Will Indian states flock to host foreign retailers?

India’s government has just announced the opening of the country’s retail sector to foreign investors,  leaving it to them to find willing ‘host states’ – a charming phrase used by the Financial Times. However in The Hindu today, Devinder Sharma, noted food and agricultural policy analyst, explains the hollowness of this apparent option:

“Being a signatory to Bilateral Investment Promotion and Protection Agreements (BIPAs), India has to provide national treatment to the investors . . . state governments will, therefore, have to open up for big retail. Industries will use the legal option to force the States to comply.”

After pointing out the political and commercial advantages for the beleaguered American economy and the boost for President Obama’s poll prospects, Sharma puts forward questions and answers them.

SUMMARY

Will FDI in retail be really good for India?

  1. Even in the U.S. big retail has not helped farmers — it is federal support that makes agriculture profitable – currently an annual subsidy of $307 billion.
  2. The Indian retail market is estimated to be around $400 billion with more than 12 million retailers employing 40 million people. Ironically, Wal-Mart’s turnover is also around $420 billion, but it employs only 2.1 million people.

Will it improve rural infrastructure and reduce wastage of agricultural produce?

FDI is already allowed in storage, and no investment has come in. Let it also be known that even the 30% local sourcing clause for single-brand retail has already been challenged and quietly put in cold storage by the Ministry of Commerce.

Will FDI enable farmers to get a better price for their crops?

In the U.S. some studies have shown that the net income of farmers has come down from 70% in the early 20th century to less than 4% in 2005.

Yesterday’s Wall Street Journal notes that Wal-Mart has been lobbying the Indian government for years to open up the country to foreign retailers. Sharma adds:

“In India, we are aware that Wal-Mart alone had spent Rs.52 crore in two years to lobby, as per a disclosure statement made in the U.S. It has certainly paid off.”

Source: Made in the United States, The Hindu, Sept 15, 2012

Read the article here: http://www.thehindu.com/opinion/op-ed/article3897906.ece

 

 

 

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