I wanted to take this opportunity to try and put forward my view point about the subject as per my understanding and interpretation of the matter. I have no political leanings towards any parties and nor am I a capitalist or a communist or a Keynesian economist to be influenced by any one particular form of thought. I just present some plain calculation as per my understanding of the subject and whatever little I managed to gather through my limited reading.
Before we come to the point of whether FDI is beneficial or harmful, we need to understand few factors and involve few variables to understand the effect. First is the Exchange Rate [value of local currency against $], second is inflation [purchasing power of money], third is trade deficit [Exports minus the imports] and fourth is liquidity [amount of money in circulation]. All of these factors are tightly tied together in a cause-effect or effect-cause relationship. It is a general practice that international trade is measured against the $ and so is the exchange rate of a local currency.
Let us observe the macroeconomic condition of the Indian Economy against the above factors.
Exchange Rate: The Rupee has significantly depreciated against the Dollar over the past year and is at the moment the worst performing Asian currency vis-a-vis $. This situation, does benefit the exporters as they earn more for the same quantity of goods exported but, it hurts the importers, as the commodities in the international market become dearer. The reason for the Rupee nosedive is because of reverse flow of $ out of the country. Lack of $ supply and increasing demand for $ has made it dearer resulting in a depreciating rupee. Some of the reason for the reverse flow of $ are:
– FII (Foreign Institutional Investors) pulling back $ from the Indian market due to macroeconomic conditions in their country of origin [European or US crisis]
– Increasing cost of Crude Oil
– High demand for Gold in India – means purchasing gold from international market at the expense of spending $
Each of the above has led to reverse flow of $ thus making Rupee nosedive to it’s lowest value ever. Though this has a silver lining but I would come to that towards the end of the post.
Inflation: For the last year or so the inflation levels have been uncomfortably high and the rupee nose dive has definitely contributed to the higher commodity prices in the local market. India also has had a chronic problem of negative Trade Deficit , which means it Imports more than Exports which would always effect the ForEx Reserves of the country as we would spend more $ than what we earn. It also means that, with a depreciated Rupee every import is expensive and the product continues to be in the local market. If the price of the import goes up in international market (like crude oil) then those imports become even more dearer in the local market. Pushing inflation higher. This has led to lesser confidence of FII or FDIs thus prompting them to pull back the $ from Indian Market
Liquidity: Liquidity indicates, the amount of money in circulation in the market available for commercial transaction. Central Bank [Reserve Bank of India] is the sole controller of this Monetary Policy. It is common sense that higher liquidity equates to higher commercial transaction, however a stubborn inflation level with the existing circulating money has tied down the hands of the central bank from increasing any more amount of money in circulation through the instruments available with them. With less money in the market, banks charge a higher interest rate on loans, which has repercussion on every other aspect of the economy as people borrow less and invest less. The reduced economic activity due to the this and the other aforesaid factors makes the growth rate of India slow down significantly.
Food shortage and higher crude oil prices in the world has had a strong impact on all the developing economies, it has made it difficult to rein in the inflation and keep it under acceptable levels. As the central bank (RBI) cannot come up with a more lenient monetary policy, there is a need to find fresh sources of investment and attract the FIIs and FDIs back into the country.The Retail sector has done decently well in the recent past with investment from the private sector. It has generated significant jobs as well as contributed towards GDP. Indian consumers have shown that they can spend and are even ready to spend a bit higher than usual for the convenience these retail outlets provide them. Importantly the Indian middle class is ready to pay for the experience and convenience along with the price of the commodity thus making the retail sector a lucrative business to be in. The Middle class is also expanding and the penetration levels of retail outlets is way below the expected levels even in the major cities, which means there is sufficient scope for new players and further expansion. When Private players were allowed to invest in retail outlets fear was expressed that the roadside Stores would be history or the vegetable markets which my generation has grown up seeing would vanish. After some 5 years of Private players in retail sector, neither have the road side stores died out nor have the vegetable markets vanished, both have carved a niche for themselves and a method to co-exist.
With investment from FDIs within the boundaries specified by the government will help to further extend the good work that local private players have done. It would provide benefits to the consumers and also pave way for innovative products from the local entrepreneurs. Like any other sector, FDI in retail has it’s own positives and negatives. Studies done in developed countries indicate no significant effect on employment or better returns to farmers, it also indicates that inspite of better technology and supply chain practices there is a food shortage in the world. Yet China’s success in allowing FDI in retail and helping large number of people to move out of poverty is for all of us to see and learn from. Also the technological know how that foreign players could bring in could help in improving infrastructure related to cold storage and supply chain to reduce waste and prevent food shortages within the country. India often sees significant food crops getting destroyed or wasted due to lack of proper storage or logistics.
