To FDI or not to FDI (in retail)?

With its decision on allowing 51% FDI in multi-brand retail, the cabinet has set loose the cat amongst the pigeons. Everyone, from those for it and those against it have been running helter-skelter to justify their stand. Now, I do not know if FDI in retail is a good option or not, because opinions of both sides have left me confused. But here are a few things that I would like to throw open to the readers of this blog. Readers are free to make their own decision on FDI in retail.

1. The Prime Minister said that FDI in retail would bring in modern technology and investment in back-end storage and logistics. This would help prevent damage to produce and thereby give a better price to farmers. But such technology isn't exactly any rocket science, that cannot be developed locally. More so, with Indian retail firms being there for long, why haven't they been able to invest in such technologies? Was it reluctance on their part or did government policies prevent them from  making such large-scale investments? Moreover, storage and transportation of fresh produce requires massive investments in infrastructure and streamlining of procedures. E.g., good roads that can endure heavy traffic, transparency in functioning of various toll nakas and R.T.O. check points, a reliable supply of electricity in small towns and villages, where farms are located. Why wasn't such investment made before? If India can develop technologies to send a spacecraft to the moon, such things should definitely be simpler.
2. Better prices of farmers and producers is also touted as another benefit. But then, if retailers were giving good prices to farmers, why is the US and EU continuously subsidising agricultural products? In effect, the taxpayers of the US and EU are collectively paying for the produce indirectly, when such money can be used for the benefit of the society at large.
3. Before bringing in FDI in retail, what has been done by the government to reduce wastage of food produce due to poor logistics and/or storage facilities? Everybody (at least the government) knows that farmers have to compulsorily sell their produce at the mandis or nearest APMC. All the wholesalers in these mandis are generally affiliated to some political party or the other. Even the workers at these mandis have unions which are affiliated to a particular political party. The elections to the office of these mandis is hard fought by political parties and used to show case their control over the local politics. This makes it quite clear as to why have these mandis not modernised. They never feared competition, because they patronised all those who were in power. They use their muscle in the legislature to see to it that nothing forces them to make investments and reduce cash flow. The wholesalers in these mandis have been responsible for loss of produce as well as its inefficient handling, leading to unnaturally high prices. Even if the government changes this law and allows the farmers to sell the produce to someone who offers them the best price, it would help the farmers, without the need for FDI. I have a suspicion here. With most mandis being dominated by regional parties, is the Congress trying to strike at their base by weakening their clout through the mandis?
4. While FDI in retail will generate jobs for many, how many would be lost? We need to consider the worst case scenarios in both cases, i.e. the minimum number of jobs that can be generated and the maximum that could be lost. Once we have that picture in front of us, then we can make an informed decision about whether there would be a positive employment or negative one.
5. The Amul model of co-operative involvement has been extremely successful in Gujarat and areas where Amul is operational. This means that Amul definitely has a lot of expertise in the areas of logistics and food processing, storage, transportation, etc. Why wasn't Amul called upon to provide their expertise to other agricultural areas as well? And can't others learn from Amul about the intricacies of logistics, storage, etc.? What prevents such learning, apart from no fear of competition? (Thanks, Dwaipayan Dasgupta for pointing this out)
6. Back in the early nineties, when the Indian economy was being liberalised, there was a group of people, basically owners of various companies, which was called the "Bombay Club". They lobbied with the government against liberalisation, stating that it would spell doom for Indian companies. But, the government went ahead and many of those belonging to the Bombay Club now have companies which are successfully competing with foreign giants and giving them a run for their money. Why? Because these companies were left with no choice, but to adapt the global standards. Will the similar analogy hold for the current retailers and wholesalers?
7. Despite the presence of many Indian retail giants such as Reliance Fresh, Big Bazaar, More, etc. my mother still prefers buying wheat and rice from her trusted aadatiya. At home, we still get our flour ground from the neighbourhood flour mill. And our family still buys fruits and vegetables from the vendor on the street or in the mandi. How difficult would it be for the big retailers to change this mind-set of the Indian consumer? Remember, Reliance Fresh, with perhaps the deepest pockets amongst the Indian retail giants, hasn't been able to shave off too much business from the small retailers.
8. Can we afford to become a country, where people drive 10-15 km (one way), just to get their weekly/fortnightly supplies? This, at a time when petrol prices are going through the roof with every passing day! The small retailer saves us a lot of fuel when we walk down to his shop and buy stuff from there. So, will the saving on food prices be enough to compensate for this long drive?
9. They say, a picture is worth a thousand words. I saw this picture at the Rumtek monastery near Gangtok. We need to learn a lot from this picture. It perhaps sums up the fact that we need to take a holistic approach on the issue of FDI in retail and not just look at it being able to provide more money to farmers and cost less to end consumers!!