Retreat on FDI

BOWING to pressure from allies and the Opposition, the UPA government has suspended its decision to allow international supermarkets in the country. Though it did not yield to the Opposition demand for a rollback of the Cabinet move to allow 51 per cent foreign direct investment (FDI) in multi-brand retail, the suspension is expected to continue at least until the assembly elections in Uttar Pradesh, Uttarakhand and Punjab are over. If the UPA waits for a “political consensus”, then reforms would never happen. A related decision to permit 100 per cent FDI in single-brand retail, however, stays.

The biggest gain from the end of the political impasse is the resumption of work in Parliament. The UPA perhaps could not afford to get stuck indefinitely with one issue and allow important pending bills on Lokpal, food security, land acquisition, pension fund, insurance and aviation to remain in the freezer as an adamant and disparate Opposition was determined to stall all legislative work until its demand was conceded. If it was a half-defeat for the government, it was only a half-victory for the Opposition as a “holdback” is different from a rollback.

But the common man is the major loser. There is a strong economic case for allowing global retailers in the country. Half the FDI coming in retail would have gone into building an efficient supply chain to move farm produce from growers to consumers, cutting waste in transit (which is an exorbitant 40 per cent) and softening prices, eliminating exploitative middlemen and bringing international agricultural practices in the country. Foreign retailers who the opposition parties see as a threat are already operating in the country in one form or the other. Indian industry has unanimously and vocally pleaded for FDI, while the Opposition has chosen to back the middlemen, largely responsible for manipulating prices. There is no threat to neighborhood shops as they are easily accessible and economical for day-to-day shopping. The country has missed an opportunity to boost its sagging growth. Politics has, once again, prevailed over economics.


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