Implausible villain, this

Second, MNCs bring about an improvement in the quality of consumer goods. Observe howdramatically the entry of Sony, Akai and Samsung has improved the quality of hi-fi stereo systems, TV sets and VCRs available in India.Third, MNC-driven competition lowers prices, especially of lower-quality goods, benefiting the average Indian household. The entry of Louis Phillipe, Levi Strauss and Benetton in the garments industry has reduced the inflation-adjusted prices of local-made shirts, making them more affordable to a larger segment of the population.

Fourth, multinational entry provides consumers with a larger variety to choose from. In two-wheelers there are the joint ventures between TVS-Suzuki, Hero-Honda, and Rajdoot-Yamaha. In pharmaceuticals, there are Pfizer and Ceiba Geigy. In eye-care we can get the world8217;s best from firms like Bausch amp; Lomb. The personal and office computer choice has expanded with the advent of Hewlett Packard and Digital. The list is endless.

Over the years Indian consumers have had many of their needs supplied by MNCs. They occupy such a central place in our livesthat we forget they come from them. This is true of Swiss MNC Nestle and of Anglo-Dutch Unilever and its subsidiary Hindustan Lever, which produces soaps and detergents for lakhs of Indian households. For generations Dutch giant Philips has met our electrical needs from radios to bulbs. In cosmetics, we have Pond8217;s. In pharmaceuticals, ev-eryday drugs have been supplied by firms such as Swiss MNC Ceiba Geigy. There are, of course, Colgate Pal-molive and Cadbury8217;s.

Domestic consumer goods firms obviously do not want MNCs in their industry. Foreign competition means an erosion of monopoly power, loss of market share, lower prices all of which translates into lower profits. Since the least efficient firms are the worst affected they have a big incentive to get together to pressure the government to restrict foreign entry.

What about consumers? Suppose the government wishes to raise Rs 1 crore in taxes. It can either tax each Indian one paisa the population being about 100 crore or a hundred companies Rs 1lakh each. Now since the companies will each lose a lot more money, and since they number only a hundred, they will get together and pressure the government to tax everyone and not just them. The Indian population, on the other hand, being large, diverse, and uncoordinated, and paying only one paisa each, has few means or incentives to apply pressure. The tax will fall on the entire population.

Similar is the case with producers and consumers with regard to foreign direct investment FDI in consumer goods. Producers being small in number, and each facing a large loss, are able to co-ordinate themselves and pressure the government to restrict MNCs. Consumers being far more numerous and widespread, and each facing relatively small benefits, are unable to come together to voice their interests. How would a political party behave? Clearly, in favour of the producers who lobby hard and also fund the party campaign. It is no surprise that the BJP panders to big business in its enthusiasm for labelling theconsumer goods industry the non-core sector!After five decades of suppressing consumer demands and needs in the name of 8220;self-sufficiency,8221;as a new generation starts enjoying the fruits of globalisation, we realise the bankruptcy of the ideas of our socialist past.

As the ex-Communist world from Poland and the Czech Republic to Russia and China wakes up to its economic follies, the interests of the consumer get a hitherto unimaginable importance. As they liberalise their economies, their peoples have the chance to consume quality products at world prices. It is time we dispensed with pre-conceived notions about FDI and multinationals too. Governments and parties must give weight to consumer aspirations. For the consumer, the entry of MNCs in the consumer goods industry leads to unambiguous improvements in living standards through competition, lower prices, better quality, and more variety.

If the problem is market domination by MNCs 8212; as in the oft-repeated example of the soft drinks industry,cornered by Coke and Pepsi 8212; the answer lies in regulation, not restricted entry. To ensure that prices reflect the value of a product, independent regulatory bodies should be put in place to ensure fair competition. Monopolies, domestic or multinational, should be handled through regulation, not by creating barriers to entry. It makes no sense to let domestic monopolies flourish and have shoddy goods at higher prices in the name of preventing market domination by MNCs.

The only way to appraise the value of MNCs in the consumer goods sector is a hard-nosed cost-benefit analysis. So far the rhetoric has been biased in favour of the cost side, that is, domestic producers. It is incumbent upon the government to look at both the costs and benefits of foreign participation, consumer welfare being an extremely important but not the sole other consideration. Even if we do not consider benefits such as foreign capital, technology, jobs, management and other skills, the consumer8217;s interests alone are compellingenough to put into serious doubt the validity of the BJP8217;s assertion that India can do without MNCs in its consumer goods industry. The sooner it starts giving adequate weightage to consumer interests the better it will be at establishing guidelines and the right regulatory framework for FDI. The benefits will accrue to the nation.

The writer is a research scholar at the London School of Economics