AAP’s misjudgement

On FDI in retail, its government shows a lack of understanding of what benefits aam aadmi the most.

Updated: January 15, 2014 12:29 am
With modern retailing, on the other hand, the shareholders could be located anywhere, and the stores would hire workers in Delhi.  PTI With modern retailing, on the other hand, the shareholders could be located anywhere, and the stores would hire workers in Delhi. PTI

On FDI in retail, its government shows a lack of understanding of what benefits aam aadmi the most.

The AAP government in Delhi has decided to block the entry of foreign multibrand retailing, on the grounds that this would induce job loss. The argument underlying this decision is flawed. First, modern multibrand retailing actually generates more jobs for the working class than conventional Indian mom-and-pop retailing, under which family members of the owner work in the shop.

With modern retailing, on the other hand, the shareholders could be located anywhere, and the stores would hire workers in Delhi. Then, typically, modern stores work two or three shifts a day, and thus generate much more employment per store when compared with family-run shops. Further, employment in modern retailing is generally more meritocratic in nature: the persons employed in the store do not have to be relatives of its owners. Second, the AAP’s decision does not kill modern retailing in Delhi, it only restricts it to Indian companies. It is not clear why the shareholders of Indian retail firms should be favoured over those of global retailing firms, particularly when the latter possess a superior technology that is good for consumers and workers.

The AAP may also have failed to gauge the real impact of modern multibrand retailing on voters. A more sophisticated understanding of politics would focus on voters at large and not obsess about the interests of either owners or workers. The real impact of organised retailing is on consumers. And here, the international evidence shows, for instance, that the poor are the biggest gainers from Walmart. Walmart’s remarkable global optimisation of production, inventory and transportation yields low prices for mass produced products that matter the most to the poor. Indeed, the elites in the US look down upon shopping at Walmart. If the AAP government truly aims to cater to the interests of the aam aadmi of Delhi, it would lay out the red carpet for Walmart and its ilk.

The AAP’s decision on multibrand retailing may be seen as yet another illustration of the gap between the politics of protest that has brought the party into prominence and the complex business of running a government which calls for the capacity to balance the specific interests with the general, the short term concerns with those that are likely to endure in the longer run. The decision may also have an unfortunate cascading effect. Gujarat chief minister and the BJP’s prime ministerial candidate, Narendra Modi, has already said that he opposes FDI in multibrand retail. It would be unfortunate if other parties also take their cue from these populist stances.

