While the Indian national spectrum allows for a surprising amount of political heterodoxy, with ideologies spanning temple construction, Gandhi-family installation, statue benediction, Bhaiyya defenestration, policy-paralysis-induction, and even more policy-paralysis-induction, there is an almost equally emphatic monochromaticity in economic thought among the political class. In that, there is not a single party of any note that consistently stands for free-markets and limited government. I am not saying, for a second, that what is roughly characterized as libertarian-ism is the solution to India’s economic malaise (far from it if I may add) but some sort of economic diversity in the stated policies of our political masters would bring a countervailing force to the overwhelming preponderance of the big-government protectionist socialism that all parties espouse.
The Swatantra Party tried, a long time ago, to bring a bit of an exotic flavor to the Indian polity, by attempting to infuse concepts like free enterprise into the socio-economic lexicon. They failed. Quite miserably.
The lesson was learnt. In India, the common people have a very definite anthropomorphism of an ideal government.
Namely, the male head of an undivided Hindu joint family.
He sits on a swinging recliner, hookah in hand, as every earning member hands over a significant portion of their salary to him. “I will administer the common pool of money in a way that will benefit you all”, he says, “and I will protect you. Let none be left behind”. The family members crib and carp about the patriarch’s profligacy and incompetence, recount incidents of how he never ever really backs them up in times of trouble. And yet come beginning of every month, they once again pull out the cash and hand it over to him, eyes downcast.
How does this go on for years on end without any change? Well for a start, the patriarch always acts benevolent—-he buys the bahu a sari on occasions or gives munna a toy train from time to time. “We got something back”, they think, all fuzzy and warm, “something that could have gone to the middle brother’s family otherwise”. Even more importantly, the patriarch goes heavy on the compassionate rhetoric in a very Alok Nathian way, ready to weep and emote and hug close to chest, even as he is almost always powerless to do something of any importance.
Perhaps this line from Phir Bhi Dil Hai Hindustani captures the expectations from the government best— “Humme pyar chahiye aur kuch paise bhi, Hum aise bhi hain, hum hain waise bhi”.
First the paisa. In terms of entitlements and handouts, all couched in a blanket of compassion. Rs 2/Kg rice. Laptop to maulvis. Subsidies on cooking gas and oil. “What gifts is the Finance Minister bearing for the housewife?” asks the papers, just before the Budget, as if he is a genial Santa Claus coming down the chimney with bagful of goodies. In short, as long as we believe we are getting “something for nothing”, we are happy.
Then the pyar. The government “cares”. It is the knight in shining armor which stands between the citizenry and the forces of the “market” (and no I am not referring to the Manisha Koirala starrer “Market”) , picturized as a gigantic black serpent with multiple heads—the imperialist, the Walmart, the East India Company, the foreigner, an agent of such evil that if left unmolested would poison the milk of your infant, leave you jobless and snatch away every last bit of what you own. Which is why the government is needed, with its magical shield of red-tape and sword of regulations and market-fighting exercises like the Budget wherein it seeks to control the beast by slashing excise duty on kumkum while increasing it on agarbatti and rolled bidis.
The political class is only too happy of course with the power vested in it. It suits them just fine. Which is why they never want to reduce the size of government or of its role (they do fight over whether it is the Center or the State that should be doing more of the governance).
And why should they?
Resources flow in the form of direct and indirect taxes. A portion of this is then mooched off by a bloated bureaucracy and similarly bloated political administration as over-head (the cost of President Tai’s foreign trips for example or the long entourage that accompanies every minister), another portion is used to maintain boondoggles like Air India whose principal reason for existence is to be the free luxury carrier for IAS and ministers and their families. Yet another portion goes to fund entitlement schemes and subsidies, most of them designed to maximally benefit political pressure groups.Whatever little is left over, well yes, that then goes for funding what the government ought to be doing—building and maintaining common infrastructure (roads, highways, schools, defense etc). Almost as an afterthought.
