Do we really need FDI in retail?

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SummaryIndia is, sadly, caught up in an economic quagmire so intense and so pronounced that our politicians are faced with a very ticklish situation.

Pardeep Jain & Minakshi Garg

India is, sadly, caught up in an economic quagmire so intense and so pronounced that our politicians are faced with a very ticklish situation. With rising doubts about India’s current economic health, there has been a vigorous debate among policymakers on the issue of FDI in retail. It is imperative that policymakers must take into consideration the unique situation of India, and not blindly follow the western model. Although the central government is keen to implement FDI in retail to spur investment, opposition parties and several states continue to oppose this. One of the reasons for this is that it will lead to the closure of tens of thousands of kirana shops across the country. Although the government says that it will create employment for the Indian youth, what is the guarantee of the same?

It is important for Indian policymakers to learn lessons from such experiences in other countries and adopt a cautious approach towards opening up the retail sector. The government should also keep in mind that following the example of China isn’t necessarily right as China can afford to open its retail sector because of its globally-competitive manufacturing sector. But India is still, to an extent, an agricultural-based economy. The government says that the big retailers will buy directly from the farmers. Isn’t it a shame that even after 65 years of independence, we still want the West to come in and save our farmers? Given the right encouragement, can’t our entrepreneurs set up the cold storage supply chains so that farmers get a better deal and the produce is not wasted? Why is the government trying to shift its responsibility to foreign retailers?

Also, the relief in the form of lower prices to consumers is more a myth than a reality. The government says that the retail chains will offer products at economical prices as a result of growing competition. In reality, they might be free to set the prices and the government might have little say. Do we really want big malls at the cost of putting our people, our farmers at the mercy of big retailers?

Pradeep Jain is associate professor, Minakshi Garg is research scholar, department of management & humanities, Sant Longowal Institute of Engineering and Technology. Views are personal

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