The Hindu Business Line : `FDI in retail will cause more unemployment'

Foreign direct investment in retail will only result in more unemployment in an economy already struggling to adapt to outsourced technologies and processes with high labour productivity, says Prof Prabhat Patnaik, Vice-Chairman, Kerala Planning Board.

Delivering the inaugural speech at a seminar on `R&D needs for regional development,' at the Regional Research Laboratory (RRL) here, Prof Patnaik said India should ideally look to formulate its own independent trajectory of innovation to ensure equitable growth and employment.

Two Caveats

Both India and China are projected as fast-growing economies clocking nine per cent to 12 per cent between themselves. True, the growth is impressive but two caveats are in order.

For one, the growth is unequal and, for another, there is a frustrating absence of innovativeness locally. This lack of innovativeness is what has made the country subservient to foreign technologies and process, reducing it to a glorified processing backyard of the world. In the case of China, the appendage of a global manufacturing workshop fits best.

Migrant Tech

Prof Patnaik cited the cases of the perceived areas of excellence of Indian entrepreneurs - textiles, drugs and pharmaceuticals and even IT - enabled services. There is nothing to suggest indigenous innovative spirit in any of these sectors, which largely thrive on technologies and processes that migrate from the developing world.

And this is because India offers the cheapest available labour. The whole outsourcing business has come to be predicated on what Prof Patnaik called the `wage differential' in relation to prevailing rates in the US or the respective developed economies.

By merely imitating the hyper-productive labour regime, India is driving unequal growth. For instance, Prof Patnaik cited the case of China where manufacturing industry growth had exceeded 12 per cent, while manufacturing employment growth rate was 0 per cent.

Heavy Price

This is the price India too would need to pay for non-innovativeness, he warned. Continued failure to act decisively in this context will bring about a situation where islands of prosperity will pockmark a large ocean of deprivation and poverty.

Jobless growth and a pronounced dualism in the larger society will thus get further perpetuated. Prof Patnaik called for a suitably formulated `income policy' to retain human resources.

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