ibnlive » Chat

4 pm Dec 03, 2012

Voting on FDI in multi-brand retail in Parliament

As Parliament prepares to vote on the issue of FDI in retail, get a clearer perspective from one of the senior-most journalists in the trade.
24 questions answered
  • Why is there so much opposition to FDI in retail. Is it Scepticism about its success, or that it is really not good for India, or Just political polarisation. if it is just political, then it is v.v.bad for India, in every respect regards Asked by: Narayanan
  • Vivian Fernandes There are various reasons for the opposition. The Communists are viscerally anti-American. They oppose the entry of Wal-Mart, which they think is a flag bearer for American 'imperialism.' This is also the reason they oppose genetically-modified crops (which they equate with the profitability for Monsanto, an US corporation). The RSS is insular. It harps on Swadeshi and has never been keen on globalisation. The BJP is quite opportunistic, opposing for the sake of opposing, as it was in favour of FDI in retailing earlier. The traders under the aegis of the Confederation of Indian Traders,,led by Pravin Khandelwal, fear they will lose. Hence their vocal opposition. Though, it is a fact, that many traders are gaining by buying wholesales from cash-and-carry stores like Metro and Bharti. Mamata Bannerjee wants to be more leftist than the Communists. The opposition of Nitish Kumar, otherwise, a progressive chief minister, is hard to understand. He is also opposed to GM crops that can transform Indian agriculture. In Kerala, the Congress leaders are opposed because the politics of that state is quite left-oriented. The opposition is hard to understand because organized retailing is a reality in India. The big industrial houses like Reliance, Aditya Birla Group and the RPG group already have a presence. FDI in retailing will in fact put competitive pressure on them, for the benefit of consumers - and also farmers and small manufacturers. .
  • Is it fair to be calling vote on FEMA as Govt will have to go in for vote in each executive decision as in the end FDI is an commercial decision and not an constitutional decision related secular fabric of nation Asked by: Manav
  • Vivian Fernandes That is right. The government is hopeful of winning the vote in the Lok Sabha. Parliamentary Affairs Minster Kamal Nath says this is enough.
  • Is it not our failure that even after 21 years of reforms,we are still divided on its benefits? Why oppose a fundamentally good policy? Why doesn't the public punish them? Asked by: Kamal Agg
  • Vivian Fernandes If you look at the history of public policy making in India, virtually everything has been achieved in the face of opposition. When we abolished import quotas and replaced them with tariffs in 2000, there was an outcry that Chinese imports would swamp the country. Then Commerce Minister Murasoli Maran even set up a 'war room' to monitor the imports of 300 'sensitive' commodities. Nothing of the kind happened. When reforms were initiated, the BJP and The Communists said 'silicon chips not potato chips.' This was in response to allowing fast food joints like McDonald's into the country. Companies like McD, McCain, Kentucky Fried Chicken and Pepsi Foods have actually helped our potato, tomato and poultry farmers, besides creating jobs for low-skill persons. There were similar apprehensions when gold imports were liberalized in the early 1990s.
  • Is the Walmart flouting FEMA norms as was proved in its recent corruption scandal over Cedar which led to suspension of its CFO and what will be the future of MNCs retail venture as these bribery scandals will only grow Asked by: Shailesh
  • Vivian Fernandes Tell me a business in India that can be done without bribery. What the Wal-Mart example shows is that even a powerful company is not immune to the venality of our officials and politicians. To comply with the US Foreign Corrupt Practices Act, US-based corporations will engage consultants to do the bribing and call it consultancy fees or fees for educating public opinion (as Enron did). Unless our police and judiciary are effective, bribery cannot be eliminated.
  • Is bjp more opportunistic than cong and communists or they all are same? At least with some parties you know what is coming. Asked by: Kamal Agg
  • Vivian Fernandes The Congress was opportunistic when it was in opposition during the NDA regime. It forced the NDA to write the 26 percent FDI limit on insurance into law. Now it is seeking the help of the same BJP to raise the limit to 49 percent! Similarly, Manmohan Singh as Rajya Sabha MP during the NDA regime said the oil companies could not be divested without amending the law. The Communists are consistent. They are opposed to private enterprise of all kinds. It is the BJP and the Congress that keep changing their spots, the BJP more so, because it is supposed to he a pro-market party.