Whenever any player in the political game, and remember this player is almost always doing this out of compulsion, tries to change the extant culture and attempts to unfetter the markets from regulations, there is a concerted push-back from across the political spectrum.
In order to get the public approbation for maintaining the status-quo, two archetypes are sought to be created.
One is the focus of compassion, the Rakhee of Baazigar, holding to herself two fatherless offspring. The other is the all-powerful villain, the predator, the Madan Chopra, who wants to not only take away everything the hapless widow owns but also wants to see her take a shower. Once the conflict has been framed in such a simplistic black-and-white manner, the end-game lies simply in appealing to the sentimental “Ma Mati Manush” core of the country, and more often than not, the original mover of “reform” panics at the groundswell of opposition and the river keeps flowing as it always has.
This time too, we see the same hoary “anti-market” story template being re-used for “FDI in retail”, as predictable as a Madhur Bhandarkar movie. The object of compassion is the “kirana” shop-owner and Madan Chopra is “foreign investment” and his accompanying “deep pockets” and “efficiency in procuring and transporting goods”. The moment he is allowed in through the door, “kirana shops will go out of business because Walmart will do in India exactly what it did in the US” (this usually followed by a copy-and-paste from an anti-Walmart site) and finally, horror of horrors, “the market will be flooded with Chinese goods.” (the last to be said with great outrage, similar to how they say in “Clerk”, “Doctor ne feees maangi hai”).
This narrative is of course a lot of Ravinder Jadeja. As I had pointed out in a post about a year ago, the concept of a “foreign” company, in today’s integrated global economy where parts, labor and capital are sourced from different parts of the globe, makes no sense. (“Corporations do not have countries, they, like JLo, have only bottom lines”). Second, not all foreign companies are Walmart and using the classical Walmart business model as a dart-board for FDI in retail is disingenuous. Assuming though that all foreign investment in retail is Walmart, there is the assumption that Walmart’s business model can be applied as is Indian markets with the same effect on local business that makes Walmart such a bogeyman. Not to speak of the other assumption, namely that Indian-owned retail chains cannot adopt Walmart’s business model themselves (they have a better chance of doing it than Walmart, at least initially), once again assuming it is a silver bullet for all types of markets. (Again I have elaborated on this in that old post). Or that Indian-owned retail chains would not sell “cheap Chinese goods” because being desi, they are somehow more socially committed or patriotic. [Please read the old post for a greater elaboration of these ideas]
The thing is that with markets, no one knows what may happen. Will kirana shops be totally wiped out as retail chains step up their activities? I doubt that will happen, the ones who are able to best leverage local conditions and markets will survive and flourish. What I do know, because it is common sense, is that increased competition will help consumers and prices will go down. Some say that procurement prices for farmers will go up but then, as this article says, it won’t be as big a blessing as being touted. Why? Read the reason.
While he welcomes the government’ s plans on foreign retailers, Mr. Jakhar said the policy change will only result in a small benefit to most farmers. In most Indian states Walmart and other stores will be required to buy produce through a monopolistic distribution system that compensates farmers poorly for their produce while benefiting a vast array of middlemen.
“It’s a blessing but it’s not a big blessing,” he said. As an organization we have been saying these large corporations have to purchase directly from us. If they go through the middlemen, it won’t make a difference.
The crux of the problem lies in the agricultural marketing laws of most Indian states that forbid retailers from buying directly from farmers without going through designated wholesale markets or paying a tax to those markets, according to Mr. Jakhar and other agricultural experts I have spoken to in the past. While the national government has been asking states to amend those laws to allow for direct purchase of produce from farms, most have not done so because the traders who control the wholesale markets have significant political clout, they are also a big constituency of the opposition Bharatiya Janata Party, which opposes allowing foreign retailers into India
The problem, if you note, is not capitalist Bob Christo gone amok. On the contrary, the problem stems from regulations that have been put in place inhibiting the free buying and selling of goods, enforcing a monopoly by official fiat ostensibly to protect a powerful voting constituency. The patriarch government, once again, to the rescue. Not.
