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FDI in retail for Karnataka - I say NO! Can wait.

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Governance

Retail, FDI - don't stop reading here please, its not as geeky a topic as it sounds. Lets talk our state for a moment. Refer TimesofIndia Bangalore, page 15, "Karnataka industry mostly supports FDI in retail". Refer this, a quote by Mr J Casta:

J Crasta, co-chairman of Assocham (southern chapter), said middlemen, in the last 50 to 70 years, have taken manufacturers and consumers for a ride.says even when tur dal prices peaked at Rs 250 a kilo, farmers could get only Rs 20 a kilo. Every agriculture produce passes through 7 to 12 middlemen before it reaches the consumer, each one taking a margin, leaving hardly anything in the hands of farmers and consumers paying a huge price.

Rs 20 a kilo in the farmer's hands, to Rs 250 a kilo. No government PR, or newspaper so far has explained to us as to how 100% FDI in Retail will put more in the hands of the farmers. What exactly will the FDI in retail do?

  • Raise farmer's income on Tur dal Rs 20/kg to Rs 50/kg ?
  • Lower this peak price from Rs 250/kg to Rs 150/kg ?

Now, what are the safeguards to make sure that this doesn't happen

  • Raise farmer's income on Tur dal Rs 20/kg to Rs 50/kg, while peak price we pay remains the same (Rs 250/kg). Meaning, that some middlemen may go away, farmer's benefit a bit, but the consumers don't.
  • Lower this peak price from Rs 250/kg to Rs 150/kg, but farmer's income stays at Rs 20/kg. Meaning, consumers benefit, but farmer's don't, and half of the middlemen may go away.
  • Farmers get Rs 20/kg, we pay Rs 250/kg, middlemen may go away and be replaced with the "Retail industry"!

What safeguards does the bll have to make sure that none of of these three (above) happen? Now, the final argument.

  • Let's say the bill has safeguards to make sure the above three do NOT happen.
  • Why do we need "foreign" money to give more to the farmers, and yet make consumers pay less? Why is it that Reliance, Titan, Big Bazaar, More, Spencer etc etc can NOT ensure that, but Wal Mart & Tesco can?

If the problem is with middlemen inflating prices, give me a bill to clean that up first. If the gap between farmer's income and consumer outgo is huge, I want a REGULATOR who would publish and keep tab on the "difference" numbers every month.

FDI in retail can WAIT!

Why shouldn't it? I don't understand.I am either too dumb to follow the debate, or the proposal is not designed to guarantee benefits to either the farmers or the consumers like me.

Comments

silkboard's picture

quote from Chennai

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See this for the argument (http://www.thehindubusine...)

Opening up the retail sector to foreign direct investment is a welcome move that represents significant benefits to farmers, according to Mr Manikam Ramaswami, Chairman, Agriculture Forum, CII Southern Region. Mr Ramaswami said entry of large multinationals into food retailing will help address major concerns for the farmers — marketing, right pricing and market information. Multinationals have the capacity to provide adequate support, pricing and supply chain management, he said.

First tell me why is it that right pricing and right information can NOT be guaranteed by domestic players, or by government itself. Why not fix those hurdles first? And when our information technology companies build supply chain tech for most of the developed world, why does anyone think that we can't do it ourselves? Why?

Only argument that can be made would be about "money", that all this supply chain and tech information tech needs money.  Clear the hurdles that Domestic retail players face today in connecting farmers with consumers, and then see if they can raise more money on their own.

If information tech is the problem, let there be 200% FDI in supply chain info tech area. I think the Wal Marts and Tescos can wait.

Ravi_D's picture

Just agri products?

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+1 SB.

While I do love the convinience of shopping at a well planned, diversely stocked store carrying genuine products (think IKEA), I'm not sure we are informed right. It is mostly FDI for the sake of FDI.

Typical twisted argument, right? We support it - as farmers get more out of it! OTOH, multi-Brand retail is what the name suggest - multi-brand. Includes  agri products, but that is not necessarily the only (or even the largest) component of retail business. Visit any big box global retailer, and you'll see first hand. Typical wallmart store in the US probaly has about a 5th of its shelf space filled with fresh produce and food articles.

silkboard's picture

Agri because it is 'hot'

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The examples floating around in quotes that are getting prime coverage in all newspapers talk about Agri, so used Agri. The point about SME is also getting a lot of coverage. There, I havn't see any numbers at all (like the Rs 20 to Rw 250 bit on Agri).

Either way, is FDI in retail 'supposed' to help SMEs and Farmers, or will it kill inflation and ease my pockets? I don't know. And I am sure so do many. So please say NO to this, and to anything else where you don't know the "outcome".

Government PR has to do a MUCH BETTER job of explaining what these proposals do. They can't have media play proxy for them all the time.

idontspam's picture

Yes to FDI

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Its not 100% foreign ownership for multi brand retail only 51%. So indian partner is definitely involved.

 In the case of multi-brand retail, fresh farm produce cannot be branded and 30% of the inputs have to be sourced from small enterprises, as per the agenda note. Multi-brand entities will have to bring in an investment of $100 million (Rs500 crore). States will, however, have the freedom to decide whether they should allow multi-brand retail chains with foreign partners to be located in their territory.Currently, 30-40% of fresh produce goes waste and more than half of this can be brought to the market if the proper farm-to-fork infrastructure is in place.  Source

Farm to fork requires significant monetary & expertise investments. Supply chain investments are only realized at the retail shelves if it has to be farm to fork so it is not sensible to assume the expertise will come as charity.

FDI is good for consumer but for farmer... here is the catch which has been swept under the table. The APMC act.

At present, agricultural produce can be moved out of an area only by agents who own licences issued under the APMC Act.

An inter-ministerial group headed by chief economic adviser Kaushik Basu had recommended that the APMC Act ought to be amended to enable farmers to bring their products to retail outlets and also allow retailers to directly purchase from farmers.

“The APMC system has abetted monopolistic behaviour and reduced the choices available to small farmers. Unwittingly, the well-intentioned APMC law has contributed to helping cartelisation and collusion among incumbent traders. The need, therefore, is to revisit the APMC Act with this in mind,” it said.

