and timing of investment in “back-end” infrastructure by the foreign entrants and the cap on purchasing strategy of these retailers. The impossible condition is the devolution of decision-making to the States.
Magic number 50
The condition that 50 per cent of the
If all it takes is $84 million, one has to ask the question: Why can’t the Government of a trillion-dollar economy find the $84 million a year (that is less than 0.1per cent of the GDP of India)? For this investment to rise to 1 per cent of GDP, it would take an initial investment of approximately $20 billion by the retailers or 20 global retailers to venture into India!
Magic number 30
Another condition imposed is that 30 per cent of the purchasing of processed goods must be from “small-scale industries”, those with investment in plant and machinery of less than $1 million. Further, this will be monitored by self-certification.
Is this condition being met by the current multi-brand retailers in India such as the Reliance group, the Big Bazaars and so on? One has to wonder about the true purpose behind this condition. Are small-scale industries to be punished if they succeed? If they supply these large chains and their products are accepted and there is an increase in sales, should they not invest in capacity or should the ambitions of these entrepreneurs be sacrificed at the altar of the Governments’ myopia?
Power to the States
The devolution of decision-making powers to the State is protecting the Government’s gluteus maximus , the strongest muscles, at best and is a case of blatant, State-sponsored corruption-enabling mechanism at worst. This, in effect, removes any responsibility of the consequences of the decision-making of the State from the Centre in an ingenuous system of abdicating responsibility without loss of authority. The retailers now can focus their immense resources on the smaller institution of the state instead of the myriad complexities of politics and power at the Centre.
These three conditions not only vary on the spectrum of the ridiculous and the impossible, but leave one with a distinct impression of some pungent aroma wafting from the offices of our esteemed ministries. One has to wonder if these malicious conditions are Machiavellian on purpose or a consequence of some other exigencies. They are largely irrelevant to the whole process.
Policies to follow
If the Government was indeed serious about protecting its farmers, the impoverished citizenry and enabling the success of small-scale entrepreneurs, we believe that they should ensure that the following policies are also enshrined and enforced:
No imported fresh produce should be sold through these retailers in the country. They have to source these only from indigenous farmers and spend the resources required to ensure quality, consistency and efficiency. The MRP system should not be disbanded. If the retailers wish to pass on their efficiency, then let them price below the MRP or arrange for promotional offers to the consumer. The MRP is a distinctive price point identification mechanism that will ensure that the customers are aware of the manufacturer’s intended price and that the discount provided by the retailer is not tailored by pugnacious marketing schemes.
The environmental effect of the packaging will be clearly monitored and the data made public. Packaging does not mean just the ubiquitous plastic bags but the far more precarious food and other consumer product packaging. There must also be a maximum provision of recyclables in packaging and other materials partly funded by these institutions.
The wages and benefits must not be exploitative but must be based upon the living wage, not just a minimum wage, and clear benefits on the success of the store/organisation must accrue to the employees.
A transparent and independent whistle-blower and consumer complaint system must be put in place, which will be subject to the provisions of RTI act. There must be legislation in place to protect small traders against discriminatory pricing by manufacturers and other suppliers to the retailers and by the retailers themselves vis-à-vis consumers.
Of course, this list is merely indicative and would need to be discussed and modified and given flesh and teeth before legislation. But we do believe this would be a good place to start.
It would also be interesting to note the edicts issued by ministers and the Government post the various visits by international retailers to Government offices these last few weeks seeking “clarifications”. It is time the discussion moved from the de facto state of affairs to the future.
(Manghat is an academic in the UK and Balasubramaniam is a consultant in India.)