The benefits of FDI in Retail would be
– Stem the reverse flow of $
– Stem the depreciation of Rupee [More supply of $]
– Positive effect on Food Shortage [cold storage, supply chain practices, infrastructural improvement]
– Positive effect on Inflation [strong Rupee and better food supply will bring down cost]
– Lower inflation gives leeway to RBI to ease their Monetary Policy
– Boosts Economic Environment
– Boost Sentiments of the Corporates
– Generate new Jobs
– Option for innovative products developed locally – encourage entrepreneurs
Inspite of all the listed positives, we must understand that FDI in retail is not a Panacea. Other policy measures would still be required to sustain growth and alleviate poverty. Measures need to be taken to prevent factors that depreciates India’s value as an Investment Destination. Corruption is one big factor that needs to be dealt with. It’s impact on the Telecom sector is quite well known. Telecom Industry was a booming industry in India and had tremendous pace of growth, it also attracted large international players from across the world to invest and set shop. It was one industry that was growing and yet the cost per call was decreasing constantly. This was due to the increasing subscriber base and the tremendous potential that an ever expanding middle class and rapid urbanisation held . Yet the 2G Scam and the follow up taxation policies in the sector has slowed down the growth of the industry. These all incidents hurt the investors sentiments and they feel less confident in dealing with the government and agreeing to any clauses. Coalgate scandal is just another case in the point. We need to learn from those mistakes and deal with the FDI in Retail or Aviation or any other industry with newer wisdom.
Nonetheless, at the moment FDI in Retail is a much needed shot in the arm for the Indian Economy. India has always provided a dichotomy of view points on various matters. As a market it has also defied some of the predictions and speculations of economists and political analysts alike. I would hence request people to do their own critical analysis and thinking on any matter and not trust or believe the view points that are put up in public by various parties, whether the ruling party or the opposition, as they have their respective vested interests and political skulduggery to deal with.
Anyone interested to know more about what other countries are doing to ensure level playing ground between Foreign players and local players in retail must read:
The male of any species is entrusted with a basic instinct to mate and pro-create, the female of any species possess methods of attracting the right male for the purpose of mating so that the species could survive and sustain. In animals the act is rather mechanical and also indiscrete and promiscuous, some of the tribals around the world are also known for that. The so called civilised society, in a way, has been about, effort to curb and rein in the promiscuity involved in the act of pro-creation and give it a more decent form. While one must say that the promiscuity has been curbed or camouflaged to a large extent, however not much has been done to modify the basic instincts. What also doesn’t help is the civilised society’s obsession with the female form.
It is rather surprising element of a civilised society, while acts of sexual crime are condemned yet the obsession with the female form goes on unabated. One look at our literature, print media, audio-visual media, entertainment industry will show how strongly are we obsessed with it. Both classical and contemporary literature have played a strong role in fueling and sustaining this obsession, interesting description and newer ways of describing the female form has been appreciated. While the artistic expression, undoubtedly, has to be appreciated yet their indirect contribution to sustaining the obsession with female form of the society as a whole cannot be ignored. Same could be said about the other forms of media who have constantly fueled it and do so even to the current day.
The obsession of the male towards the subject could be said to be conscious lecherousness and unconscious attempt to find appropriate partner, the female obsession towards the matter is out of insecurity, inadequacy or opportunity. The extent to which the female form is used repeatedly and with uncurbed exaggeration that it has a constant presence in the unconscious of everyone of the members of the civilised society. So, on one hand the male basic instinct has not changed and on the other hand the obsession with the female form continues unabated, both of this put together form a potent combination and a festering ground for heinous crime and oppression. No wonder from time to time we see the unwanted “Dress Codes” being specified for female students, professionals or citizens and that is considered as one of the reasons for the crime.
I feel instigated to say that civilised society in the attempt to curb promiscuity has let loose a demon that it didn’t know existed. So much so that I would not hesitate to state that all of the males of a civilised society is a potential rapist, though the one that actually trips the rope is the convict and if the charges are proved the whole society doesn’t spare in making the person feel unwanted and a bane to the human life. Yet the trap was already set and the act played out intelligently to hide the real motive.
Unless society collectively learns to get rid of this obsession of the female form and the male basic instinct to pro-create could be transformed, I would say that we haven’t yet seen the end of the heinous crimes against woman no matter how much modern and technologically advanced world we might consider ourselves to be. I understand that Individuals make the society but after the society is formed the society now starts defining the individual. So change has to come from individuals and slowly propagate to cover the whole society.