A model APMC Act was finalised in 2003 and was circulated to the state governments for implementation in 2007. Since then, a few states have amended the act and only a few such as Punjab, Haryana and Himachal Pradesh have relaxed their procurement laws.

Source

Success stories are also from the states which have amended APMC act. incidnetally this is already helping without FDI in retail which shows that for the farmers APMC is the bottleneck not FDI.

...based on Punjab’s successful experience with agri corporates. The entry of agri corporates like Bharti Wal-mart, Pepsi Co, Tata Khet Se and Metro Cash and Carry, has actually helped in strengthening the retail supply chain. Farmers in Haider Nagar locality of Malerkotla, who supply vegetables to Bharti Wal-Mart, have not just been able to improve the quality of the vegetables they produce, but they are also getting better prices. Potato growers in the Doaba region have also benefitted by selling their produce to Pepsi Co.

“Most of the agri businesses are sourcing 30- 40 per cent of their requirement from farmers within the state. As a result, farmers are assured of a buy back arrangement with these corporates and of higher returns.

Source

srinidhi's picture

lease out crops..control prices

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what has happened since some years is farmers lease out their crops to exporters and MNC's..this has helped them really well!

If this can happen better with FDI in retail..then its most wellcome..also this can control inflation to  a great extent..

The mandi's at APMC yards, as SB explains, controls the prices of all produce and it is never solely based on supply and demand..the goons have taken public for a ride all these years..so if FDI is what it takes to root out this menace..so be it!

Naveen's picture

Retail FDI should be welcome

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Sorry - I don't agree. FDI in retail was long pending & the arrival of the walmarts, tescos & the carrefours is only a matter of time.

As IDS mentions above, it is the APMC wallahs who had been posing obstacles, arguing that the farmers lives would be badly effected, when in fact, they worried about their own lucrative businesses that squeezed farmers.

When Metro Cash & Carry first entered, APMCs had caused havoc in the name of the farmer, but this is far from true. Eventually, they were admitted for "whole-sale" business, but not for retail. Even now, they face opposition in Kolkata & Mumbai.

Also, see this link.

psaram42's picture

Cooperative Societies Act, 1912

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During the pre-independence era, public and private agencies dominated the dairy industry, although government policy did not favor any one organizational form. Early efforts to organize dairying along cooperative lines were made immediately after the enactment of the Cooperative Societies Act, 1912. Rajaji Nagar Cooperative Society is an example of a successful Cooperative venture apart from the well known and documented Amul story. [1]

I remember in 1960s we used to get our milk from the cow in front of our eyes. Still we Were getting cheated once in a way with water addition.

I am having 2 coconut trees. I get only rs 6- 7/- per good size coconuts which the shop sells at 12 to 15 rs each. This is an equal partnership. Small time Farmer like me is always at the receiving end.  However coffee growers are auctioning their beans. There are big business houses too in this sector viz coffee and tea.

These are the days of Malls. We are frequent visitors of Garuda Mall, for movies and chat, Hopcoms for vegitables and Fresh at for groceries etc. Branding is an in thing now?

idontspam's picture

Who is impacted?

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Guess who is offended by the FDI... no, not the retailers... no, not even the farmers.. yes the APMC middlemen.. see here. In fact the farmers are asking for reforms in guess what? see here

Regarding Amul, here is the truth

"When Amul started procuring milk from villages, these very middlemen created ruckus but it was the will power of farmers in Gujarat that the entire chain was broken. Their economy improved and consumers now can get milk round the clock making the country self sufficient in milk"

There were no retail chains in those days who could pump in the money for the entire supply chain & backward integration so crowdsourcing was used in the form of co-operatives. We are better placed today than to resort to co-operatives for every commodity.

From offical site: The exploitative trade practices followed by the local trade cartel triggered off the cooperative movement.  Angered by unfair and manipulative practices followed by the trade, the farmers of the district approached the great Indian patriot Sardar Vallabhbhai Patel for a solution.  He advised them to get rid of middlemen and form their own co-operative, which would have procurement, processing and marketing under their control.  

abidpqa's picture

Farmers can see the prices of

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Farmers can see the prices of their produce in newspapers. Regarding vegetable, fruit prices they can check with their friends in the city. There are lot of agriculture companies are here in the country. If they had very good beneficial technologies the farmers would have already used it. So what is the benefit foreign retailers can bring here. When Indian big retailers were allowed the same argument was put forward. When FDI is being allowed, the status of those should be published.

Regarding APMC, as I read the law, I could not find any provision that said farmers should sell only in their local market.

FDI as an option is good, but marketing only its benefits is not correct.  When talking about job creation, it should be net job creation, and mention the quality of the jobs produced.

I was hoping the the retailers (Indian) will be using goods made by smaller producers against big producers, but they have been selling in-house brands. If they be considered to be made by SMEs, then that provision for 30% purchase is somewhat meaningless.

idontspam's picture

The KA APMC act

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Amending Act 43 of 1976.-  ...It is also proposed to provide that wholesale trade in notified agricultural produces can be conducted only in the market yards and sub-market yards so as to have effective regulation of trade and to afford on the spot processing and packaging facilities to the traders as well. 

 (Published in the Karnataka Gazette (Extraordinary) Part IV-2A dated 7-4-1976 as No. 1858 at page 4.)