Will all kirana shops survive? If prices do go down, some will not.
So what should the government do in this particular case? Nothing. ( I mention in this case because some regulations I believe are necessary and what those are I shall leave for another day. However they should be nowhere close to what we have in India today)
What can the people do?
If you feel compassionate towards kirana shops, do keep buying at a premium. There are many people (not a whole lot though) in the US that refuse to buy at Walmart, drink coffee from Starbucks on principle and invest in only socially conscious companies. Nothing prevents you from manipulating the market by regulating your own demand. Set an example. Compassion, like charity, begins at home.
But we know you won’t do it. You will go to the place where prices are the lowest. Why? Because you are a human being. It’s the same reason why, despite having shaken your head in sympathy, you never stopped using MS Word just so that typists would not lose their livelihood (I remember long lines of typists sitting in Gariahat, busy all through the day, who have now all vanished since no one comes to them for typing official letters, resumes and theses). It’s the same reason why you never stop to think what happened to travel agents in these days of direct online purchase of air tickets from airlines and easy online comparison shopping (Again some travel agents survive, many do not.)
Nature is governed by Darwinism, or the survival of the fittest, and when government tries to step in and egregiously alter the natural scheme of things, things go south. If our compassionate society had fallen for the Left’s party line of “Computerization would lead to apocalyptic lay-offs in every sector of the economy and lead to Uncle Sam controlling India through software” (which was a very very popular and emotive argument decades ago), then, well we know what would we have missed then.
If there is anything that captures perfectly the schizophrenic craziness of our national discourse, it is how at the same time, there is both opposition to the government withdrawing subsidies for LPG (“It will increase prices”) as well as to FDI in retail, even though that will, in all likelihood, bring down prices.
Because, we feel that subsidies are our right (“Don’t we pay taxes? Don’t we deserve some money back?If we don’t get our money back, someone else will take it.) but the operation of a free market, without overt (intentionally italicized for emphasis) government restrictions , is not.
And that’s sad.
56 thoughts on “The Compassionate Society”
govt as alok nath. Now that explains everything. thats a brilliant insighta really makes sense more you think about it
This time too, we see the same hoary “anti-market” .. should be hairy
PB, No “hoary”= ancient. It’s not supposed to be hairy.
Did you mean “Karan Arjun” rather than Baazigar?
No I meant Baazigar. Madan Chopra is in Baazigar.
(“Corporations do not have countries, they, like JLo, have only bottom lines”). – he he he he he he . On a serious note, I am sure my enterprising kirana store fella will not fall out of business. I dont even have to go to the store. I pick up the phone, read out the list and within the hour he brings them home. As a value add, he also picks up medicines for me from the pharmacy next door to him when I ask him. I bet no big retailer can ever beat that.
Excellent post GB. BTW who are these geniuses trying to find mistakes where they do not exist? When you said on Twitter you no longer feel motivated to write posts, I think I now understand where you were coming from.
Precisely the point. Walmart has to become kirana in order to survive in India. I am to be honest more worried about Walmart and Ikea not being able to last in India than I am about the kirana guy.
Very balanced and sensible post with the usual GB humour. Well done boss.
This is an excellent piece! And I am glad that at last someone has covered all the relevant aspects of this FDI drama in the most succinct way possible.
Contrary to what the Keynesians (like Singh-ji) and socialists (like Obama) would have us believe, economic prosperity has always coincided with absolute free markets of the Austrian type and not through (Nehruvian-Congress) controls. Controls make for Nanny States (like US and Scandinavian countries of today or India under Nehru’s license Raj). Time and again the Austrians (Rothbard, Hayek, Mises and even Ron Paul) and to some extent the Monetarists (Milton Friedman), have been proved right as to the benefits of free market, but Keynesian economics continues to remain popular among politicians primarily because of its pro-vote bank rhetoric (“jobs for all”, “greed of market”, “income re-distribution” etc) which is exploited to the hilt. Euroland is a good example.
