India, the third largest economy in Asia with consistent GDP growth in the range of 6% and or above for the past 15 years, this is indeed a great success story in overall developing of country while the developed countries capitulating in growth.
Signs of global economic downturn and domestic stagnation sticking into the Indian economy, which really needs a jump start to sustain the growth we have taken granted since liberalization.
We have set goals based on the assumptions of sustained growth hitting hard reality, before it turns ugly we need to be proactive.
The discussion of FDI in retail sector reminds me of the GATT agreement we have signed in and formally joined WTO. With the license raj, closed economy we were at a stagnated growth and infrastructure was crumbling and mammoth socialistic institutions and schemes were eating away exchequer.
We were compelled to open up our economy for liberalization which brought prosperity with lot of disparities, never the less it has increased the per capita income of avg Indian.
With liberalization we have exposed ourselves to international competition and we have completely neglected the agriculture sector, which was and still is a major contributor for our economy and manufacturing sector which is still a weaker sector.
We had tremendous growth in services sector only a few benefited contributed a lot to the country. Agriculture and unorganized retail sector are the last standing sectors badly needs reform to improve efficiencies and consumer happiness along with support price for the produce.
This is going to hit hard on the mom and pop shops across the country, as the new found wealth among the Indian would opt for the foreign retail for plethora of reasons starting from quality of product and service and choices of the product. Though this approval stipulates for companies to invest into back processing operations of retail, and a mere 30% procurement from local producers may not be enough to quell the fear of displacing the existing retail with mammoth internationally experienced and efficient companies. Some would argue both can exist together which is a wrong notion.
We can certainly feel the need of customer service improvement and a jump start for the ailing policies leading us to stagnant growth model. Price stabilization and elimination of middleman along with competition is good for consumers and the producers. We need to find a middle ground by creating special zones, such as cities with more than million people, where these people can operate and stringent enforcement of local employment and using the money these people generate by the for infrastructure and other employment generating investments. I think we should take a cautious welcome approach, otherwise we will have to live with this stark reality of economic engine loosing steam.
If we can reduce the labor costs and can produce goods at competitive price we could emerge as an alternative to china in manufacturing sector and these foreign retailers will act as conduits for our exports giving access to world markets. Our product distribution and guaranteed price farmers and wastage of goods will be minimized with efficient operators. On the flip side we have the problem displacement of existing mom and pop shops to a level, who needs to competitive and may need to go as specialty stores and some may have to close shop.
While acknowledging the apprehensions I would cautiously endorse the FDI plan in retail sector with safeguards in place and put to action. This is a delicate choreography Manmohan Singh is good at it and should become like on of those WTO myths. We badly need investment in the country though but we can not afford to take away livelihood of millions of people.
--Ranga Raju (Arkansas, USA)