Amending Act 29 of 1987.-  It is considered necessary to amend the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966.-   (i) to restrict the sale and purchase of notified agricultural produce to a market yard, market subyard or sub-market yard except in cases of certain cooperative societies, and sale by a retail trader; 

Regarding price fixing

76. Sale of agricultural produce.- The sale price of notified agricultural produce sold in the market area shall be determined either by tender system or by public auction or by open agreement or  by sample or by reference to a known standard or in such other manner as may from time to time be directed, with the previous approval of the [Director of Agricultural Marketing]

This is amended by a toothless amendment in 1986 which admits to armtwisting by middlemen  

Amending Act 35 of 1986.- ... even though statute restricts the commission charge  at 2%, the Commission Agents in practice collect more from the agriculturists as most of the producers/sellers are illiterate.  It is also felt necessary to define commission sales and to provide penal provisions

From Karnataka APMC act of 1966 full text

Also one will notice going thru this whole act how much bureaucracy has gotten built into it. 

sanjayv's picture

Bang on IDS - APMC it is

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I was talking to a colleague whose father is a farmer, maybe about a month ago, about pricing and movement of food.  He was talking about the price of various items in Bangalore versus what his family would make for growing the same.  The simmary I got was that the traders disctated a price and the farmers had to give in.  It is the APMC system that is one of the major guilty parties.

Remember when Reliance fresh was making its appearance and all the talking heads were disucsisng how this would mean more money to the farmer?  Has anything really happened yet because of that?  I am not sure based on my experience shopping so far.  Looks like the same talking heads are now crowing about how FDI in retail will liberate the India farmer.

Here, here and here are few stories talking about APMC with relation to big retail and reliance.

silkboard's picture

Bang on, but that's APMC

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Who disagrees! Who has forgotten the mandi and transporter strikes when APMC act amendments were being proposed in Karnataka. I haven't. Private procurement, or better regulation of public procurement system (APMC act amendement, or new act) - whatever. Do them first.

Please don't sell majority FDI in Retail sector as the fix for farmers (or SMEs). FDI will might mean that middlemen will be hired by whoever can afford them. Or foreign money will drive new land lease related problems. Neither of those guarantee me, the consumer or Farmers the benefits that are being promised.

Whats happened so far to Real Estate sector after FDI was allowed? Are we paying any less for our houses? Are the construction workers getting minimum wages or better from all builders? We are probably back to what the government is trying to skirt around - RE reforms, talk of black money driving the sector. Refer Business Today, Feb 2011 (http://businesstoday.into...)

"In this emerging services sector, while short-term worries such as hardening interest rates need to be addressed, there is also need for some fundamental reforms like tackling the high stamp duty which makes even honest citizens deal in black money," the survey said. ... The report also pointed out problems related to foreclosure of loans and the Urban Land Ceiling Regulations Act (ULCRA), which need to be resolved at the earliest.

Fix Agri procurement, and incentives for SMEs (labour, location, capital, infra) first. When you already have two big problems on hand, don't avoid them and buy a third one. FDI can wait.

 

idontspam's picture

Consumer will benefit

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Consumer will definitely benefit from FDI, better prices, better facilities, more competition. Why does the consumer have to be denied this because we are not sure of the benefit to farmer? Consumer is not a second class citizen to the farmer. Also, why this artificial protection to the Indian retailers? No need to wait, now is better than ever for FDI in retail.

kbsyed61's picture

@SB, your questions!

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SB,

The title of your posts is an interesting one ".....I SAY NO...". Seems very powerful and with lot of convictions.

Question on FDI is not a single question. It is basically a 2 part question. Seems you are looking more closely at the 1st part fo the question - Why is that the farmer gets only a pittance? Second part is do we need FDI at all?

One biggest reason for farmer's not getting his due share is introduction of  a regulator where it was not needed, AMC. What was needed was enforcement of no nefarious design in Prices going up/dn due to hoarding and artificial scarcity in the market.

Let me give you some of my experiences while I grew up closely observing my maternal Uncles in oil seeds business. This is in 70s and 80s. Until late 80s there was no regulation on Oil seeds like Groundnuts. A vast areas of Andhra Pradesh, Karnataka, Tamil Nadu, Mahrashtra and Gujarat used to cultivate ground nuts as the major agriculture product. Almost 90% of groundnuts were used up in extracting the groundnut oil. The price used to be determine by the market forces. In majority of times it worked fine except for in instances of Jacked/Lowering of prices. Basically price reflected the market and it used to be reasonable correct. Believe me all the farmer's used to recover the cost and some profit in most seasons except for where the crop failed due to Monsoon failure or other natural calamities.

The season used to run for about 4-5 months after every harvest. This is how my uncles used to do business, like many others. Everyday they will find out the market rate in Bombay.Using that as baseline, they will fix up the purchase price. Farmer's or small traders would come and negotiate the sell price. The price negotiations is fixed around the ultimate market price. Obviously farmers would not  get the market price that is of Bombay. But somewhere close by, not like Rs 20 against Rs. 450. If the Bombay rate was Rs. 1500/- for 240 Kgs of Groundnuts, Farmers would get around 1200-1300. My uncle would buy them at 1200-1300, then transport to Bangalore/Hyderabad and may be sell it at 1400-1450.

This is not to say that people always made profits, there are times they incurred huge losses. That is part of the business.

The whole supply chain worked like a well oiled machine, even in absence of a modern day infrastructure like storage godowns, Cold Storage, good roads and communication channels.

 

kbsyed61's picture

'Naysayers shouldn't stop those who wants it'.

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There was  an interesting article in Hindustan Times by Vinod Sharma suggesting 'Naysayers shouldn't stop states who wants it'.

Seems Punjab has welcome the FDI and ready to take that risk. We all can step back and watch how things will playout in Punjab.

Final word on FDI is still to be said.

kbsyed61's picture

ICRIER Study!

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ICRIER study on "Impact of Organized Retailing on the Unorganized Sector" instituted by NDA govt in 2004, has done some interesting facts.

According to ICRIER study, impact on Agriculture/Farmers by Organized Retailing:

  • Farmers benefit significantly from the option of direct sales to organized retailers.
  • Average price realization for cauliflower farmers selling directly to organized retail is about 25 per cent higher than their proceeds from sale to regulated government mandi.
  • Profit realization for farmers selling directly to organized retailers is about 60  per cent higher than that received from selling in the mandi.
  • The difference is even larger when the amount charged by the commission agent (usually 10 per cent of sale price) in the mandi is taken into account.

Must read case study on sale of Cauliflowers by Farmers in Hosakote.