The question is not about whether FDI in retail or increase in petrol/ diesel is good or bad, it is about the way it is being portrayed in the paid media – as if FDI in retail and increase in petrol/ diesel is the only thing standing between India and prosperity and that anybody who questions the motivation behind the “reforms” should be at once ridiculed as anti-reform and anti-growth, which in today’s India is a crime as heinous as being labeled communal or anti-secular.
The questions among many others remain: Why do politicians get 300-500 LPGs per annum – are they also going to be capped to 6 ? Why charge a multi-stage tax on petrol if you are so concerned about rising crude prices (which incidentally is not rising)? Taxes account for 50% of its price (unprocessed Texas crude at today’s rate is Rs 31/ liter)? This utter dishonesty and holier than thou attitude of Congress is what riles me up. [BJP is heading on the same track]
If one were to step back and take a bird eye view, it would become obvious that not more than 10% of India (the tax paying general category middle class and small entrepreneurs) through their taxes, through their being denied education, jobs and now promotions, subsidizes and funds the remaining 90% Bharat, their free cell phones and washing machines, Rs 2/kg rice, their “free” loans etc in the name of of “inclusive growth”. These folks then eventually vote for those politicians who introduced the anti-10% discriminatory schemes in the first place and who use tax payers money to fund their lavish lifestyles.
As we Austrians insist, taxes are the first step in the “road to serfdom” which invariably and inevitably ends in socialism, which manifests itself in myriad ways like Communism, Maoism, Nazism and Fascism.
The customers who go to Big Bazaar and Reliance Mart might move to Walmart. The ones who go to kirana will still go to kirana. What good will a Walmart do to me if it is 10km away from home?
I agree with you that FDI in multi-brand retail will bring down prices. This will be good for the consumers. Also I feel the whole issue of Kirana store owners losing out to be a non-starter. I have seen many cases where a Kirana store loses it’s customers because a new Kirana store opens halfway between the store and the customer’s house. Happens all the time. The good Kirana stores manage to survive despite the increased competition. Often the new kirana store owners give up after 1-2 years. Now in case of Walmart the problem is even bigger. There are very few places where Walmart could open it’s big box stores. One only needs to visit places like Mumbai to see how much shortage there is of property.
But there are a few areas where I am not so cheerful about FDI in retail. Why does the government feel it is the only way to save the economy. The government says companies like Walmart and Ikea will invest in infrastructure. While this may be true for cold-storage , but what about roads. It would be the government’s job to build roads. And surely these companies will be only a small share of the market initially. (Walmart will open it’s shops after 2 years or so). What about the farmers who will still have to go the old route to sell their produce the one which includes n number of middlemen. Why doesn’t the government try to do something to eliminate these middlemen instead of going gaga over FDI.
There is one organisation in our country which is a prime example of how the farmers benefit when the middlemen go away. And that is Amul. Today Amul is owned by the farmers themself. Even world bank has praised the model of Amul. Why haven’t we produced many more Amuls in the past 60 years ? I guess, it needs visionaries such as the Late Verghese Kurien and support from politicians such as Lal Bahadur Shashtri. Such kind of political will is absent these days.
I got a lot of ideas from this article :-
Im normally quite disinclined towards reading anything of the serious variety and generally hold no political opinions, simply because I find it tedious to keep up with the news. However , this post of yours held my interest throughout, and I just wanted to say thank you for writing in a style that gets a lazy mind like mine thinking that keeping up with current affairs may not be such a bad idea!
Check Dr. Swamy (swamy39 on twitter).