Coke Studio India season 1 had Leslie Lewis as it’s producer. Leslie Lewis gained popularity at a national level through albums with Asha Bhonsle (Rahul and I) and Hariharan (Colonial Cousin) and has been releasing albums by adding western beats to old film songs. His orientation is more pop and western style and I think his exposure to other forms of Indian music is limited. This showed up glaringly in the music produced by CS India in season 1. Lot of people found it way below the levels reached by CS Pakistan and some songs fell flat on their face. Yet to be fair, songs produced with Shankar Mahadevan last season were the face saver for CS India, though I think that the Music arrangement skills of Shankar himself helped there. I give, what was as per me, one the best songs of Season 1.
Coke Studio in Pakistan, has became synonymous with their culture, while it is well appreciated by a wide audience in India (primarily north), it is also hoped that Coke Studio India could stand-up and reach the levels that we believe CS Pakistan has reached. Understanding the short comings of Season 1looks like CS India decided to make changes in the production team. This time they the music is being produced by young Amit Trivedi. Though I haven’t followed every episode of CS India or heard much about the music produced by Amit previously, yet I have had the couple of songs I had a chance to view, I must say, indicate a marked improvement over what we had last year. Here I give you two of the songs that I thought did justice to the folk music that it was trying to enhance. Folk music itself is quite complete and mesmerizing in itself, so it is the prerogative of the western or pop beats being introduced to ensure that it enhances the feel of the original music and not subdue or overshadow it. I present to you two songs that I think did just that and leave a wonderful feeling and a hope that it will get better than this
While India was slow to catch up with the process of Industrialisation, however it was not slow in adopting Bandh (Strike Action) as a useful protest mechanism. Bandh became a strong weapon of Political protest during the struggle for Independence, and Mahatma Gandhi used it to the fullest extent during the Non-Co-operation movement. The objective of bandh those days was to stifle economic activity and also to indicate that one can’t oppress people of a country to do what it doesn’t want to. It had it’s effect and definitely made the then British Government take notice of such protests. Though the point to remember is, even those days response to Bandh was never 100%. India those days was divided between ‘British Controlled Presidencies’ and ‘Princely states’ and Princely states had their own method of functioning quite different than rest of the country.
Post Independence one would have thought that, the need for such weapons of protest like bandh wouldn’t have a place (except for the Labor/Working class) against a Government that was supposed to be By the, Of the and For the People of India. Yet, Bandhs continue to dominate the political landscape even till date and remains one of the key weapons of protest for the opposition parties against the existing Government and their policies, whether in the state or at the Centre. Some political parties are notorious for indiscretely call of bandhs without even considering the effectiveness, political mileage or effect on common man.
I think that Bandh as a form of protest or as a form of civil disobedience has outlived it’s expiry date. It’s another example of how the Indian political class is losing touch with the common man they claim to represent. Also Bandhs are no longer democratic in nature. Today when parties call for a bandh they also ensure that it is a success by various means, as it effects their political reputation. So it is not a question of ideology or allowing scope for ideological disagreement. This Intolerance towards the alternate voice is dangerously for a democracy. Today when bandhs are called by any party this is what transpires among the ordinary common man
- Firstly people check which parties are calling the bandh
- Next they check whether they are in a state where any of the parties calling the bandh is the ruling party or has significant clout
- If the party is ruling party or has clout in the state then the response is to stay indoors to avoid trouble
- Organisations indicate or instruct their people to stay away from office or work from home or reach office before the bandh starts and leave after it is over
So Bandhs might appear to be successful at the outset, but in the truest of sense neither does it help increasing the reputation of the Parties calling it, nor does it reflect the support of the people for the cause. On the contrary it affects the daily wage workers, it affects economic transactions causing losses to the Government exchequer and any attempts to make up for the losses would mean either higher prices or higher taxes which in a way hurts the common man back again.
It is interesting to note here that, The Constitution of India makes no mention of Bandh/Strike and the Supreme Court of India had banned Bandhs as a form of political protests in the late 90s. Yet our political class with least regards to the Constitution or the rule of the Land continue to call bandhs indiscreetly. Yes under trade union laws the Working class is allowed to call for a Strike against oppression of the Proprietors of an company, however we have seen it also often gets misused as, trade unions also have political backing.
Critical study of the Indian political system carried out by people outside of India has led it to be called a Dysfunctional Democracy for various reasons, this even while we continue to be proud of being the largest democracy of the world. I am not surprised with the findings of such critical studies; Where there is paranoia about the alternate voice or intolerance towards any hint of disagreement, there democracy is murdered. While a lot of thinking is required to get the democratic structure back on track, at the minimal, we should look at immediately stopping archaic and self defeatist methods of Political Protest