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  1. B
    BackToVedas
    Jan 15, 2014 at 5:18 am
    Kejriwal is another Mamta in making.
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    1. R
      Rajiv
      Jan 16, 2014 at 5:41 pm
      Lets take first thing first, FDI is not the permanent solution for INDIA woes, just think about it. Its a temporary solution to get some inflow of dollars to reduce the trade deficit. But now see in the longer perspective, the foreign companies will surely invest hefty amount but they are actually doing it for profit. That means at last they would be earning the money by selling our goods to us only and earning huge margins in between. So after 10 years or so, they would have taken back whatever they have invested and they start taking more money from us. This similar has happened to the bs like Nike and other clothes bs. Just think about it....
      Reply
      1. A
        Anil
        Jan 15, 2014 at 6:06 am
        He can only do short term populist reform thats too on paper.............So far nothing happen on ground. No knowledge of how to run....All the decision he has taken without approval in embly can be challenge in the court but both congress & BJP is playing with him by not filling any PIL as they want him to commit more mistakes, why not politics is a war...the more you trained the less you bleed....But dear kejriwal is having national ambition...reality is that he is crawling so far in Delhi. Sir first get trained then take decisions
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          Anoop Joseph
          Jan 15, 2014 at 5:13 am
          Looks like the biggies are alarmed by AAP's move, and a paid news. Of course the retail giants can give jobs, since India has cheap labour available. We al are educated enough to see what is actually happening. The income of these retail giants are saturated now, and they want more income, and we, the people of India, should not entertain it. The Congi ministers have already got their share from the companies, so obviously they will support thier entry. Keep going AAP!!ps: I'm not an AAP member, but I do like their policies, which resonates with my principles
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          1. A
            alpine
            Jan 15, 2014 at 9:39 am
            AAP IS BAAP KI BAAP.... SO, BEWARE OF AAP! Jai Ho! Sheila Govt. was far far better than this AAP...
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            1. O
              omkars
              Jan 16, 2014 at 1:44 am
              India desperately needs investment in FDI in multi-b retail. Ultimately,big corpoations create more jobs and the products are superior because they have a retion at stake. McDonalds or Pizza Hut didnot drive Rehri-wala out of business. Mc Donalds in Punjab pay more than any business in taxes. A huge amount of food goes waste for lack of food processing units.Food served outside home is of suspect quality. Aam Admi is afraid to eat out for fear of Delhi Belly. Once we have faith in the quality of food,more people will eat out which means more jobs and more tax revenues. This is what a government is supposed to do, -facilitate business not obstruct. India is one of the most difficult countries to start business. We need jobs and not the ministers who think they have monoply over truth and they know better than anyone else. Indeed,if AAP flops,it will be because of its dumb economic policies.
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                Inasu Chirayath
                Jan 15, 2014 at 12:16 pm
                who ever wrote this article has no clue on FDI. A common man would never benefit from any sort of FDI in India unless these companies procure 50% of their commodities from India which they would never agree and so AAP's decision is right!
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                1. I
                  indian
                  Jan 15, 2014 at 5:34 am
                  AAP has got it wrong - the small businessmen or shopkeepers do not pay their taxes, they flout munil and labour laws and overall, are bad citizens of the country. Through their ociations and forums, they also act against consumer interest by not negotiating on MRP, charging on card payments etc. They are big drivers of the 'cash' economy and hence, hand-in-glove with netas and babus.
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                  1. I
                    indian
                    Jan 16, 2014 at 3:26 am
                    Show me mom&pop shops which pay their taxes, which follow labour laws in employing helps, which follow munil laws etc. Show me mom&pop shops which offer discounts on MRP to consumers. Why protect people who are not even good citizens ? Besides, it is ridiculous to believe that a few hundred shops of retail chains can kill off the entire sector. It is even more presumptuous that what mom&pop shops sell are useful to the consumer, whereas retail chains sell 'cheap items' 'which we do not need' - if you dont need, dont buy. There are numerous examples of MNCs across sectors which tried to do business India, have failed and quit the country - if it happens to Walmart, Tesco and others, so be it. Dont also underestimate the adaptation skills of the mom&pop shops - they have kept up with the changing technologies (witness the rise and death of video libraries, payment collections, etc), changing consumer tastes - witness the death of udipi eateries in mumbai, but the spread of shops selling sweatmeats; they can do the same with compeion too. Mom&pop shops are run by traditional business-minded people who have a great sense of survival.
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                    1. I
                      India+
                      Jan 15, 2014 at 10:10 am
                      A party that wants to live on votebank by appeat policies, freebies, and governing from the rooftop cannot take India forward. At best it can make for a street theatre taking India backwards for sometime, till people wake up to the real challenges.
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                      1. I