You seem to see Alok Nath and Ravindra Jadeja as your Mandir ka Ghanta … Jo bhi article likho … unki baja do !!! (inspired by Rajpal Yadav)
I think lawyers,doctors, civil servants, retired professionals etc should be encouraged to blog . All the noise abt injustice is created by engineers (related to IT) who lack the know how to actually fight back.
while I am not against fdi in retail, I find the explanations provided for this particular step disingenuous. this is a trivial reform (if it can be called that). a lot of very bitter pills have to be swallowed by the public if we have to get out of this mess. power, infra, mining (the commanding heights) are in absolute shambles. stagflation is upon us
“But we know you won’t do it. You will go to the place where prices are the lowest. Why? Because you are a human being. It’s the same reason why, despite having shaken your head in sympathy, you never stopped using MS Word just so that typists would not lose their livelihood (I remember long lines of typists sitting in Gariahat, busy all through the day, who have now all vanished since no one comes to them for typing official letters, resumes and theses). It’s the same reason why you never stop to think what happened to travel agents in these days of direct online purchase of air tickets from airlines and easy online comparison shopping (Again some travel agents survive, many do not.)”
Precisely my point as well. We do not really care about them, and we do not really care about the small-scale shops either. What we’re more keen on is “showing” that we’re sympathetic towards them: we buy products from whoever offers us the cheapest rate, and will continue to do so.
Which is possibly the reason that we should invite Wal-Mart and other giants to open shop in this country. Given the massive inflation thrust upon us there is absolutely no reason why we should not look for avenues where we can shop for cheap.
I mean, why should we be the ones that will bear the brunt forever? If we are going to suffer the hikes, there is no reason whatsoever for us to be compassionate towards the kirana (?) shops and pay a higher price there as well.
We, as you’ve mentioned, are human beings.
Rakhi didn’t have 2 sons in Baazigar.
Shashwat, I said “offspring.” Offspring not equal to sons. Ajay Sharma (SRK) had a baby sister.
The offspring is a brand of bowling you often get to see in para cricket. The ball, when bowled by a right-hand spinner, spins from the offstump towards legstump.
It’s difficult for walmart to replace local kirana stores….the kind of real estate required for a Walmart store, they definitely cannot be built within city limits add to that India’s poor infra (unlike in the US where driving 10-15 miles hardly takes any time), I’m sure a trip to walmart in India would be more of a weekend affair..for most day-to-day grocery you would still go to local kirana store…
How about this as an honest opinion.
Arun shourie on FDI.
“In India, the common people have a very definite anthropomorphism of an ideal government.
Namely, the male head of an undivided Hindu joint family.”
I think that is absolutely exactly true. Also the reason why we are so lazy with our activism. We can’t understand the responsibility of being a democracy.
How can we get MB to start reading your blog? I read this piece right after listening to the Mamata interview on ibnlive.com. My head was hurting after listening to her mad ramblings, especially on FDI. Thanks for getting me back on sane ground.
Nice post again. Informative too, specially the article mentioning middlemen in agricultural marketing.
“The crux of the problem lies in the agricultural marketing laws of most Indian states that forbid retailers from buying directly from farmers without going through designated wholesale markets or paying a tax to those markets, ……. most have not done so because the traders who control the wholesale markets have significant political clout, they are also a big constituency of the opposition Bharatiya Janata Party, which opposes allowing foreign retailers into India”
It is all very magnanimous to shed crocodile tears over hike in LPG and Diesel prices, but no one bothers to end the hoarding tactics that lead to rise in vegetable prices in the daily market. There is absolutely no control there and the dear poor-friendly politicians turn their back on such small issues.
Has the time come for presidential form of democracy in India with more power for states to run their business. Else in current form we will have only high command with MMS style prime minister.
