Modi downloads retail elbow room - E-commerce thrust without vetoing BJP

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  • Published 28.02.14
Modi speaks at the traders’ meet on Thursday. Picture by Yasir Iqbal

New Delhi, Feb. 27: Narendra Modi today said Indian traders should learn to integrate with the “global order”, leaving the post-poll door wide open without jettisoning the BJP’s seemingly transient opposition to foreign investments in multi-brand retail.

“These days, even small-town consumers hanker after branded products. Whether we like it or not, the challenge is to integrate indigenous trade with the global order by not regarding it as a challenge… by enhancing your capabilities and by befriending and taking advantage of information technology,” Modi told a meeting of traders today.

He urged traders to embrace technology, including online shopping, to expand their markets, contending that foreign direct investments were not just about putting money in industry but about putting it in unconventional and potentially smart sectors. Modi also appeared ready to back the goods and services tax, which he has been stonewalling for years. (See Business)

If Modi tilted towards FDI, he did so with finesse. As in the past, he did not explicitly spell out his stand on FDI in multi-brand retail. He took care to lay stress on building local capabilities and allowed his party’s leading swadeshi proponent, Murli Manohar Joshi, to repeat the BJP’s opposition to FDI in retail.

However, having paid obeisance to the official line, Modi sprung online commerce on the gathering organised by the Confederation of All India Traders.

Modi underscored that unwrapping a “universe of branded goods” through online shopping for the last consumer in the village would shower traders with profits.

“Somebody needs to purchase eight books and (has to) travel several kilometres for it. The trip may cost an additional Rs 200 or so. So why not bring the books home through virtual shopping through a trader-retailer compact that allows the trader to create online shops in small places — I mean a virtual mall?”

E-commerce or online shopping may not be as polarising as multinational malls, and volumes are yet to reach western levels. But online shopping has grown exponentially in India in the past three years.

Modi’s comments come at a time an online-versus-offline war has begun between some companies and e-retailers who have been accused of undercutting stores. Some retail chains contend that their stores were being used by shoppers to only check price and size, before buying the products online at cheaper rates.

Some of those who have complained the loudest are multinationals. The e-retailers are all Indian-owned firms as foreign investment is not allowed in e-commerce. Global e-commerce giants can now act as platforms where buyers and sellers can meet and sell to each other but they can neither keep Indian inventories nor ship goods against rupee payments.

So, the BJP can claim that Modi was actually batting for Indian companies. But the Indian e-retailers are not averse to the inflow of foreign investments — in fact some need the cash to upgrade themselves — as long as control remains in-house.

Modi’s comments suggest that he is laying the ground for possible room for manoeuvre if the NDA is voted to power.

The Centre allows 51 per cent FDI in multi-brand retail now but few states other than those ruled by the Congress have endorsed it. Local clearances for retail ventures are given by respective state governments.

The BJP’s official stand has changed since the time the NDA’s 2004 poll manifesto said: “Organised retail trade on the international pattern will be promoted…. 26 per cent FDI in retailing will be allowed.”

The BJP’s 2009 election manifesto had said: “The BJP understands the critical importance of retail trade in the context of employment and services provided by them and thus favours a dominant role for the unincorporated sector in retail trade. Towards this end, it will not allow foreign investments in the retail sector.”

Asked to explain the about-turn, former finance minister Yashwant Sinha had claimed the NDA had favoured FDI while the BJP, though against it, had decided to “go along” with its allies.

Still, the Atal Bihari Vajpayee government had commissioned the Indian Council for Research and International Economic Relations to assess the pros and cons of allowing FDI in multi-brand retail, which suggests the BJP had been serious about the poll promise. But by the time the report came, the NDA had been voted out.

Adhering to the official policy, none of the BJP’s state governments have allowed FDI in retail. One of new Rajasthan chief minister Vasundhara Raje’s first moves has been to revoke her predecessor’s decision on this.

Addressing another meeting hosted by the think-tank India Foundation, Modi indicated he would encourage states to conduct their economic and trade negotiations with foreign investors independently of the Centre, like his government had done in Gujarat.

“These days, overseas companies land in the states through their consulates, independently of Delhi. A Japanese delegation arrives in Gujarat every week,” he said.

Modi implied that economic revival and “reaffirming” India’s “economic might” would be his priority if he becomes Prime Minister, and stressed that the foreign ministry would have to transform its thinking.

One-word repartee

Modi stressed that infrastructure went beyond power, roads and rail and claimed that his knowledge of economics could be compressed into one word: “trusteeship”.

The last bit was a retort to Union finance minister P. Chidambaram who had said that Modi’s understanding of economics could be contained on the back of a postage stamp.

“My knowledge is so minuscule that it does not need a stamp. It is contained in one word that summed up Mahatma Gandhi’s economic vision, and that is ‘trusteeship’,” Modi said.

“I will function as the country’s trustee and not as its owner. I don’t need tomes to guide me. Granth walon ko rakh loonga apne paas (I will employ people with knowledge),” he said.