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
    Jan 15, 2014 at 5:18 am
    Kejriwal is another Mamta in making.
  2. R
    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....
  3. A
    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
  4. A
    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
  5. A
    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...
  6. O
    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.
  7. I
    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!
  8. I
    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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