Monday 24 September 2012

Reforms – good or bad

Recently we have been hearing a lot of arguments for and against reforms. Whatever the opposition might accuse the Congress of, including the scams, one has to accept and give due credit to Congress for the economic reforms. They took the initiative and put India on the fast track towards economic growth.

BJP on the other hand has a ‘double-faced’ approach towards reform and FDI. Though BJP which is opposing the reforms, had itself proposed it while in power in 2002. It’s a know fact across Asia, including China, foreign retailers have proved a boon providing consumers with cheaper products and upgrading the technology of local producers to make them globally competitive. Only in India, do opposition parties want to protect the banias against the aam admi.

The existing Wal-Mart-Bharti retail chain imports only 3% of its goods, sourcing 97% indigenously. Import duties and shipment costs makes imports uneconomical, except for a fraction of goods, such as plastic toys. Indian shopkeepers can already import Chinese items freely. Yet they import only a small fraction, not because they are patriotic or for their love of locally manufactured Indian products, but being profit-minded, don’t find enough profit in most low priced Chinese goods.

Hence the argument against foreign retailers, that they will flood India with cheap Chinese goods, ousting domestic producers causing mass unemployment holds no water. On the contrary it will create lakhs of jobs, including provide an impetus to other connected businesses. Look at the auto industry, was mainly dominated by Ambassador and Premier car till 1991. These have been replaced by a wide range of new brands, some Indian, but mostly international. By freely allowing foreign investment and reducing import duties, we have created a world-class auto industry that exports in great number. Interaction with big brands, have helped create hundreds of globally competitive auto parts producers. Big retail brands – Wal-Mart, Carrefour, Ikea and others will do the same. Don’t underestimate the Indian manufacturer or entrepreneur. Given a chance and atmosphere, he can compete with the best in the world.

Developing countries like China, Malaysia, Thailand and others have allowed multi-brand retail without experiencing any domestic economical upheavals. It appears the opposition leaders, some of whom have their own interests want to continue with the scenario of farmers being exploited by middlemen and don’t want them to interact with big retailers and upgrade their methods. They want aam admi dependent on the age-old unorganized kirana stores with ungraded food grains and products. Let’s have the self-confidence that kirana shops will reform too, to take on new competition.

The opposition has done well to bring out various scams and keep pressure on the government. However, to oppose everything for the sake of obstruction is not right either. The fear of foreign retailers is an outdated view. Today India needs to open up and learn how to compete with world-class competition. Activists of BJP in hush tones accept in private that Congress has stolen the thunder from BJP. Some even whisper that Congress is coming back in 2014.

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