Page # 57, Fig 5.1 for Cauliflower Supply Chain

Page #60, Table 5.3 for Farmer's profit for Cauliflower

Page # 61, Chart 5.2 for Profit share by Farmers, Intermediary and Retailer.

MaheshK's picture

Bring on the FDI in retail

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I am all for FDI in retail. Look at the car and two wheeler sectors. Honda and others have come, but Maruti and TVS is doing well (I think Bajaj refused to wake up).  Competition has increased the quality. Same thing with the retail. It will bring new products to India from the west. Like IKEA products. May be they can start making it in India with IKEA quality control.  Look at the jobs that would be created. Though low paying, it is still better than working in a Lala or a Baniya store.

I bought half kg of a vegetable in Malleswaram market on Sampige Rd. I pad Rs. 20. When I checked in More, it was only Rs. 18 per kg.  So the guy in the market is selling at Rs. 40 a kg What nonsense! Those cheats will go out of their business (hopefully) when the big retailers enter the market.  Unfortunately, our netas who are totally unexposed, are opposing the FDI in retail. They have their own agenda to protect their vote banks. 

(1)Big box retailers like Walmart have sophisticated logistics so the problem of rotten veggies and perishable items will be solved and that savings will be transferred to customers and suppliers.

(2)People will not have to face problems of supply side, like onion, sugar and other commodities which were the big problem in past. Also artificial shortage of commodities will be greatly controlled.

(3)Customers will be benefited as adulteration by small grocers will be reduced.

(4)Suppliers and farmers will be benefited as they will not be victimized by some corrupt practices by business traders / dalals.

(5)Government revenue will be increased and those can be utilized for other projects.

(6)Sale of duplicated brand items will be greatly controlled so that will increase the sale of branded companies.

(7)Indian market is huge enough so the problem of closure of small businesses will not be as severe.

Article in Rediff on FDI in retail

http://www.rediff.com/business/slide-show/slide-show-1-how-fdi-in-retail-will-help-consumers-farmers-economy/20111129.htm

kbsyed61's picture

Balanced View?

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I am sure Praja members have heard and read about Prof. Sebastian Morris of IIM. He has penned an article that appeared in Hindustan Times

The government’s decision to introduce majority ownership in multi-brand retailing must be seen in the present situation of declining foreign direct investment (FDI) and negative foreign institutional investments (FII). Hopefully, retailing investments by global firms will revive FDI and FII.This will pull along FDI and portfolio investments in general. In the long run, foreign firms with access to cheap capital abroad will do the job that should have been done long ago: provide competition to the stranglehold of agriculture produce market committees (APMC) — thereby resulting in the high retail prices of agricultural products to be passed on to the farmer.

He also makes an interesting remark about disconnect between transport planning and housing in urban areas

Will consumers gain?..........But even here the gains are likely to be smaller than what’s possible, as they, too, would be constrained to find large parcels of land that are well connected with major cities and towns. The disjunction between transport planning and housing in Indian cities could deny advantage to large retail (as has been the experience so far) and continue to sustain petty retail in spaces outside their natural comparative advantage.

silkboard's picture

Sorry - promises without guarantee

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To quote HDFC Chairman, Mr Deepak Parekh

Modernization of retail trade is an essential part of India's growth story, Nowhere in the world is there a four times difference between what the farmers get and what the retailer pays

Notice the last part - "retailer pays". As opposed to 'consumer' pays. But thats okay. So he is talking about benefit at both the ends. Our prime minister is promising lower prices to consumers. Nothing concrete from our state's Chief Minister yet.

Who doesn't want the benefits at both end? I am no supporter of the "middlemen lobby" that may be behind all the protests. Did we need 51% FDI to modernize Banking? Did we need 51% FDI to produce the first modern car, cheaper than established oldies? Did we need 51% FDI to establish top quality IT Services companies in our country? Did we need 51% FDI to get cheaper and better Telecom services?

May be yes or may be not. But it seems to me that FDI isn't as important right now as

  • A Retail and Farm procurements regulatory commission to watch and ensure that what Mr Parekh promises above does happen.
  • An information network for Farmers, under the supervision of a regulatory commission
  • Some sort of grievance system and network, operated by the commission
  • No-cash policy for all procurement of farm products, through UID and smart cards
  • APMC act amendments at states, pushed from the top
  • Leasing norms for farm lands - any amendments to "Multi state cooperative societies Act 2002"?
  • Duty waivers for importing any retail, supply chain or logistics technology

FDI can wait. Govt needs to talk on the above lines first. Ushering in FDI is not the best way to skirt the other reform items. If it is, then please explain.

idontspam's picture

Who will bell the cat?

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We dont have to hold FDI to ransom for not being able to do other reforms, if anything FDI might put pressure on the govt to reform other policies.

Current Indian big chain retailers were given a head start to make things happen, but as usual they chose the easy way out instead of reforming the system. Most large chains have ignored the perishables & have gone into safer durables where they dont have to change the APMC. It took a Metro from Germany to fight.  We need external entities which are not used to working in this system to change it. There are no garuntees.

We heard in 1995 how KFC will kill poultry & darshinis, we pelted stones & prevented them from opening. Did we ask for garuntees that they will not kill small stores when we allowed them in? They have created a bigger market for poultry than we ever had. In fact today darshinis are more popular than the KFC's & survive along side. Why are we afraid of competition? 

 

Almost two decades after China opened up retail fully, starting with allowing 26 per cent FDI in 1992, the sector has seen rapid growth, against the backdrop of increased market consolidation, higher production efficiency enabled by rising investments in rural infrastructure, and booming exports made possible by the setting up of new supply chains.

Many of these changes, according to Chinese analysts, were made possible by the entry of foreign retail giants such as Walmart and Carrefour, who changed the way Chinese companies managed their businesses, from farm procurement to logistics. Yet, 20 years on, it is Chinese local retailers — and not their foreign competitors — who dominate the retail market, with initial fears of a foreign invasion ultimately appearing unfounded as local companies learned quickly to out-compete their foreign rivals.

Source

psaram42's picture

Role of FDI in Land use policy

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By opening up Land use to foreign investors the government attracts hard cash. That is why government in power goes head over heals for FDI as BJP did while in power. Now it is the turn of the congress government.

