OPINION: Is Holding Parliament Hostage Over FDI Justified?

Since the start of parliament’s winter session this year, the functioning of parliament has been stalled mainly due to the issues that include the demand for a separate Telangana State in Andhra Pradesh, Mullaperiyar dam in Kerala and the Foreign Direct Investment (FDI) in unorganized retail trade.

The already queered government on issues such as 2G spectrum allocation and Commonwealth Games scam is now facing the scorch of opposition led by the Bhartiya Janata Party (BJP) over FDI and several regional parties from Telangana and Kerela over their respective regional concerns.

The government seems to be in a peril since two of its major allies, the Trinamool Congress in West Bengal and Dravida Munnettra Kazhagam (DMK) in Tamil Nadu have echoed the opposition’s voice on FDI. Both the parties have 18 seats each in the Lok Sabha. Moreover, there have been consistent reports from within the Congress, of party members having differing opinion on the policy, that from the official stance.

For the ninth consecutive day, the proceedings of both the houses in the parliament have been adjourned, with many people questioning: has the constant disruption and failure to proceed made the national panchayat irrelevant?

The BJP, the Trinamool Congress, the DMK and the left parties among others are against the FDI in multi-brand retail. The All India Anna Dravida Munnettra Kazhagam (AIADMK) wants to raise the level of Mullaperiyar dam in Kerala to 142-feet but MPs from Kerala want to keep it intact at 120 feet as it has been for the past 116-years. The Telangana Rashtra Samithi (TDP) and members of Congress from the region are demanding a separate Telangana state out of Andhra Pradesh.

Unanimously, their demands cannot be termed illicit or illogical, but in fact, it is imperative to take them into consideration if it is presumed to yield national prosperity. They have their respective concerns, which sometimes are even pronounced as their narrow political interests, but that too is a political issue. However, their loggerhead behavior of walking in the aisles of the house, raising placards, creating din and displaying apparent disdain for the chairman of the house is seriously censurable. It is not only a wastage of precious time and money of the citizens of India and their representatives in the parliament but it also tarnishes our global image.

What could be the implications of FDI in retail?

The critics of FDI in retail claim that with ample of financing resources, global retail chains will outcompete domestic players, displace jobs and undermine livelihoods. According to the National Sample Survey Office’s survey of employment and unemployment in 2009-10, 44 million people out of the total workforce of 459 million in India are involved in unorganized retail trade.

Defending its move, the government says, it would only allow FDI in cities with a population of more than one million and thus it would not affect vendors of small cities. But ironically, 26 million people out of the 44 million who are involved in retail trade are based in cities with more than the given number of population.

The government also mandates minimum of $100 million investment by any foreign retail chain which simply implies that the FDI being sought is more technological and less labor intensive. Therefore the claim that FDI will create more jobs seems to be spurious in its immediate effects.

Another major drawback of FDI is the structural change that it is expected to bring. With entries of giants like Wal-Mart and Tesco in retail trade, the intermediaries (whole sellers) between the producers and the ultimate consumers are definitely going to reduce significantly. However, the number of producers and consumers will be left untouched. As a result, in respect of producers there will be few number of buyers (retail giants) and a large number of sellers (farmers) whereas in relationship with ultimate consumers, there will be few sellers (retail giants) and large number of buyers (common man). Thus reducing the prices paid to the producers who are at large and charging more prices from ultimate consumers as few hands will dominate the market.

But another aspect of the same modification in the supply chain is that it will reduce the post harvest wastage and the difference between prices paid to farmers and charged by the ultimate consumers. Because of a very long supply chain that prevails in our country and lack of logistics and warehouses, many products decay in transit, especially when they are perishable goods. Further, due to a large number of middlemen and commission charged by them, there is a huge difference between what farmers get and what consumers pay. The FDI and modern retail has the propensity and potential to fix these flaws.

Both these aspects are of the same coin, which is FDI in retail. It is up to the policy makers to decide which is in the best national interest and therefore a calibrated decision reached with consensus among all the segments of the political class is feasible in the long run.

The Commerce Minister, Mr. Anand Sharma in his statement said, FDI in retail will create 10 million jobs in just 3 years; however, the deputy chairman of Planning Commission, Mr. Montek Singh Ahluwalia in an interview said, he did not know the calculations of this future analysis thus cannot endorse the figure but reiterated that the policy will boost the efficiency of the sector as a whole.

In fact, it is not all about creating jobs or displacing them. In any structural change that occurs, something gets replaced by something else. For example, should we not allow the construction of multi storied buildings because if we do so huts will go out of fashion?

