Out of The Frying Pan and Into The Fire

The top U.S. magazine, “The Times” dubbed the Indian prime minister as “underachiever”, reluctant to take politically-tough, but economically-critical decisions. The slowing growth of India’s economy is fully known and criticized domestically as well as internationally. Standard & Poor has already warned India that the country could become the first among the BRICS economies to lose its investment-grade status.

Ugh…..stop rubbing it in, put a break to all your jibes! We have been holding it up for a long time, but our government comes back in action, true reforms are back.

The government today relaxed Foreign Direct Investment (FDI) in aviation, multi-brand retail, power exchanges and broadcast services – key economic reforms, that have been delayed for months due to political reasons, especially, blackmailing by opposition parties, and protests by some of Congress’s own allies.

For opposition parties and government-critics, this should be news worth welcoming. The government is letting foreign businessmen handle the part of our hard-hit economy. We have been criticizing the Congress for handling the economy immorally. So be it. Let foreign brands control it. We have been copying and borrowing from other countries anyway, whether its western technology or culture…..they have never let us down. Even when industrialization and reforms such as opening the economy were introduced in India, there were protests. Can we now imagine an India, secluded from globalization and ignorant to industrialisation?

It would definitely help growers to receive a larger percentage of the final selling price of their produce, and shorten the chain from farm to fork. Traders and middlemen squeeze them dry. These traders procure goods at lower cost from farmers, whereas sell the same at expensive rates, after processing and packing them. And since they will bring high-end preservative technology such as storage refrigerators; grains, which are rotting in India, would come to some use.

For consumers too, it would expose them to world-quality products, including clothes, eatables and what not.

Presently, the situation is too adverse. I go to a shop, I want the two-litre Thums up, but I end up buying a half litre bottle of Pepsi, because the shopkeeper doesn’t have it. So, I had no choice but to compromise with size as well as quality. FDI in the retail sector, therefore would give Indian consumers a variety of choices, and better quality at better prices.

Holding that FDI in retail will harm farmers and small traders, Uttar Pradesh Chief Minister Akhilesh Yadav had said, any move facilitating entry of multi-national firms in the sector would be opposed. Well, Akhilesh is the same person, who proposed the idea to close malls in his state by 7 p.m.

And on a serious note, one should consider the fact that Wal-Mart outlets and other supermarkets do not immediately and directly affect the small shopkeepers. Such kiosks are small, so they keep small stuff. They do their small earning. Not that we go to Wal-Mart just to buy a packet of matchsticks. Moreover, a shop next-door would never lose its utility; the proximity and the personal touch will never go out of fashion.

The government has, however, left the option to invite multi-brand retail on the states. According to the clause, “Retail sales outlets maybe set up in those states which have agreed, or agree in the future to allow FDI in multi-brand retail under this policy. This is an enabling clause. This means that no FDI in retail will be allowed in any state, unless the state explicitly agrees to come on board and agree to the policy.” It’s a very flexible idea as state governments can chose what is good for their state, and thus, mind their own business.

But the opposition’s job is to oppose it. They will again set one or two Carrefour stores on fire. But, as Congress party chief Sonia Gandhi recently said, “It’s their bread and butter.”

The government has also decided to allow foreign airlines to buy up to 49 percent stake in local Indian carriers, in a much-awaited policy move, that provides a potential lifeline to the country’s debt-laden airlines by opening up a fresh source of funding.

And as far as the aviation sector is concerned, barring a few airlines, this sector of economy is under serious crisis in India, and heavily debt-stricken. For instance, Kingfisher Airlines.  If Vijay Mallya is not ready to compromise with his Goa villa to pay off the debt, chances of the airline’s mere survival is impossible, let alone its revival. Air India is another example. Its situation has been badly devastated by wrongly-timed aircraft purchases and wrong-doings of its careless and immoral employees. Gulf-based carriers like Emirates could be the first foreign airlines to enter the Indian aviation sector.

India’s growth is insufficient to revive suddenly and miraculously, but at least, we’ll be in a better position with investment inflow, and growth may revive up a notch. We will not be able to take a steep jump from fire to ground, but at least the pan is safer.

The decision comes at the right time, when the economy is in a terribly egregious state. The foreign retail traders will give huge taxes in foreign currency; the Indian taxpayer’s money must have all been squandered as seen in the umpteen scams that have surfaced since the UPA-II regime.

The economy needs money inflow, foreign direct investment is nothing but the right option (given that the government uses this money wisely on development and growth of each and every sector).

But if such reforms keep getting opposed and rolled–back, the growth of the Indian economy would face a legendary downfall.

For those who think it’s a sort of economic colonisation, think again. Don’t defunct the already-still parliament. Let the bill pass and economy revive.

 

Sakshi Tirthani

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