Bihar Chief Minister Nitish Kumar today said it is not possible to accept FDI in multi-brand retail in the state “as it is converse to policy of growth with justice”.
“It is our considered view that as the domestic retailing is underdeveloped and is in a nascent stage,it is important that this sector is allowed to grow and consolidate first before any liberalisation,” he said in a letter to Union Minister of Commerce,Industry and Textile Anand Sharma.
“We have to be very cautious and careful because at stake is the stablity of vital pillars of our economy-retailing,agriculture and manufacturing,” Kumar said.
It needs to be highlighted that the negative effects of FDI in retail in terms of job loss,displacement of small retailers and undermining of traditional supply chains by the monopoly power of multinational retailers far outweigh the professed benefits,the Chief Minister said.
“Therefore,the case for opening up of the retail sector to FDI does not seem to be justifiable and is converse to our policy of growth with justice. Thus,in view of the above it is not possible for us to accept FDI in retail in our state,” he said.
Finally in the interest of farmers,retailers and consumers,the central government should reconsider its decision for liberalisation of FDI policy in multi-brand retail,he said.
The Chief Minister said that he had received Sharma’s letter regarding the union cabinet’s decision for liberalisation of the Foreign Direct investment (FDI) policy in multi brand retail.
The policy seeks to transform rural economy and unlock supply chain efficiencies in the agri-business,Kumar said,adding “though the stated objective of the policy cannot be disputed we have serious apprehensions and reservations on the path chosen to achieve these objectives”.
He said the premise that opening up FDI in multi-brand retail will bring much needed investment,technologies and efficiencies to unlock the true potential of the agriculture value chain is far fetched.
On the contrary the liberalisation of the FDI in multi-brand retail would jeopardise the unorganised retail sector and adversely affect the small retailers,farmers and consumers,he said.
It will give rise to monopolies of large corporate houses which can adversely affect the pricing and availability of goods,he said.
The global retailers through their retail chains will set up backend “captive infrastructure” meant for their own business operations and not openly available for the farmers,consumers and public at large.
Therefore,the claim that MNCs would dramatically transform and modernise the food supply chain in India is nothing but half-truth,he said.
“We must accept that broad based modernisation of the food supply chain in a country of our size cannot be brought about by MNC retailers,who are driven by their narrow business interests,” he said.
There is massive scope for expanding storage,warehousing and cold chain infrastructure in the public and cooperative sectors in India and improving their management.
Allowing FDI in retail cannot be a substitute for positive public intervention and desired level of public investment in this crucial area,the Chief Minister contended.
Kumar in his letter said the retail sector in India is one of the major employment providers after agriculture and permitting FDI in this sector can displace the unorganised retailers leading to loss of livelihood.
He said the Indian retailers have yet to consolidate their position and given their insecure state,”there is a serious apprehension that the flow of organized foreign capital with its associated baggage of infrastructure,bulging financial power,professional managerial staffs etc,would sound the death knell for the Indian retailing sector”,Kumar said.
The entry of large global retailers would slowly but surely marginalize domestic retailers and in the long run kill local shops and millions of jobs. “We must accept that unorganized retailing in India is a means of livelihood and not of profit”,Kumar pointed out.
“It disguises the abysmal nature of unemployment in the country. Indian agriculture has for long been a source of livelihood for the teeming millions and during the lean season even the productive farmer finds himself unemployed”.
Since the true potential of manufacturing sector has not been harnessed,the retaling sector helps in absorbing these shocks proving safety-net and opportunities to the superfluous labour to sustain a living,he said.
The inflow of FDI in retailing will restrict the labour absorbing capacity of the retailing sector since the foreign retailing giants will employ labour saving machinery and know how both to add value to their service as well as to enhance their profit,he said.
He said this will hike the rate of both unemployment and underemployment.
While making lofty claims of huge employment opportunities through FDI in retail,one tends to conveniently overlook the existing capacity of the unorganised retail to provide means
of livelihood to millions in our country,the Chief Minister said.
Therefore the need is to protect,strengthen and modernise traditional system of small traders through institutional credit,he urged.
Kumar said it was being claimed that the elimination of intermediaries and direct procurement by the MNCs would secure better prices for the farmers. The fact is that the giant retailers would have far greater buyer power vis-a-vis the farmers compared to the existing intermediaries.
The entry of giant MNCs into agriculture procurement would further worsen the problems for the farmers because as against today,where several traders have to compete with each
other in order to buy the farmer’s produce,there will be a single buyer in the case of the MNCs. This will bring about greater dependence of farmers on the MNCs and they would be vulnerable to exploitation,he said.
The overwhelming majority of farmers in India are small and marginal farmers and the problems faced by them today mainly relates to rising input costs,unremunerated prices and lack of access to institutional credit,technology and markets. “What they need is enhanced state support and
intervention,” he said.
He said the mandatory stipulation of 30 per cent sourcing from small industries is also misleading and untenable. Firstly,it doesn’t specify whether it is India specific or can be sourced from any where in the world.
Secondly,having joined WTO,this protective sourcing stipulation cannot be implemented without contradicting the provision which accords for national treatment to products between contracting parties,as mandated by GATT,the Chief Minister said.