[quote]Whatever little is left over, well yes, that then goes for funding what the government ought to be doing—building and maintaining common infrastructure (roads, highways, schools, defense etc). Almost as an afterthought.[/quote]
And how much of those funds are actually used in building that infrastructure? After having been in Canada since last 13 years, I still get amazed with the extent of infrastructural development. What surprised me is that the human nature – and its extension – corruption is prevalent in every part of world. So why can’t Indian government accomplish what Canada/US government has accomplished?
Rakhee reference – Shouldn’t it be “Karan Arjun”?
Why did you not publish my comment? Was it tough/below belt or was it bcoz it was not in english? Let me rephrase:
would you have written the same article if you had your own kirana shop?
Couple of things
– If Walmart store is more than 4 km away from my house, My mom will not pick up any grocery from there. Yes but when she goes once in a month we’ll probably pick up extra stuff.That means most of unmarked/highly perishable things will not be a strong suit for Walmart like veggies / fruits. However as far packaged food is contain it can take on big chunk.
– May be we can get unadulterated milk now :d
– Many of the Walmart’s in house products “great value ” would also be doing some kind of meat processing. Which technically speaking might required them to brand their food as non veg here..They might just have to open up few manufacturing units here. This would impact existing brand but I guess it would be fair competition.
The only people who would suffer from FDI in retail are the big Indian retail chains like Big Bazaar, Reliance etc.
There is a huge CVS like store very close to where my parents live and yet they still get their toothpaste, shampoo etc from “morer mathar Godai er dokaan”.
The relationshoip between the fixed “mach waala” or “sabzi waala” and the emotional indian customer will take a generation to fall out …. and by then a healthy economy SHOULD NOT have these small shop establishments anyways.
Yes, we certainly don’t need foreign retailers to flood us with Chinese goods. One of the biggest electrical goods markets in Delhi is at a place called Tilak Nagar in West Delhi. Today, you can hardly find any Indian-made goods there. I talked to some of the dealers, and they say even with the logistics problems, Chinese goods afford them much greater returns. So… Are these the kind of ‘small traders’ the BJP (with its ‘swadeshi’ rhetoric) trying to protect?!
As for the olden socialist rant about computerization, I still remember that in the ’80s, the first computers installed in banks were euphemistically described as ALPMs (‘Automatic Ledger Posting Machines’), probably just to avoid the controversy caused by the word ‘computer’! That was the height of paranoia among bank managements, and the terror of communist-sponsored bank unions…
What intrigues me is why, with a lot of empirical evidence of the potential for retail FDI to benefit farmers and consumers alike, this Govt. chooses to peddle the line that it’s needed to improve (a) market (read: stock market) sentiment and (b) (international) investor confidence? Thus automatically opening itself up to the charge of being stooges of “capitalists” and “foreign powers’ respectively…
I have not even finished one paragraph, and I have learned three new words.
FDI in Retail – Ab sailaab aayega Madan Chopra (Distributor Nexus)..
Yes, Bong doesn’t post tough comments. He has been blocking my comments for years. But he did post yesterday (see one message above).
@Agneya — Perfect observation. The core problem with India’s economy is that very few people pull their weight. They have poor or no skills, and they are inefficient. They are simply not productive enough to finance their aspirations for pukka houses, roads, health care, white goods, etc. This over-aspiration ranges from the abjectly poor farmer trading votes for subsidized kerosene to the upper middle class “faking it” and underperforming in middle management of MNCs and still flying to vacations in Thailand. India has tried to bankroll this binge by inflating currency, which is well-known to benefit hustlers disproportionately. But that trick is now no longer working, so it is necessary to keep borrowing from outside (which partly means repatriating much black money via Mauritius and the “Gelf”). Which is where FDI comes in.
Rich and Famous,
I havent blocked a single comment of yours (just as I havent blocked your above comment) in recent memory (and most probably ever) despite your more or less consistent nastiness (it’s either at Ganguly or Bengalis or at me and sometimes all together) and yet your morbid fascination with my blog, a fascination that has continued for years, despite you hating almost everything I write with a vengeance. You are a troll and yes, from now on, perhaps I *shall* block you. For just being a troll. If you believe you post “tough comments”, thanks for the weekend laughter. Please feel free to feel that.
