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Why is the BJP opposed to FDI in retail?

September 27, 2012 23:08 IST

Why is the Bharatiya Janata Party opposed to FDI in retail? A day after promising to scrap FDI in retail, the BJP set about fine-tuning its line to ensure it did not fall foul of the middle-class.

Led by pro-reform Arun Jaitley, leader of opposition in Rajya Sabha, the BJP's mega conclave at Surajkund was told that 'the BJP is committed to economic reforms which are in national interest. Every change in not a reform. Some changes may end up hurting National Economic interests'.

As Jaitley sought to convince BJP delegates from all over the country, he listed 10 reasons why the BJP opposes the proposal for opening the multi-brand retail for several reasons, some of which are stated below:

1. In the first instance, manufacturing sector jobs will be lost in India. Domestic retail primarily sources locally. International structured retail sources internationally, leading to a drop in domestic manufacturing. This is all the more significant since India has not carried out significant manufacturing sector reforms.

2. International structured retail doesn't create additional retail jobs, it merely displaces existing jobs.

3. Only 18 per cent of the Indians are in structured jobs, 51 per cent of India's working population is self-employed. Along with agriculture, retail trade constitutes the largest fountain of self employed jobs. Structured international retail will be harmful to job creation in India.

4. Fragmented markets serve maximum interest much more than the consolidated markets. FDI in retail will consolidate the retail market and restrict only to end consumer interests.

In the first 12 years of opening retail for FDI, Thailand had witnessed 38 per cent of consumer market consolidate in favour of three large retailers.

5. The oft' quoted example of China is misconceived. China as a low cost economy is the predominant & the largest supplier to the big retailers. It can't be argued that goods manufactured in China will not be sold only in China.

6. International retailers proceed on the principle of 'buy cheap and sell costlier'. The initial low prices facilitated by the deep pockets result in eliminating competition and then raising prices.

7. It is a myth that the middlemen will be eliminated & the benefits will go to the producer/farmers. The benefits of elimination of middlemen goes to the retailer and not the farmers/producers.

The International Farm Companies Network data shows that in the US a milk producer gets 38% of every consumer dollar spend.

In the United Kingdom, this figure is 36 per cent. In India, riding on the strength of the cooperative movement, milk producers get 70 per cent of every rupee spent by the consumer. If farmers in the United States and UK have become prosperous due to retailers, why does the USor the European Union subsidise their farmers to the extent of US $400 billion annually? This is a staggering Rs 5,000-6,000 crore daily.

8. The argument that back-end operation such as cold chains and transport facility will benefit from international retailers is baseless. Building cold chain is not rocket science; why can't building cold chains, rural farm roads co-exist with Mahatma Gandhi National Rural Employment Guarantee Act.

9. Basic principals of trade negotiations have been ignored while making concessions to the US and the EU by agreeing to their proposal without any corresponding quid pro quo.

10. That an option has been given to the states to implement FDI policies is a myth being spread to mislead people. 'FDI investment' is a central subject and not a state subject.

International treaties on investment to which India is a party, require a 'national treatment'.

The deception is a trap for future litigations for the FDI to spread to the rest of the country. As Jaitley explained, 'reforms' are not what western powers define 'Reforms' to be. Let the western powers realise that the biggest reforms required are in:

  • Elimination of agricultural subsidy
  • Removal of restrains on outsourcing
  • Removal of unreasonable restriction on visas
  • Dismantling of unfair trade barriers on products of smaller economies.

The government had an option of large numbers of domestic economic reforms which are pending. There is a broad consensus on these reforms. The government has chosen to ignore these reforms but implemented a decision which will hurt national interest, Jaitley concluded.

A correspondent