  • Why is it that on one hand 100% investment in single brand and arrival of luxury brands like Gucci, Louis Vutton is acceptable and there is controversy over multibrand retail so is it not hypocrisy Asked by: Ravi
  • Vivian Fernandes This is just to buy political acceptability. If 100 percent FDI in multi-brand retailing is allowed, can you imagine the furore.
  • A different question, The poverty in terms of percentage has fallen steepest in the last five years(whichever criteria you choose tendulkar, saxena or sengupta committee),average health has gone up the highest in percentage terms, we are hearing less and less of terror or naxal strikes, Paper less courts have made a beginning,10 are functional, another 18 months Sam promises to connect 250000 panchayats through optic fiber. I can go on and on but do these things mean nothing? Only things we are interested in discussing are Vadra, Gadkari, Policy paralysis, Lack of communication. Are we becoming too negative? Will history judge MMS better? Asked by: Kamal Agg
  • Vivian Fernandes There are a lot of groups that use corruption to attack private enterprise (chief among them being the Communists and their sympathizers in civil society). But corruption in India is at egregious levels. Without it, there would have been greater improvement in the other indices that your spoke about.
  • Other than making statements in favour of FDI retail , can you pls give instances with facts & figures abt the good FDI retail did in countries which experimented with same before- like USA , Europe , Indonesia etc ? Asked by: VJ NAMBIAR
  • Vivian Fernandes If you read a study done for the Commerce Ministry by Thomas Reardon of Michigan State University and Ashok Gulati (formerly of the International Food Policy Research Institute) you will get an idea. Just do a Google search. In the United States, Wal-mart has immensely improved the purchasing power of consumers, specially poor consumers, with its everyday low prices. It faces flak there because it does not allow unions, and imports cheap stuff from China (allegedly leading to job losses in the United States). In China's Wal-mark has been operating since the late 1990s. But it is not the biggest. It has been beaten by Shanghai Bailian, a state-owned departmental stores. Wal-mart has a plan to tie up with a million Chinese farmers. The Chinese government has also embarked upon a programme to upgrade its wet markets (fish etc) with the help of Metro, a German wholesaler. There are people who say that organized retailers squeeze farmers. They actually squeeze margins, which is not the same as squeezing farmers. It will be mutually beneficial if Wal-mart gets produce at the lowest rate per kilogram and farmers get more per acre. This can be done by improving productivity, reducing wastage and producing what consumers want.
  • In tdays THE HINDU there is a very interesting article by Sainath with facts that go against FDI retail policy ? Why isnt anybody answering such relevant questions ? Asked by: VJ NAMBIAR
  • Vivian Fernandes Sainath's opposition is ideological. He has also been railing against genetically-modified cotton and holds it responsible for farmers's suicides , when Bt Cotton has made India the second largest producer and exporter of cotton. (If he was so much concerned about farmer suicides, he should have investigated them in West Bengal, which under the Communists, and even now, has more suicides proportionately than in Maharashtra).
  • If and when bjp comes back to power, can we expect a turnaround in their economic philosophy or they are the new socialists? Asked by: Kamal Agg
  • Vivian Fernandes They will follow Socialism with Saffron Characteristics! How can a party which has traders as its base be anti-business?
  • Every body talks abt FDI retail paying better remuneration to farmers. Experinece world over including USA proves the stark contrary. Why will India b different? Asked by: VJ NAMBIAR
  • Vivian Fernandes In the US agriculture is done by corporations. There are very few small, individual farmers. The situation in India is quite different. Why would any agri-business corporation want to antagonize its business partners (farmers in this case). If it contracts to buy a certain quantity and fails to do so, it will not have an easy time at the next round. Trust is important. That does not mean there will be no unscrupulous practices. To counter that farmers will have to form cooperative or small producer companies to enhance their bargaining power.
  • FDI RETAIL is a very important bill with crucial( & bad) implications for India's future, going by experiences elsewhere .Shudnt the bill be subjected to pre-legislation debates with stake holders across the country ? Asked by: VJ NAMBIAR
  • Vivian Fernandes We have debated it for over a decade. The present policy is the best. Only states that feel confident can proceed. The Chinese call it 'crossing the river feeling stone from stone.'
