Indian Parliament has been adjourned for several days without conducting any business over the issue of permitting foreign direct investment in multi-brand retail. The UPA government has said that it will not permit voting on the issue.

With more than 270 Parliamentarians (including TMC and DMK members) against retail FDI, the government fears it could lose the vote. Yet, there is a cacophony of voices in the English media, ignoring the majority sentiment of Parliament, saying that FDI should be permitted. There has never been a clearer divide.

WHO'S FOR, WHO'S AGAINST?

Aligned in favour of FDI in Retail are the ruling party, big foreign retailers, Indian corporate houses, well-heeled consumers and the Western media. Aligned against the policy are millions of small traders and retailers, the broadest cross-section of political parties representing the people at the ground level, and consumers who are sensitive to their environment.

The divide is a classic case of the big trying to uproot and displace the small. India is, perhaps, the last big bastion of a grassroots-oriented, bottom-up kind of place, now rare on earth. The big top-down Wall Street mega-corporate-driven system that believes the world is theirs to dominate wants to take over the Indian market.

The manner in which the policy is outlined is itself a dead giveaway that the policymakers are well aware of the pitfalls. They have practically declared that this is a policy designed to support big capital and the predatory multinationals in retail. Let's look at what has been outlined and what it means.

ONLY BIG CAPITAL IS WELCOME

The minimum amount fixed for foreign investment is $100 million — more than Rs 500 crore. Only the big guys have this kind of capital. The Commerce Minister says that the big foreign retailers will invest not millions, but billions. This is precisely the danger. Money power will hence take over a ready market, as it has happened in some other countries. With global sales in the hundreds of billions of dollars, and with unlimited access to capital, even the sky isn't the limit for what they can invest.

Just consider this. As they build scale, the foreign retailer can go into any mandi or market and buy up the entire supply of whatever is available there. All those dependent for a living as participants in the supply chain — traders, retailers, goods handlers, others — will be rendered jobless. The government has explicitly said that it wants the produce to go from farm-to-fork through a big foreign retailer, and they want the current supply chain to be eliminated. Advantage: big foreign retailer, by policy.

RURAL INDIA UNDER THREAT

The foreign retailer is restricted to opening stores in large cities. This is no problem as any foreign company will only start in the big cities. The real issue is on the sourcing side. The policy permits them to purchase locally all agricultural produce, including fruits and vegetables, pulses, fresh poultry, fishery and meat products, and sell them unbranded in their stores. They can virtually corner the trade in the rural areas, as they scale up. If, in a local region in India, the trade is served by tens of thousands of small people, they will be replaced by giant retailers.

More than 50 per cent of the rural economy is made up of services, and a big part of this is trading and supplying to urban India. What will the small man in rural India do when his livelihood is taken away? Sorry, this policy is for big foreign retailers only.

INVITATION TO TAKE OVER MARKET

The policy says that at least 50 per cent of the investment must be in “backend infrastructure”. Perfect, says the foreign retailer. They will have to invest in infrastructure in any case. They will set up their own warehouses. They will have their own fleet of trucks. In India, lakhs of small truckers and owners of LCVs make a living moving agricultural produce. To the extent the big retailers take this over, this avenue of making a living will be closed.

The reason for the want of infrastructure in rural areas is that the government hasn't taken the trouble to build it. The small farmer-trader-retailer ecosystem cannot build this.

Without addressing the issue of how to build this to support the small people, the government says that this should be done by big foreign companies. By policy, the advantage to big foreign companies is assured.

PROCUREMENT FROM SMES

The policy stipulates that at least 30 per cent of the procurement of manufactured and processed products should be sourced from “small industry”. Such a concession is made precisely because policymakers are aware that small industry is under threat. Wait a minute. Do we know what percentage of the Indian retail sector is supplied by the small and micro enterprises?

Nearly two-thirds of the grocery trade comprises food products, and a vast portion of this comes from the small sector. In India, leading consumer-packaged goods companies have their brands manufactured through small industry. The total supply from the small sector to the retail channels is likely to be upwards of 60 per cent, at a conservative estimate. Therefore, the government is making no reservation. Quite the contrary, the policy takes away perhaps 30-40 per cent of the market that the small sector is currently having. Advantage: big foreign company again.

SELF-CERTIFICATION?

All compliance (for backend investment, procurement from small sector) is through self-certification of the foreign retailers, as per declared policy. This process of self-certification is touchingly naïve. The government that views all Indian businessmen, companies and traders with a huge dose of distrust is quite happy to repose its trust with a bunch of big foreign retailers, who are defendants in hundreds of litigation cases all across the globe. Advantage: big foreign company again. It is remarkable that a government that talks the language of “inclusive growth” is sacrificing the aam aadmi to support big foreign capital. Remember, it is not what they say but what they do, that would reveal their true colours.

(The author is Group CEO, R K SWAMY HANSA, and Visiting Faculty, Northwestern University, US. The views are personal. >blfeedback@thehindu.co.in )

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