Maybe it’s a mistake responding your barb, since I try not to respond to trolls nowadays. But I just had to.
Incidentally, “Kirana Seth”‘s IP posts abusive (as in gaali) comments on this blog hence that IP is under blocked.
You are mostly right, although you don’t go far enough in stating the benefits of markets.
For instance , you seem to find it regrettable that some businesses will not survive the competition and some people will lose their jobs.
You should not !
Indeed, putting inefficient businesses out of business is a good thing. The resources held by that business (including the people employed by it) will be re-deployed more efficiently in a way that will be a net plus for society….
So, the benefits of FDI would be three fold … They will create value for consumers, they will create value for farmers (if done right) and they will cause some old inefficient businesses to stop existing and re-deploy the resources locked up by them.
If you have trouble appreciating the third, think of how the industrial revolution actually led to widespread improvements in the standard of living…. It wasn’t merely because the peasants could get cheaper clothes and food.
Most of the benefit came because many peasants abandoned (or were forced to abandon) their self-sufficient lifestyle and go to work for the new industries. They created more value in their new jobs than they had in their old ones, got exposed to city life and the values that go with it, had children who went on to do more value-added work … and so forth….. ultimately building what we know as the middle class in the west.
GB again an excellent write up. the whole FDI/ No FDI debate has become cacophony as people are drumming their own drums. We need a debate based on facts. But again we are in India and we are good at debating w/o facts and stats la Barkha Dutt/ rajDeep Sardesai/ TimesNOw mode.
it’s great fun reading your bollywood analogies put into economics 😛
@mein or me
But didn’t Shourie backtrack a little from what he said on FDI? A day after his interview to NDTV in which he said he was in full agreement with the decision to open up the retail market and hiking diesel prices, he clarified, maybe under pressure from his party, that he was never supportive of the move to open up retail; he was merely endorsing the move to hike diesel prices.
Shourie has had this belligerent streak in him which occasionally surfaces when he decides to contradict his party’s line of thinking. Most of the times he’s articulate and intelligent, but sometimes it just seems to me IMHO that he’s trying to be this holier-than-your-regular-Opposition guy. How else can one explain how Shourie can dismiss FDI in retail as being inconsequential when he as Cabinet minister under Vajpayee strongly opposed the idea?
I’m new to your blog and I’m loving it 😀
On a totally unrelated topic, when can we expect a review of Barfi and the Oscar hoopla surrounding it?
Walmart won’t replace the kiranas. Just like Indian-owned private shopping marts didn’t wipe out the old-style markets. As you said, there will be some flab-shedding. The inefficient will be excised.
In urban India, salaries are higher than before, and some people would gladly pay more for groceries in an air-conditioned market with pleasant sales-staff. I remember going out to buy vegetables with my mom in Bombay: we would go to these markets with potholes in the road (which turned into puddles in monsoon) and mosquitoes and the unbearable heat.
These markets won’t disappear. There will be some people who can only afford to buy there.
If anything, increased FDI will, like a rising tide, lift all boats. Nice post.
The bigger issue under the UPA government is not whether FDI is good or not. The issue is whether this new influx of capital, like many other initiatives before, is meant to “strengthen the economy” or strenghten the Congress + accomplice’s bank accounts.
Looks like there will be a no-confidence motion soon. If this government falls and the reforms reversed, we are definitely going to be rated “junk” by the agencies.
The BJP meanwhile keeps up with it’s good work of self-destruction.
anyone who can guarantee safe food (without fertilizer overdose and other poisons) at 50% lower rates than the street vendor is welcome. We dont need the airconditioned markets …we need good products at lower rates.