                        Informed
                        Jan 16, 2014 at 4:01 pm
                        Its not patriotic, its anti-national communist move. By reversing policy decisions, kejriwal wants to make sure no businesses run in India and no foreign business will trust the indians any more. I do not support FDI in retail, but I do not support reversing existing policies, its a retro step and a shame.
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                        1. I
                          Informed
                          Jan 15, 2014 at 4:07 am
                          Your argument is not even tangentially touching the multiple core issue. One, movement of money to handful of foreign owners at the expense of revenues of small scale retailers' survived by families. Two, the quality of jobs in terms of earnability, ries paid by big retailers hardly matches what mom-pop earn from their shops. A comfortable life of a family becomes a daytoday fight if the man has to close his shop and work in the new retail mammoth. Three, the parity between what is invested from outside and what is taken outside as margin. The crores of margin that is currently getting distributed between mom-pop families now will lie in the bank accounts of Walton and Cohen and his executives who are already filthy rich. Four, the impact on the local manufacturing sector when these retailers start importing from China, which can kill the local price point. I am sure you will bring the Indian IT services to US, but thats what US has to worry, we need to worry about our interests here. US is a consumer market, we are a producing market. Five, simply we do not need so many cheap items that walmarts and tescos sell. One of the main cultural change it will bring is, it will make Indians buy useless things like western cultures. Our cultural foundation has been built on focusing on needs than the wants. This will be systematically shattered leading to total financial crisis like the US debt situation. You may get interim benefits of large scale useless buying, but not good for countries like India.
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                          1. I
                            Informed
                            Jan 15, 2014 at 4:12 am
                            Your argument is not even tangentially touching the multiple core issue. One, movement of money to handful of foreign owners at the expense of revenues of small scale retailers' survived by families. Two, the quality of jobs in terms of earnability, ries paid by big retailers hardly matches what mom-pop earn from their shops. A comfortable life of a family becomes a daytoday fight if the man has to close his shop and work in the new retail mammoth. Three, the parity between what is invested from outside and what is taken outside as margin. The crores of margin that is currently getting distributed between mom-pop families now will lie in the bank accounts of Walton and Cohen and his executives who are already ultra rich. Four, the impact on the local manufacturing sector when these retailers start importing from China, which can kill the local price point. I am sure you will bring the Indian IT services to US, but thats what US has to worry, we need to worry about our interests here. US is a consumer market, we are a producing market. Five, simply we do not need so many cheap items that walmarts and tescos sell. One of the main cultural change it will bring is, it will make Indians buy useless things like western cultures. Our cultural foundation has been built on focusing on needs than the wants. This will be systematically shattered leading to total financial crisis like the US debt situation. You may get interim benefits of large scale useless buying, but not good for countries like India.
                            Reply
                            1. I
                              Informed
                              Jan 15, 2014 at 4:13 am
                              Your argument is not even tangentially touching the multiple core issues. One, movement of money to handful of foreign owners at the expense of revenues of small scale retailers' survived by families. Two, the quality of jobs in terms of earnability, ries paid by big retailers hardly matches what mom-pop earn from their shops. A comfortable life of a family becomes a daytoday fight if the man has to close his shop and work in the new retail mammoth. Three, the parity between what is invested from outside and what is taken outside as margin. The crores of margin that is currently getting distributed between mom-pop families now will lie in the bank accounts of Walton and Cohen and his executives who are already ultra rich. Four, the impact on the local manufacturing sector when these retailers start importing from China, which can kill the local price point. I am sure you will bring the Indian IT services to US, but thats what US has to worry, we need to worry about our interests here. US is a consumer market, we are a producing market. Five, simply we do not need so many cheap items that walmarts and tescos sell. One of the main cultural change it will bring is, it will make Indians buy useless things like western cultures. Our cultural foundation has been built on focusing on needs than the wants. This will be systematically shattered leading to total financial crisis like the US debt situation. You may get interim benefits of large scale useless buying, but not good for countries like India.
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                              1. I
                                Informed
                                Jan 16, 2014 at 4:06 pm
                                if there are lines to big bazaars and reliances, why do you need Walmart and Tesco? why not as a supporter of AAP, you also be an activist and send letters to every indian asking them to shop in Big bazaars and reliances.AAP is doing a big mistake by reversing an existing policy similar to indian govt taxing vodophone on a retrospective move. These are illogical and untrustworthy moves with no sense of integrity. You can make new policy decisions against FDI in retail, but you cannot retrospectively change a policy and put all the current investors in jeopardy.You seem to be holding too much hate towards banias, I don't care about your caste affiliations, but I think about a family that is surviving from his shops instead of sending profits overseas to USA. I am ok with anything as long as the profits remain in India, no FDI.