FDI is not a ghost ridden policy that is creating an apartheid state or handing over the country’s governance to Pakistan. It is just a policy India needs to adopt this time or the other if we really deem ourselves as a future leading global market player. There might be difference in opinion on one policy or another, but should that be considered at the cost of other most awaited issues like Lokpal or inflation? And even if the FDI has become the issue to deal with utmost urgency, then is this the right way to deal with it? Should one also raise slogans, mess up documents and tear them into shreds in a government office if one’s application for issuing a certificate is not met immediately?

Absolutely not.

This situation can be handled in a different, more civilized way. A debate, as has been rightly demanded by the opposition parties is the best way to solve a crisis like this. And even if the government is delaying any such demand, the boycott of the parliament is an alternative; at least it is not subjected to parody in the outside world.

About Mohammad Behzad Fatmi

Mohammad Behzad Fatmi (Class of 2012) is a former staff writer for Jamia Journal, and a 2012 Bachelor of Commerce graduate. He can be reached via email at: behzad.fatmi[at]gmail.com

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  1. After reading your article I think I should support the bringing of FDI to India as it is a very important initiative taken by the government specially for the consumers or the common man.

    Also when the computer was to be brought to India a number of objections were made,but it did not take anyone’s living,on the other hand it brought a large number of job opportunities! This led India to be the largest exporter of it services.Hence if we dont think new we will remain behind the other developed countries.

  2. whats been a serious problem with the indian government is that it assumes juxtaposing foreign models to the highly diverse Indian economy is going to wave away its problems. High time the so called policy makers get money commissioned for some research!

  3. montek has a crazy head, to put it in simple words. Messed up and is at wrong plc at the wrong time. I don’t know how he can still afford to share his views after the bpl faux pas. I feel a govt must take all aspects of the economy into consideration when it plans to implement a policy as powerful and destructive in the long run as this. Its time it stops coming out with new poverty measures to work down the numbers and come up with somethg substantial. Fdi is not what the ppl who can’t even before a night shelter in delhi care for. Even less the rural farmers who don’t know their fertilizer dosages.Behzad, pls don’t assume this to be the only solution the govt has at hand. India is as individual as the developed countries that undertook research for their own growth. Why can’t the economy rely on its own ppl for growth? Where have these ‘developed’ countries come from? Why are we so keen on ‘showcasing’ ourselves to the world? Being the south asian big brother? Fdi is the next big mistake after the cwg.The govt as it is is known for mishandling the things made to appear good by it.Trust me the opposition doesn’t care two hoots abt the employment generated and the ppl displaced so it can’t be trusted to play an instrumental role. It’ll just go own with its rahul, sonia chant which will eventually die out in no time.
    Anyway. Very well-written, very well researched and i’m proud of you.
    Thanks for sharing your views. You-ll be prof. Fatmi in a few years :D

  4. abhinav ranjan b.com(h)

    The basic problem lies in the fact that this UPA gobernment dosn,t have strong will power to take politicial decisions.what is happening here that they make some noise about things which do not serve larger interest of people . Timing of this decision is highly questionable; when people were expecting lpkpal they boughyuut the matter of fdi in retail.present scenirio of parliament deadlock is more due to forth coming assembly election ,especially UP.It would be unfair to blaim BJP for parliament crisis,even upa allies are also opposing.The reason behind this is that they always follow populist policy rather than popular one.If they fear it would cause job loss and unemployment,then they should suggest the way which would create job surplus and employment.As central governmet is saying that it will check inflation;then it is not going to serve purpose because its reach going to be very limited. Of coursre it will create huge employment for se.mi skilled and non skilled labour force.When YASHWANT SINHA tried to bring 49 % fdi in life insurance then congress opposed . now same thing opposition and small allies are doing.I end this with a hindi poetry
    nadi ka dariya hai tufan se jujho
    kab tak chaloge kinare kinate

  5. I didn’t understand what writer want to say abt FDI, such a big article, but without conclusion.

    Is price is going to reduce for end user?
    Is country economy is going to develop?
    Will it creates new jobs ?
    Is it good to go for a change after 62 yrs of Independence?
    Is it worth to try FDI with mobile and computer in this country?

    Can we take a chance in limited manner or complete no to FDI ?

    Ali S Raza
    B.Tech 99

  6. To be honest I did’nt get answer of the question posed by the author,Is Holding Parliament Hostage Over FDI Justified? But still I will praise you for your style of dealing with such a critical topic. Good!!

  7. changes are important… 2 decades b4 country changed its economic system(became open markrt) n v got positive result.. great achivement doesnt came without risk..i think govt shuld go for fdi..n proper debate shuld b dere without spoiling tym with mess up documents… written well !!!

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