  1. Cash by leasing Land resource
  2. Improving Productive forces by competition
  3. Improving Living Standards with better product range

 

silkboard's picture

Still ...

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IDS, if the KFC lesson hodsl good, then all the more reason - why not be bold and make guarantees on the promises being sold to us (Farmers and Consumers).

Who is saying competition and more capital is not good. Protecting local retailers is not the reason, not for me for sure.

  • Before you usher in competition, please put up a regulator first. May be there already is one, educate me first please.
  • If you make any promises to Farmers and Consumers (which PM and Industrialists are, loud and clear, they certainly were not when KFC opened), put some goals there please, and tell me where I (Farmer or Consumer) should go if all that new capital dosn't get me the benefits I am made to expect.
  • Or, say that there are no guarantees in this FDI game, neither Farmers nor consumes may benefit, this is FDI because we need the F money. At least be honest about it. Admit it, and stop making false promises.

That's it. And at least I am good with investments flowing in from Europe, America, Moon or Mars.

Public Agenda's picture

corporates playing politics ??!!!

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The amount of play the letter from 2 so called leaders of banks and consumer goods is hilarious

"The opposition politics is a sham"  they claim and is being opposed by the Corporates playing the opposition to the opposition.

Do we really live in a dream world?

In Jan this year the same corporates were asking the UPA to step up to good governance in an open letter 

But only afew of us remember that just before the Cabient meeting held to start 51 % FDI in multibrand retail, the FM had the pre-budget meeting with the corporates around the 10th of Nov

This is when the coprorates were brought on board. In fact the UPA2 wanted to bend over backwards for them to show their investment climate . 10 days later the Pm met the US President also 

Now let us go back to the Onion price scam last year when prices were over the top! over Rs70 / kg of onion

what about the dal prices and the rice prices previous year 2009

and then we can see how this FDI in retail decision was engineered to show support for investment from abroad by creating the High prices earlier

We need to understand how it is all linked? Have we heard about the people who were arrested for hoarding onions/ rice/ dal etc 

Well they were actually let off and so while middlemen are bad no regulation has also increased prices

and this lack of regulation is in every sector, airlines, telecom food, services etc because the "market" demands that least regulation

and the "pro good governance policies" are nowhere near pro-public.

this is where the letter from 3rd letter corporates has fallen flat on its face.Coprorates should not play politics is very clear... hopefully they will also learn that pretty soon

 

 

 


kbsyed61's picture

No dearth of cynicism and naysaying!

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PA, SB, and others,

There is no dearth of 'doomsday' forecasting in everything and anything. We have heard this before. When Govt of the day in 84 announced it will go for 'Computerization', traditional unions and their political masters were on streets and left no stone unturned to convince us that it will take away the jobs. Did we loose more jobs or we were able to add more jobs since then?

Isn't it a fashion to see conspiracies in every thing a govt does? Isn't a trend to be cynical for everything that govt does, based on our prejudices and bias against it? Purely based on our liking and disliking a party? Dom'n if it does something and Dam'n if it doesn't.

Whenever such arguments in favor of policy is made, a cry goes for empirical data, studies etc. Then what do we have to say about the conclusions drawn in the report by ICREIR? Mind it this is the study commissioned by the NDA govt when they were in power in 2002. Isn't enough or this is manufactured by govt? Let the states  who want to take risks go for it. Why me, you and others from Karnataka who are skeptics and not convinced, stop Punjabis, who wants to experiment? Will know the truth about its impact and doomsday scenario reality?

In all this we are somewhere striking at the roots of very foundation of our laws and constitution. In democracy, the majority rules. Now, thanks to coalition politics, opposition rules and dictates to what govt can do and it can not do.

Do you need examples? Read politics done on VAT implementation.

 

 

srkulhalli's picture

Simple question

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Can you or me buy directly from the farmers and sell it  ?

Suhas

Public Agenda's picture

reality not conspiracies

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These are the days of post Wikileaks.

and the sooner the way we look at information changes the better for all of us 

Wikileaks this time last year mentioned how the FM of India ws chosen and the lobbies backing him? the statement was in a communique from the Secretary of state, US. It seems like the lobbies were clear now. And if there were not any then there certainly are now. They have already stood up to be counted

2 press statements from the White House during last  week on FDI in retail in India.


silkboard's picture

Suhas, in most states you can't

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Search for APMC Act. In most states, you can't.

Most states don't want you to buy directly from Farmers mainly because they fear that you may not pay them the minimum procurement price.

srkulhalli's picture

Doesnt make sense

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Why would the farmer sell to me if it is lower than the minimum prcurement price.

This seems to be a clear case of licence permit raj.

I agree with Silkboard, first internal reforms before you get in FDI. There is much we can do to improve the case for farmers in any case

 

Suhas

silkboard's picture

APMC amendments "next"

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Suhas, state governments are dithering on things they need to do first. Central government is hoping the lure of FDI will hasten states into amending their APMC acts (and other things that we may not know yet, APMC has been "popular" thanks to media and strikes)

See this news from Punjab for example, dated Nov 27

http://www.thehindubusine...

“Farmers will get advantage of the FDI into multi-brand retail as they will get better price for their produce from retailers provided the Punjab government amends APMC Act whereby allowing direct procurement from farmers and setting up of private market yards,” said Mr Sukhjit Singh Bhatti, a potato grower from Jalandhar.

Also ...

Farmers say that they would get better price for their produce if direct purchase from field is allowed and companies could set up private market yard without any permission.
abidpqa's picture

The need of APMC should be

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The need of APMC should be also understood before blaming it. What was the market available before APMC was introduced, say 30 years ago? Before APMC, a single buyer would approach the farmer, and give a price, and as the farmer does not know about the market prices, they had to sell at whatever price that was quoted. Earlier, there  also may have been lack of knowledge about storage, etc. When they come to the APMC, there are many sellers and buyers, and a fairer price becomes available to the farmer. This may not be the case now with all the information available. Now, I think farmer may not be able to sell outside the APMC, but any one could buy in APMC. Whatever, I read does not answer that directly who can buy in APMC. I hope somebody with experience can answer that.

kbsyed61's picture

Who and When?

