The Cabinet decision approving 100 per cent foreign direct investment (FDI) for single-brand retail trading triggers apprehensions about another jolt to the economic sector.
For attracting foreign investors towards single brand retail trading, the mandatory requirement that at least 30 per cent of purchases for production and sale should be from India has also been lifted. Foreign companies will have 100 per cent freedom in single brand retail sale - no special sanction is now needed for starting outlets either. The government has also allowed foreign airlines to invest up to 49 per cent in Air India under approval route. Although majority of the shares would remain under the control of India, they would be given to private companies. Criticisms have been raised against Modi government that by agreeing to the longstanding demands of the multinational companies, it has pushed the unorganized and helpless traders in the country to competition with foreign companies in the area of single brand retail trading. Foreign companies might wage a ‘price war’ targeting the market. When the consumers are attracted by very low prices, the native traders would weaken gradually; then with all of the consumers in the hands of foreign companies, they would thus reap maximum profits by increasing the prices. The crisis is likely to deepen in the employment sector as well. When the traders and employees lose their jobs, the foreigners on the other hand, would try to cut down employees as much as possible through digital trading. Those in the field of Indian retail trading sector are already facing hardships due to demonetisation and introduction of Goods and Services Tax (GST). It is the duty of the government to protect them; but what happens now will only add insult to injury.
It is amusing to see the government claiming that the move was to revive the investment, income and employment sectors. We cannot help but question if the investments would provide income or employment. The present ruling party had strongly opposed foreign investments including in retail trading sector. When Dr Manmohan Singh government decided to allow FDI in multi-brand retail trade in 2012, the BJP had frantically opposed it. The BJP that claims that they currently allow only single-brand trade, had then dubbed any kind of foreign investments as ‘selling the nation’. But now, it is those who oppose foreign investments that are anti-nationals. While he was Chief Minister of Gujarat, Narendra Modi had described the foreign investment policy as ‘leaving grocery stores in India to the businessmen from Italy’. Arun Jaitley who had earlier warned that the country’s production sector would be impacted if Americans and Chinese open stores in India, is currently spearheading the same ‘mistake’. Sushma Swaraj who had once said that foreign investors were being invited for breaking the back of small scale traders by cutting down the prices, now refuses to utter anything on the matter. The BJP has also changed its stance on inviting foreign investments in Air India. It is true that Air India is in huge loss. The party has abandoned suggestions which calls for fixing the problems by finding the reasons for the issues. They have opened the doors to privatization under the guise of saving the nation.
The government's claim is that lifting of controls – which leaves the people in more hardship - is to attract more foreign investments and to beat China in the matter. None of this is backed by facts. Ever since 2016, foreign investments have been on the decline. And the government is trying a panacea for overcoming this shortfall and attracting foreigners at any cost. For this the Centre has accepted the conditions put forward by foreign investors who have grasped the constraint of the government. At the same time, there are companies like Apple who insist that the current concessions are inadequate and continue to bargain for more of it. In fact the cause of recession in Indian economy is not the decline in foreign investment, but the fall in purchasing power, which in turn is due to the senseless steps right from liberalisation to demonetisation. When the real solution lies in offering greater facilities and support to the indigenous traders, the new moves to further liberalize will be counterproductive. To know why it is so, BJP leaders would do well to refer their own speeches before 2016.