It is a season of parroting foreign direct investment in New Delhi. Everyone is counselling the ruling class of India about how beneficial FDI in retail would be for farmers, shopkeepers, kirana traders and the unemployed youth. So much so that even the US ambassador to India has been emphatically pointing out the positive effects FDI could have on the economic scenario of India. However, none of the votaries of FDI has thus far come up with facts and figures, or a constructive plan of action, which may quantify how much the people of India will benefit, and how many jobs will be created.
Ironically, one of the biggest (proxy) retail FDI operators in the Indian market appears to be Walmart. And the fact that Walmart faces probe into potential “violations of anti-corruption law extending to Brazil, China and India” makes matters highly controversial. Besides, investigation is on regarding allegations of bribes paid to secure new store permits in Mexico. Walmart is not yet operating officially in India; but it is already in the news for the wrong reasons. To make things worse, the existing probes by the US department of justice and the Securities and Exchange Commission have expanded to cover Walmart through a bigger scanner.
However, an astonishing counterpoint has been made by Walmart officials pertaining to India operations —“Our expectation is that each and every one of our associates will adhere not only to the letter of the law but also to the highest standards of personal integrity.” Only time will tell how much of this commitment to probity will be fulfilled. Reportedly, existing domestic retailers have felt that it is “difficult to open stores in India without greasing the palms of officials”. It is significant that Walmart has not opened any outlet in India yet. Its joint venture with Bharti Enterprises already operates 18 cash-and-carry outlets across the country. Even then, Walmart is facing the heat from the Enforcement Directorate probe for possible violation of foreign exchange rules, as it has already invested US $100 million in the holding company of Bharti Retail.
This brings us to the bigger canvas of FDI. Understandably, the foreigner’s money would be directly invested in India, and this will require a basic definition of ‘investment’. According to Black’s Law Dictionary, it is an “expenditure to acquire property or assets to produce revenue”; for our understanding, let the word ‘revenue’ be substituted by the word ‘profit’. Therefore, a foreign investor will invest in India with the expectation of profit. And despite India’s reputation as a corruption-infested market if FDI is being advocated by the who’s who of the world, it speaks volumes of the potential of profit.
Regarding the perceived creation of jobs and the promised inclusive growth, one needs to remember that India is more like a continent than a country. The gravity of the situation can be further realized from the fact that India has a labour force of over 40 crore. When nearly 10 per cent of that 40 crore (more than four crore) face perennial unemployment, should it not be the responsibility of the government to link FDI with the creation of jobs? Has the Planning Commission or the finance ministry made any research based on authentic facts to find out how many jobs can be created?
This author is not against retail FDI in India per se. He is interested to know how it would be beneficial to the people of India. A recent report of the Organisation for Economic Co-operation and Development, a 34-nation body, has stated that 50 million people in 2012 are unemployed in OECD, which is 15 million more than in 2008, at the onset of the global financial crisis. Ironically, 50 million unemployed people of 34 developed nations make news, but the unemployment of 40 million (about four crore) Indians hardly moves anyone.