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                                1. I
                                  Indian
                                  Jan 15, 2014 at 8:19 am
                                  Walmart and other COs are already opposing the condition of mandatory local procurement of 30%. Last week they were not even agreeing for 15%.How it is going to benefit the Country by importing everything from outside and selling here ? and the Commerce Minister talks about the Cold Chain that will be coming up.Are we people fools to belive that, it benefits Indian Industry especially the MSMEs and Farmers ?
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                                  1. M
                                    Manoj Agarwal
                                    Jan 15, 2014 at 4:59 am
                                    A very flawed article with very shallow understanding of issues.. This is as pedestrian and superfluous as it can get...I'm strict opponent of AAP but I believe, multi b retail is the 2nd floor of the building.. don't try to make it first..
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                                    1. K
                                      Kejriwal correct
                                      Jan 15, 2014 at 9:06 am
                                      While I am a supporter of AAP (and BJP is against retail FDI as well - understandably as it's core support base is bania cl and dukaandars ) here is a basic summary of what retail reforms (including FDI ) would mean - Dukaandars (bania ki dukaan wala) loot people as they always sell as MRP while the public remains and doesn't realise MRP is the maximum allowed price not the normal price. at MaxRP the bania gets Max profit and consumer goes home looted and happily voting for BJP again- Large format retail always favour the consumer. Why? have you ever seen why people are in long lines at Big Bazaars, Easy Days, Reliance and More shops? Have you ever wondered how these shops sell 'ek ke saath ek free' deals? the answer is 'Economies of scale'. or big purchasing by big stores equals lower costs to them and hence lower prices to consumers. Simple. aam admi gains.- Why allowing 100% FDI or freeing constraints is important. Look at this if Walmart or anyone can be allowed to source stuff from farmers directly or producers like Hindustan Lever directly. that helps the farmers, the ordinary people producing this and everyone. It hurts middlemen, dalaals, people who d things drivings costs upward artificially and it also helps them get great discounted pricing. Consumers gain as big retailers share the benefit with end users. End users and farmers (both ordinary people) gain. Dalaals and middlemen and local goondas lose. SimpleWhy BJP is against retail reforms - they need to protect bania shops who vote for them at the cost of ordinary people's interest.What AAP is against retail reforms - they know common man is uneducated and congress and bjp have propogated the lie that the reforms will hurt ordinary people. Maybe AAP leaders themelves are among these s who do not understand the relaity that retail reforms will create huge new jobs, spur the economy and benefit common consumer. Win win and win. Yet AAP is against as they think socialist moves help generate support from ordinary people. Well they have two choices- Either get an education (if they lack it)- Or stop the supporting attack on retail reforms simply to get votes. (that is not the USP of AAP. USP of AAP is honesty)either way I will vote for AAP but for the sake of common man and his interest I hope they understand retail reforms and FDI is the simplest way to free up retail sector from the clutches of bania, goondas, middlemen, dalaals and politicians and help the common man where it helps most - inflation. Lower cost equals happy aam aadmi. Sad but AAP doesn't understand this.
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                                      1. R
                                        Rohan
                                        Jan 14, 2014 at 8:18 pm
                                        I think Media is responsible for justifying all gimmicks of AAp in the name of they being new. Government is not on the job training.Moreso AAP is doing alll only with the eye on Lok Sabha polls and nothing else. How is that media is not exposing the real intentions of them being in a hurry. It is all immaturity on the part of AAP. We cannot have this immaturity for Central government and media must advise AAp to not contest Lok Sabha Elections. One of the reason of AAP taking impulsive decisions is due to their willing ness to contest Lok Sabha election. In a more normal atmosphere they would have acted more maturely . Media must create an opinion against AAP contesting Lok Sabha elections for the sake of better governance of Delhi.
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                                        1. R
                                          Ram Prasad
                                          Jan 15, 2014 at 7:08 am
                                          What would one expect from AAP whose worldview is limited to dismembering India, throwing in more subsidies and reserving Delhi for only Delhiites...Most of the points the author makes would be meaningless to their jingoism and nautanki.
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                                          1. N
                                            Natalia P
                                            Jan 15, 2014 at 11:47 am
                                            AAP need to start taking advice on economics and policy from Anklesaria Swaminathan Aiyyar on how to go about introducing FDI in retail in India.
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