Another excellent piece. Please keep writing to provoke the thoughts within us. The pressure on the government is not so much from the local kirana stores but by Indian retail giants, who will face intense competition and bankruptcy.In short, they will have to raise their standards, something that all Indian companies are loath to do.
Regardless, this has been the year of the scoundrel with Mamta didi crying hoarse at every given opportunity, Sharad Pawar going off in a tangent and the young turk, Naveen Jindal, getting his face covered in coal dust.
I hope Manmohan and Sonia stand upright and let this decision stand by. India has already lost its face several times by reversing decisions before.
“India has already lost its face several times by reversing decisions before.” — Fret not! India can conjure a different face for every conquistador in a millisecond. There is no absolute truth here, and India can afford to lose billions of faces. Heck, many Hindu gods have multiple faces! “We began questioning the people as to where the elephant had gone and, as usual, failed to get any definite information. That is invariably the case in the East; a story always sounds clear enough at a distance, but the nearer you get to the scene of events the vaguer it becomes.” — George Orwell.
Sir u are doing an excellent job. It is in human nature to resist change whether that be welcoming FDI in retail or cutting on subsidy. It is important for us to have a thorough knowledge of the subject before harboring any opinions and for this we need people like you to guide us in process of decision making.
“The BJP meanwhile keeps up with it’s good work of self-destruction.”
The BJP will do just fine if only people like you were willing to cut BJP
1/100th of the slack that you cut the Congress-pseudosecular revolving alliances.
Alas, such is the destiny of India.
Re: a deliriously stupid comment here – Obama is a Socialist? Hahahahaha
Governing Charges – 2%
Please don’t dabble into something that you don’t understand.
Who is to say that Walmart with their deep pockets won’t influence the trade by out-pricing or out-maneuvering the kirana stores. The price benefits to farmers would prove temporary with farmers getting less once the kirana stores are out-priced. Walmart could influence policies of Govt. or wholesale traders making it unattractive to sell to kirana.
Tell it to Chinese govt. or Brazilian govt., who require a certain majority percentage of parts in any product sold there to be made in that country, that it is a free market. A requirement like this would improve the small scale manufacturing in India, but I don’t believe that GOI would do any such good thing, knowing how much they care about India;s well-being.
Half baked people like you start thinking that you have figured out everything.
The analysis seems rather shallow. There is a lot of subsidy for rich people and corporations (cheap land, tax waivers, exemptions from labour laws etc). Why such a hullaboo when there are some subsidies for the poorer sections, when it is a question of survival?
If the question was really of choosing a truly free market, one might consider it. But that is doubtful, as even in the US there is so much protectionism.
For eg., every foreign aid given by US to other countries can be used by purchasing the relevant items, arms or planes whatever from US based corporations only. If there is no difference between domestic and foreign companies, why does the US have such policies? You speak of Air India (being a researcher in a govt institute I am forced to take AI and know its abysmal levels of service) but in the US, when one uses funds from NSF one must travel in an American airline. Difference is, in the US the policy is of transferring taxpayers money to corporations who fund their elections…
The problem in India is not that people want the govt to do something for them, but that the govt does not.
Another point to make in the context of Walmart and FDI: lots of smart and well connected people in India have their eyes on a Walmart type model for a profitable business venture. The surest route to success in India is to take a proven business model from elsewhere in the world and adapt it to Indian conditions. Plug into local connections in business communities and politics, sell the growth story to foreign and domestic investors, connect to international supply chains and voila’, you have another Indian success story.
In the retail area, there is tremendous potential with the huge population, growing urbanization with nuclear families strapped for time. Someone is surely working on it and doesn’t want to get scooped by the original role model until they are ready to compete. The small kirana guy and the farmer are just the excuse.
GB – why exactly do you believe that libertarianism is not the solution to India’s economic malaise? Exactly what problems do you see in libertarianism?
KAPITALISMUS (as German as communism, bringing you culture – and everything else “MODERN” since the 1600s)