  • Can you bring in some coherence in what the oppn and congress is saying as one is saying majority has to be proved in both houses other in just one house on FDI vote Asked by: Rajesh
  • Vivian Fernandes According to the Congress, since the changes are not the Foreign Exchange Management Act but to the rules, the approval of only the Lok Sabha is enough. If within 30 days that other house does not give its approval, the changes notified by the Reserve Bank will come into force. This is my understanding of the situation.
  • Regional parties like DMK, SP, BSP, NCP arms twisted for FDI vote ? Asked by: Hari
  • Vivian Fernandes I am sure they are also doing some twisting on their part. the Bahujan Samaj party wants Congress support to the SC/ST quota bill.
  • Sometime back, I read that discretionary power to allot anything to individuals was taken away from central ministers excepting natural disasters and war but there was no discussion in mainstream media. Was it insignificant or something else? Asked by: Kamal Agg
  • Vivian Fernandes Governance is not possible without discretion. But discretion must be justifiable. It cannot be arbitrary. There was talk about removing discretionary power by adopting transparent processes like auctions. Which has recently been done with 3G spectrum.
  • If foreign companies brings products which is cheaper than India product, sure it will affect our domestic products, How can still other parties like BSP, SP, NCP, DMK etc supporting FDI. Asked by: Hari
  • Vivian Fernandes Even now cheap Chinese goods are being imported. Retailers like Wal-mart may be able to strike better bargains with their overseas suppliers.
  • Allies and some other parties saying that we are supporting UPA 2 on FDI to avoid communal force to come to power, Is it a right reason to support? Asked by: Hari
  • Vivian Fernandes They have to sell their support to the people. It is a marketing ploy.
  • Why is India too much concerned about foreign manufacturers and investment instead of development of local manufacturers and cities as FDI will only help in driving up sensex and speculative activity and not in long term development of nation Asked by: Arvind
  • Vivian Fernandes It is only with competition that we can make our industry more efficient. We also need foreign capital, technology and management practices.
  • If Govt. losed vote in Lok Sabha and Rajya Sabha or for the matter any one of them, what will be implications on FDI being allowed? Asked by: Vanshul Chawla
  • Vivian Fernandes It will be an embarrassment for the government.. It do not think it will come to that.
  • Govt has been taking big decisions in last few months relating to FDI and now to cash transfer as it believes it show something concrete to voters so by FDI vote it will try to prove opposition as impediment to growth and development Asked by: Manush
  • Vivian Fernandes Yes, it wants to wrest the initiative and show that it is capable of decisive action.
  • A big supporter of retail fdi. A suspicion Rel Fresh in my area(Laxminagar Delhi) is 10-15% more expensive than neighborhood kirana stores,you can have a case study. Why don’t I get the promised benefits which should accrue because of organized nature of the business or this is just a one off case? What happens when these large formats have a larger market share? What are the safeguards? Asked by: Kamal Agg
  • Vivian Fernandes If it is more expensive, opt for the Kirana store. If large retailers follow such a pricing strategy, they will not succeed.
  • Why did the BJP and left not support TMC’s no confidence motion as it seems they are supporting Cong from behind and claiming that they want to embarrass UPA by going in for FDI vote Asked by: Arvind
  • Vivian Fernandes The non-confidence motion did not have a chance of getting approved. Mamata Banerjee jumped the gun.
  • Why did the govt had to take too much time in taking decision on FDI as it seems was they lacked confidence or was there horsetrading going on Asked by: Ravi
  • Vivian Fernandes The government has been calling for FDI in retailing for nearly a decade. The 2004 Economic Survey extolled its virtues. In UPA I, the Left Parties were opposed. In UPA 2, the Trinamool Congress took their place. Not all the allies were on board, so far.
  • What will happen to the FDI in Retail, in case hte govt wins the vote in the LS and loses the Vote in RS. Will this have to be kept in teh back burner Asked by: Narayanan
  • Vivian Fernandes No, the government can proceed. Hopefully, it will not allow itself to lose in the Rajya Sabha.

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Vivian Fernandes
Author, Modi: Leadership, Governance and Performance