India has announced recently new policy which is being debated in the parliament. As it is in a robust democracy everyone has their fears opinions and some reasonable arguments and this debating seems to have a polarizing effect on the country, its main political parties and the society.
So why is the Foreign Direct Investment in retail sector so important now?
Indian development started in the 1990s when the country was struggling even to pay its fuel bills as it did not have enough foreign exchange. This led to IMF ( International Monetary Fund) forcing Indian the then finance minister Dr. Man Mohan Singh to open up markets to save the economy of the country. Although not much was done to liberalize the economy it was adequate to start a boom especially in the Information technology or IT sector by sheer coincidence. However unfortunately the current generation of Indian youth and those political parties who have selective amnesia seem to forget the fact that just 2 decades ago India did not have foreign exchange for its fuel bill.
So FDI in retail is the next wave of liberalization that needed to be done about a decade ago if not earlier. What does FDI do for people? First of all let us look at Agriculture. Indian tycoons so far have shied away from major investment in Agriculture infrastructure. India agriculture directly and indirectly feeds about 52% of the rural population, employs similar amount of the population while using decades old technology and giving minimum amount of profits to farmers due to subsidies (welfare) rather than due to true productivity. Add to this is the general inflation leading to food inflation. Reserve Bank is not able to increase or decrease the interest rates significantly unlike in the US UK and Australia as this would affect seriously self funded retirees of India who out number any welfare recipients. If Indian business giants had invested significantly in Indian agriculture infrastructure like rail, road transport logistics, silos chiller storages, modern agriculture technological practices, development co-operative based agriculture, creation of vertical value chain from farmgate to food consumption then there would not have been any need for foreign investments.
For various reasons Indian businesses have concentrated on developing mining interests in overseas countries, development of agriculture sector in Africa and sectors such as IT which are quick providers of dollars. Indian agriculture has none of these benefits one has to wait to realize the benefits.
India approximately produces 250 million tonnes of grain and is the largest livestock producer. This means issues such as green house gas emissions etc come into play along with investment by the foreign companies. Any company needs to have serious commitment to the agriculture sector and develop lot of systems and logistics almost from the ground up. Farmers need training and small scale equipment which is not used in the agriculture sectors in the US Australia and UK where mechanization rules and holding range from 200-20000 hectares. Indian farmers on an average hold 2-5 acres to a large extent although some own up to 50 acres. These farms are not well suited to full mechanization and due to urban migration and labour shortages not suited to manual labour either.
Indian agriculture needs some basic technology too. For e.g., it is very had to find any soil lab in India which would do soil test and provide comprehensive test result and explanation to farmers. It would be impossible to find Near Infra Red Machines (NIR) in silos to test wheat and other grains and provide prices as per premium quality or higher protein. Indian govt fixes the prices to socialize grain distribution resulting in farmers who grow high quality grain getting the same price as those who grow lower quality grain. This is akin to a IT sector programmer who programs satellite launch getting the same salary as those who develop an IPhone app. How many people would tolerate such inequality with their work? How many Indians who shout today that FDI will get rid of the Kirana stores are prepared to set up a system in India where farmers are paid a fair price not the price fixed unfairly to the farmers for their hard work and effort to produce the grain. Indian farming systems follow the same price structure which was followed when no technology was available for testing soils or grains and has this one price payed to all method. Farmers in India have to literally beg for subsidy money and a fair price. No other sector deserves more respect however no other sector is disrespected as much as Agriculture sector.
It is high time that Indian society and politicians respected farmers work and treated them as a business. It is high time they were provided with infrastructure to store and transport their produce. It is high time that price fixing by government was stopped to benefit its own PDS system. It is high time premium price was paid to premium product without farmers not having to beg for it. It is high time farmers were allowed to sell their premium product to overseas markets where it may make better price. If government does not restrict BPOs and IT companies on to whom they can provide service why are they preventing Indian agriculturalist to do so?
FDI such as this one has the potential for competition by the investors to compete for farmers, provide technology and training and then provide a fair price for a better product. This will reduce poverty too. Yes there are kirana stores. Has Indian govt stopped WIPROs INFOSYS etc from expansion just because there are many small IT shops in SP Road, Bangalore? Why are people are asking for such an unfair discrimination against farmers who battle drought heavy rain and hard work to bring food to people.
It is better that Indian society support farmers and pay a reasonable price to every vendor from big stores to the vendor in the corner of the street. If this disrespect of agriculture sector continues in India, and people start shedding crocodile tears for farmers then watch out! Many of the Indian farmers will become labourers and sell up their farms to developers and food prices will go through the roof.
Indians have to put up or shut up this time. Indian businesses have as much right to invest millions needed for agriculture. No one is stopping them. However if they can't do it they should allow others to do so and turn farm sector in India as a respectable one as it contributes 22% to the economy. It contributes only 7% and manufacturing 33%.
Long live the Indian Farmer!!!