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Suhas,

I agree with Silkboard, first internal reforms before you get in FDI. There is much we can do to improve the case for farmers in any case

As broken record, who will do it for us and when? Isn't interesting to know why these things are not in place? Lack of Funds? Lack of technology?

Somewhere in the discourse, truth about any reform is getting lost. Reforms are not 'Zero Sum' games. All reforms are riddled with both losers and winners. So in FDI too.

An interesting read on Jalandhar's experiment with Bharti-Walmart store

http://profit.ndtv.com/News/Article/in-jalandhar-a-sample-of-what-wal-mart-brings-to-the-table-293542?pfrom=home-otherstories

Another interesting issue that is lost in the pro and against din is, is it case of small minority holding up the benefits of majority in the chain? Small traders/Kirana shop Vs Farmers/Consumers?

kbsyed61's picture

Is wikileaks, gospel truth?

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PA,

Should wikileaks be treated as gospel truth? If so then greatest hypocrisy can be attributed to the party with difference - http://www.dnaindia.com/india/report_bjp-leader-arun-jaitley-hit-by-wikileaks_1524552

It was BJP's turn yet again to be hit by Wikileaks cables with a US diplomat reporting that its senior leader Arun Jaitley had remarked to him that Hindu nationalism is an 'opportunistic issue' for his party.

Not to say that other are less hypocrites.

kbsyed61's picture

Reality Check?

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Source - Indian Express "FDI in practice"

Kolkata: In Mamata’s backyard, gaining ground

About a 10-minute drive from the Trinamool Congress headquarters stands Kolkata and West Bengal’s only Metro Cash and Carry — a Germany-based B2B (business to business) group. Set up under the Left Front regime and continuing under the current Trinamool government, this outlet is a success story with an increasing clientele and consumer base.

It caters to a large section, from wholesalers and petty traders to societies, neighbourhoods and distant households who find it convenient to shop in groups from here. They come to buy everything from rice to TV sets, from flour to fresh meat.

Lucknow: A world under one roof

Having come up just a month and a half ago, Best Price Modern Wholesale located on the outskirts of Lucknow already has got itself a loyal customer base. A cash-and-carry facility, it is a 50:50 joint venture between Bharti Enterprises and Walmart and is one of 14 such stores across seven states of

the country.

Spread over four acres, the B2B store caters to small retailers, offices and institutions as well as restaurants, hotels and other catering ventures and clubs. Except for

staff and registered customers, no one is allowed inside.

Bangalore: 8 years and going strong

...Initially, wholesalers reported lower sales and accused the giant of undercutting prices. Others argued that contrary to stipulation that it was a B2B arrangement, the products sold at Metro could be bought for household consumption by any businessman with a sales tax receipt.

....Eight years later, such voices seem to have ebbed. Arun K, a retailer from Marathahalli, Bangalore, who has been shopping at the Yeshwantpur outlet for three years now, says Metro has hiked his profit margins by 15-20 per cent. Arun sells groceries, hosiery and stationery out of a small shop in a residential colony. “As in any wholesale shop, you have to buy items in bulk at Metro. As long as they have this rule and insist on checking membership cards, we retailers are safe,” he says.

 

Delhi: Deals, deals, deals

At Carrefour SA wholesale store in Seelampur in Delhi’s underbelly, shopping carts roll out of the sliding glass doors constantly, pushed by men men and women taking away everything from coke cans and Haldiram snacks, to papayas and coffee mugs. Posters all around the store offer deals, including payment via EMI, as well as a 3 per cent cashback for shopping at the outlet six times a month and spending a minimum Rs 1,000 on each trip.

Intently looking at a chart comparing the MRPs with what Carrefour was offering, a couple said: “We just came to see if we can buy from here. But they are saying we can’t as they need a licence and other documents, proof that we own some business.”

While their experience with Carrefour has been good, the Gulatis are not too sure about FDI in retail. “If they allow FDI in retail, the kirana stores, the small shops will go away... A whole culture of neighbourhood bazaars will die,” say the couple.

Public Agenda's picture

public friendly reforms

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CRZ/ Coastal Zone Management

Forest Rights act

Special component plan for SC / STs all of these in the guies of governance, equity etc effect huge populations

Similarly NREGA also while it is a stop gap meausre and more needs to be done. The BRGF is another

anyway this involves evictions, disruption of livelihoods of the rural poor and governance refoms reach them very unevenly

on the other hand we have large eastern and western frieght corrdiors, Industrial corrdors (DMIC) and also chennai- bangalore- mumbai both funded by the Japanese, follwed by highspeed rail can you say what is the polictial economy of these decisions? how come no issue of transparency corruption and political reconomy are raised here while so called pro urban pro industrial " reforms" are being pushed. these are virtually huge enclaves where golf courses malls, resorts new cities etc will grow outside electorates

on FDI in retail if political parties like the TMC have put it in their poltical election manifestos and therefore strongly oppose the policy it is because they are committed to their electorate as a democracy what is the question here ? maybe the BJP similarlyhas a manifesto and they are in power in many states do you think they should also betray their electorate

many links of FDI in retail like GM foods, processed foods, food factories, biotech you remember the BT brinjal debates and rejection just last year. and the moratorium reached.

this was the bitter pill for all the scientists, industrialists, pro-GM and pro BT advocates and the world ended for them and they thought it was the end of reforms.

