Wednesday, October 20, 2010

Bharat, not India, needs FDI

Sharad Joshi, the veteran of sound public policy has an article in today's BL where he describes how the FDI in retail would help transform the retail sector in rural.

Some excerpts:

  • India has only 35 towns with a population of over one million. The total population of these towns totals just 108 million. A policy to allow FDI in the retail sector in just 35-odd townships amounts to closing the doors of 91 per cent of the Indian economy to greenfield FDI.
  • FDI has provided the main boost to industrial growth, now entering the double-digit spectrum. On the contrary, the countryside and, in particular, agriculture is starved of investments, credit, technology, efficient marketing networks and also managerial acumen.
  • It would be more logical if FDI in the retail sector were to be primarily channelled into the rural regions.
  • On the other hand, the FDI in rural small towns and even villages will be predominantly of a greenfield character. It will open up new production lines, leading to an improvement in cultivation practices, better varieties of produce and creation of new retail networks.
  • FDI can replace the existing APMC (Agriculture Produce Market Committee) network, with its long chain of commission agents that deprive the farmer of remunerative prices and the consumer of a fair price, assured quality, choice and transparent accounting.
  • FDI is known to boost credit, finances, technology levels and efficiency in marketing. These are required in all sectors of the economy, but the need is most dire in the rural sector, and predominantly agriculture. Keeping such investment flows away from Bharat can only be an act of sheer animus towards the farm sector, on a par with the imposition of deliberate negative subsidies

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