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Corporate Dec 1, 2011

FDI has already benefited us: check McDonald’s, Coke, Pepsi

By Anil Dharker

Try and think of this imaginary scenario. It's 1991, a Congress coalition government rules in Delhi. Our economic situation is terrible - so bad that the government has had to secretly pledge its gold to keep the country's head above water. There's only one solution: to get out of this hopeless morass and to stop India from becoming a basket-case, Manmohan Singh and his Finance Minister Pranab Mukherjee jettison the socialist economic model, so far sacrosanct, and announce a liberalised economy.

But there's a problem. The BJP-led Opposition does what it does best: it opposes the move, notwithstanding the fact that it wanted to liberalise the economy when it ruled the country. Parliament is brought to a standstill. Slogans are shouted. The Opposition stages walkouts. The house gets adjourned every day. Finally, Singh and Mukherjee bow to the inevitable, and abandon the idea of liberalising India's economy.

Far-fetched? Not really. Look at what is happening in Delhi now. FDI in retail is an old idea which - like economic liberalisation - has been debated and discussed threadbare for years. The NDA government wanted it in 2003; in fact, Murasoli Maran, the then commerce minister, had recommended 100 percent FDI in retail! Maran, as we know, is part of the DMK, and DMK as we know is now opposing even the 51 percent FDI proposal.

Kirana shops are really convenience stores where people from the immediate neighbourhood go. Will people trek long distances to a Wal-Mart to save money? Reuters

This is not the first time, nor will it be the last, that politicians and political parties do a flip-flop. But if we put aside for a moment the shameful scenes in Parliament and look at issues calmly, this is what we see:

• FDI in retail will benefit consumers

• It will benefit producers, i.e. farmers, who will then sell directly to the retailer through a contract agreement, thus cutting out the middle-man.

Does anyone - BJP, DMK, Marxists and the others - dispute this? They don't. They are concerned about the 'harm' the new retail policy will do to the kirana shop owner. If you look at the overall picture, there are far more consumers and producers than shop owners, so the opposition is protecting the interests of a minority while ignoring the vital interests of the majority!

This is particularly astonishing coming from Marxists and the Trinamool Congress who espouse the cause of farmers.

As it is, I am not even sure that the kirana shop owner will be hit as badly as people imagine. Take any large city: the kind of space that will be needed by a Wal-Mart is not easily available, so these retail giants will only go to certain areas where they can find real estate.

Kirana shops are really convenience stores where people from the immediate neighbourhood go. Will that change? Will people trek long distances to a Wal-Mart to save money? The only people who will do this are shoppers with cars who might do their month's shopping as they do now at Big Bazaar and similar outlets.

Question: Have the Big Bazaars killed kirana shops? Answer: No. Are political parties then opposed to Wal-Mart & Co only because they are foreign companies?

I remember - and I am sure you do too - the furore that accompanied the entry of Coca Cola, Pepsi, KFC, McDonald and similar Big Bad Foreigners. So what happened? They are now as Indian in India as any local company. They hire Indian managers and labour, source from Indian producers, use Indian distributors, etc. They have benefited the Indian economy in very many ways...

I wish our frothing politicians would just check this out for themselves. Where do McDonald's get their patties from? Their potatoes? Their chickens? Where does Pepsi get the raw material for all the snack foods they make? From the US? From Europe? They don't for the obvious reason that they aren't crazy.

The crazies are in Parliament. They have done their best to ruin the country, and will continue to ruin it as much as they can if we let them.

by Anil Dharker

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