I think ICRIER, NCAER, CII, FICCI  ASSOCHAM, AMCHAM, USIBC and also the US govt feel they have been fed the bitter pill of political manifestos and electorates today.

in a democracy this should be strenghtened and the economic decision makers   need to learn that politiczl consensus is at least as important

wikileaks has changed the way people look at information and yet most governments always look a sting operation in the eye but the one paper which supported the anti FDI struggle upfront ( the Hindu edit) also ran the India cables on front page anchor column for many weeks,

on the other hand many of the proFDi and pro reform pink papers and corporate funded TV channels supported the "bold policy decision" to break the "policy paralysis",

 


MaheshK's picture

CNN-IBN News

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This morning the channel was showing how farmers are benefitting from selling their produce directly to Bharti-Walmart in Delhi.  They sell at Rs. 6/kg of cabbage whereas if they sell to the dalal at the wholesale yard, they would  Rs. 3/kg. From the dalal it goes to the retail and then to the consumer, who will be paying more since dalal and the retail have to get their share of the pie. Dalal gets the lions share anyway.

silkboard's picture

before I get clubbed ...

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Before I get clubbed along with arguably the most famous anonymous here (PA sir - how well you manage to bring the world into any discussions GM BT coridors and what not! cheers to you mate), let me be clear on this:

  • Do we need FDI in Retail. Eventually, absolutely yes!
  • But not right now.
  • Why? Because its being sold with the wrong promises, without clear regulator, and needless to say, without any guarantees.
  • 49% FDI too should do. I just don't want Majority-FDI companies to dictate changes in internal acts (like APMC), and formation of would-be regulatory commissions.
  • Best would be to do our home work first, and then invite the guests.
Public Agenda's picture

FDI full stop due to Election results ?

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the results of UP and Punjab has disabused the naive grandstanding unelected (and some unelectable) leaders of the govt from asking for a go ahead in FDI in retail. 

clearly the Cabinet decision was messed up and was only for branding at Davos in Jan

now on backburner for at least 2 more years?

The point being unilateralism was not handed to the party on a platter.

and also the naive understanding that walmart or TESCO etc will come to India and solve the blackmarketing hoarding and high prices

If the Govt can do its job why does it need the help from the Retail majors?

 


silkboard's picture

I still say no, numbers from Hindu article

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Strange, but each time I read around and think about it, the answer is not right now. Read this in a Hindu article/opinion a few days ago. We know Hindu's style, so its with their tinted glasses, but there are some numbers. Here is the link - knowing your onions in NY.

While the Walmarts, Shop Rites and other chain stores sell his kind of onions for $1.49 to $1.89 a pound, Pawelski himself gets no more than 17 cents. And that’s an improvement. Between 1983 and 2010, the average price he got stayed around 12 cents a pound.

And then, this was even more sensational, and very strong statement that the retail chains prefer buying larger size of onions because of their internal 'research' that larger size onions will lead to consumers spending more on onions.

“They want this size because they know you won’t use more than half of one of these in cooking a meal. And you’ll throw away the other half. The more you waste, the more you’ll buy.” The stores know this. So wastage is a strategy, not a by-product.

There are always two sides. But till there is some guarantee in place that the "middlemen" who are being talked about so much in Retail/FDI debates won't simply be replaced with larger chains this making farmers even more constrained for choices, the FDI debates can waits. Let us figure out Agri Procurement and supply chain first, and then talk FDI.

 

Mani1972's picture

SB makes sense, but...

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SB,

I agree with you that we need to understand the agri supply chain. But, who will do that and reform it? In democracy, it will happen only if its brought to focus by the aam aadmi/when forced (1991 reforms)/by sheer chance of a single individual at right place.

So, we seem to have no other option than to reform it in an unplanned forceful manner, as its happening now! I feel that is better than waiting for any of the above 3 posssibilities to happen, though i feel whats happening is almost akin to option 2!:)

Lets go ahead with it. Anyway, 49% stake is internal. Hope, we both will live to see the result. I guess to see just a smile across your face over a cup of coffee, years after, rather than being beaten up by farmers!:)

Manivannan

s_yajaman's picture

Ambivalent - but with FDI comes knowhow

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SB,

Am ambivalent myself.   Reliance Retail e.g. pumped in a lot of money into retail but have not been an unqualified success.  Not sure how a dollar converted to a rupee vs. a normal rupee changes things but here is my two cents.  There is also a likely a lot of pressure from the US to open up Indian retail (maybe as a quid pro quo) .  I don't agree with the statement made by Arun Jaitley that India will become a nation of salesmen.  Isn't it better than having a nation of unemployed young men and women.

Retail is a low margin business and depends very very heavily on operational efficiency.  Which is why most Indian retailers don't make money and then it is no more a viable business.  Walmart is known for their efficiency.  They are also know for their very aggressive contracts with suppliers.  If the high price differential between consumer and farmer is because of inefficiency then you can expect it to come down even if in fits and starts.  But if it is because of some other political reasons then Walmart is going to struggle. 

In general what we need is competition.  Then there is great incentive to eliminate losses and inefficiencies.  Think about it - a Santro that cost Rs.345000 13 years back probably costs the same even today.  STD call prices are lower than 15 years back in absolute terms and in terms of monthly salaries a fraction of what they used to be. 

What will work against players like Walmart is their basic business model which revolves around scale - large stores located outside town.  A trip to a place say like Nelamangala from Bangalore will take 3 hours travel (up and down) and Rs. 350 of petrol.  Which means you need to load up Rs. 7500-10000 worth stuff to make it worth it.   How many people can afford that sort of outlay.  The BJP is being mendacious about the impact of MR on small retailers.  Even today MR will not be more than 5-6% of an FMCG's business.  

I think both the benefits and the dangers have been overstated.

Srivathsa

 

 

 

Drive safe.  It is not just the car maker which can recall its product.

psaram42's picture

Rajya Sabha negetive on FDI?

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Rajyasabha debate started negetive to FDI in retail and looked rightly so. The argument put forth by Mr. Arun jaitly  seemed very fair and covincing why FDI is unfair to both farmers and consumers.

Mayavati was far from making any sence. The whole upper house was booing her. It was quiet a spectacle the way the chairman was conducting the debate allowing her to speak. 

idontspam's picture

FDI, Shmefdi

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As a consumer I say yes to FDI in retail. I believe it can be allowed with relevant safegaurds for small retail. I get choice to buy the same crap I always buy... maybe some new crap on the shelves of the foreign guys.

