A retail tale

Specious argument derails FDI proposal

The centre has put off its decision on allowing 100 per cent foreign direct investment in the retail sector, at least for now. Quite astoundingly, a routine act of a few Members of Parliament questioning the government’s wisdom in this respect became sufficient ground to stall a major policy decision which, in any case, needs neither Parliament’s nor the Cabinet’s nod. Does this mean then that the centre is angling for consensus on the issue to such an extent that even if there be a lone dissenting note, it will not go ahead with the proposal mooted several months ago? The issue has been hanging fire for quite some time and it is unfortunate that just when the government came close to lifting the caps for FDI in this sector, it decided to apply the brakes, succumbing to mounting pressure from various trade bodies.

Going by past experience, there is bound to be a lot of noise pollution every time FDI is allowed into a virgin sector, and the retail sector cannot be expected to be an exception. In this regard, it was incumbent upon the government to examine the veracity of the argument put forward — that is, if FDI was allowed into this sector, the biggies of the world would finish off the ‘poor’ retailers who dot the Indian landscape — instead of straightaway succumbing to it. Worse still, the argument is specious. Several safeguards have been built into the draft proposal to take care of precisely that aspect. One important condition refers to approvals being allowed only on a case-by-case basis. Since selectivity is involved, the question of a ‘free for all’ does not arise. In any case, armed with native ingenuity and local skills, our retailers can certainly give the big international chains a run for their money. There is some merit in fears expressed by retailers that international chains may adopt predatory pricing policies and sell goods at ridiculously low prices to kill competition. But there are enough checks and balances in the system to guard against unethical practices. Those who are keen to crown the consumer as king have no locus standi to complain against FDI in the retail sector.