Having said that I as a consumer dont really need  walmart/tesco to survive. Whoever needs them can campaign for them. I need freakin trains & cycle lanes to travel to places & I cant get it, I will ask for that instead.

murali772's picture

spooky

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15,000 containers and a crew of just 13 men. Too wide for the Panama or Suez Canals, it is strictly trans-Pacific. Cruising at 31 knots means goods arrive 4 days before other container ships on a China / California run. Danish built at a cost of US $145,000,000+. But most of these containers are shipped back to China EMPTY! That's right - the US sends almost nothing back. What does that tell you about it's current financial state?

To get a graphic description of the size of the Walmart operations, click here. Spooky, I must say
 

Muralidhar Rao
kbsyed61's picture

What's the relevance of this with FDI?

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15,000 containers and a crew of just 13 men. Too wide for the Panama or Suez Canals, it is strictly trans-Pacific.

What's the relevance of this with FDI?

srinidhi's picture

Actually China own a lot of

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Actually China own a lot of green backs and hence will not and cannot let US go down..hence they will do everything to keep their interests intact!

So let US invest way too much in India too..maybe that way they will be more interested in keeping us floating!

ashfaq syed's picture

new paradigm in retail

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As being discussed, the FDI in retail will bring in not only additional investments but, also the  knowhow.  one of the most important knowhow would be in farming which is contract farming.  if you see the farming practices of india for the last 50 years, you can say not much has changed and farmers continue in the most inefficient way.  infact, it has detoriated over the years as in say 3 generations, a farmer family with 50 acres of land would become 50 farmers with 1 acre of land each.  there is a need to cooperate and produce efficiently which can only happen with large tracts of land. the likes of walmarts have that capacity to integrate the farmers and streamline the supply chain which would increase the operational efficiency and reduce the overall cost.

the waste in the supply chain which is more than 30 % is what is up for grabs for all the stake holders.  farmers may get more, consumers get benefit of better quality and some cost benefit and the retail store makes rest

 

 

 

 

 

silkboard's picture

@Mani, @ashfaq, @Sathya ...

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Seeing it the other way, would FDI hurt? Perhaps not. Just that it is unlikely to bring both the "benefits" that are being sold to us (farmer will get more, and consumers will get better prices). The benefits on the farmer side are likely to  require more work on policy side than just allowing FDI.

Like you said Mani sir, there is nobody pushing the government to revamp agri supply chain, labour laws etc. Govt will anyway not move much on its own, FDI could create interest groups to push for them. But will these new pressure groups bat for higher pass-through or profit-share with farmers, or manufacturers? Probably not. But presence of these interest groups will naturally create the opposite advocacy groups who will bat for farmers (think NGOs and activists).

Anyway, now that the FDI vote is anyway through, lets watch how it plays.

murali772's picture

could be a game-changer

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@ Syedbhai - Such huge container-ships returning empty means large trade imbalnces between the countries involved, and adverse consequences thereof, about which even a basic student of economics will be able to write an essay on.

@ Ashfaq - When a Walmart (or even a Reliance) gets into contract farming, it will invariably lead to mono-culture, as also other unhealthy practices, essentially to boost productivity. As such, to address the land-fragmentation issue, that you correctly pointed out, I would have preferred the farmers coming together to pursue a co-operative model, perhaps on the lines of AMUL. What the country's farming sector needs badly perhaps is its own Dr Verghese Kurien.

@ SB - yes, I too believe that, more than the impact that FDI will have on the farning sector, it will lead to the government moving simultaneously on many other fronts too - like improved power supply to meet the cold chain needs (perhaps through privatisation - Mr Manivannan - look out :))) ); better and more scientific irrigation projects/ schemes; better rural connectivity (again, privatisation of bus services?), etc etc - in essence, a quantum leap in the way we look at finding solutions for our infrastructure problems. In that, it would be welcome, though we would certainly be faced with new challenges too. But, quoting the late Sri C Subramaniam, like I have been doing many times before, I will venture to add that it would be better than when, for over fifty years, we could not find solutions approaching them through conventional ways.

Muralidhar Rao
murali772's picture

exchanges on a mail-group

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The following exchanges took place in a mail-group, the identity of which wouldn't be difficult to guess for Bangalore civil society members, going by the contents:

DK: Delhi became the first Indian state to reverse the policy of allowing FDI in multibrand retail. The newly formed Delhi AAP govt has written to the Department of Industrial Policy and Promotion (DIPP) asking it to remove Delhi from the list of states which have conveyed their agreement to the policy of FDI in multibrand retail.

France based Carrefour and Germany based Metro are already operating cash & carry wholesale stores in Delhi.

Rajasthan, another major state of India is likely to follow suit. Cheers!


CR: Very heartening. I hope all of India follows suit. And I gleefully look forward to other cannabilistic corporations being frightened away taking their dirty money and tricks wwith them. I also look forward to a courageous govt. cracking down on our own home bred mandi mafia, including -  specially including - the Pawar kind.

Me: The choice is between the organised sector (where the MNC's with FDI's come in) lobby, the APMC/ mandi mafia controlled by the likes of Sharad Pawar, and the government run/ supported Janata Bazaar/ HopComs/ PDS. The question is which is the best for the languishing agricultural sector in the country.

Muralidhar Rao
murali772's picture

interesting perspective

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Prosperity is created by rising productivity, which by definition means producing more from less labour and capital. Rising productivity surely causes some job losses, but creates jobs elsewhere.

To understand this fully, consider the following. To protect jobs, should we ban computers, which have displaced millions of clerical jobs? Why not ban cellphones which have killed the camera industry? Why not ban washing machines, which have hugely reduced jobs in washing? Why not abolish vacuum cleaners which substitute poor sweepers? Why not abolish luggage with wheels, which deprives coolies of jobs? Why not abolish tractors and harvest combines , which take jobs away from agricultural workers , the poorest of the poor? Why not abolish cars and motorcycles, which have displaced labour-intensive horse carts and bullock carts?


For the full text of the essay by S A Aiyer in the ToI, click here.

Interesting perspective

Muralidhar Rao

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