“A couple of big bang reform moves like allowing Foreign Direct Investment in multi brand retail could lift the mood of investors even if the economy is showing signs of slowing down,” said the Chief Economic Advisor to the Union Finance Ministry Kaushik Basu. “It (FDI in retail) may not be the last word on reforms, but an announcement like that can cause the mood to shift,” said Dr. Basu in an exclusive interaction with The Hindu.
Dr. Basu explained that announcements like these could address “negative investor sentiment,” as opposed to specific policy instruments such as interest rate cuts, which could be used to address macroeconomic variables such as inflation or overall economic or industrial growth.
Addressing sentiments
“Since a large part of the problem (of economic slowdown) is not because of the economic fundamentals but because of the negative mood, an announcement such as allowing FDI in retail could play a big role,” argued Dr. Basu.
Citing data on economic growth, Dr. Basu pointed out India “has not lost its position in the pecking order among the BRICS countries.” India is still ranked second among the 41 big countries in the world, according to the Economist magazine, he said. “It is just that India has slowed down with the whole world,” he argued. “I am not denying that we may have taken a few missteps, but by and large it is a global problem,” he remarked.
Euro-zone crisis
Referring to the crisis in Europe, Dr. Basu said Europe would face its next big test in 2014-15 when the $1.3 trillion that was extended to more than 800 banks comes up for redemption. Risk averse investors are averse to investing in anything other than U.S. treasury Bills, German Bunds (Federal bonds) or in gold, even though they offer low rates of return, he observed.
“Of course, we need to do some fire fighting, but we also need to do some rethinking and (design) big strategies,” Dr. Basu said. India, he said, needs to “reposition” itself.
“When the world comes down in two years as a result of the crisis in the Euro Zone, can India come out on top?” “This can be done by investing in the fundamentals such as education and human capital.” “China has realised this. Every day you hear of stories about Chinese universities raiding American universities and taking talent back to China,” he said.
Keywords: Indian economy, FDI, multi-brand retail, Kaushik Basu
FDI will allow the Foreigners to CONTROL India's Rupee.M M Singh is trying his 1991 trick.Already the FIIs are making MM Singh and the RBI dance to their tunes.When a country loses control of her Currency,she is doomed. FDI in retail and the petroleum products' decontrol and price hikes have a connection.This will allow the MNCs to loot India by setting up Petrol and Diesel pumps.
Basically he wants to put Indian retail Industry under foreign arms,, If
we can't even develop the infrastructure that walmart can, then why
should we call us as PROUD INDIANS ??? We developed our indigenous
Rocket, should putting our retail on right track be a big deal? well
then they should better stop calling themselves as ECONOMISTS. Bhagat
Singh gave his life for our dignity, but sadly we forget what Dignity
means. Let us not then call us Indians.
Why are people hell bent on FDI in retail. Do we not have other sectors to open up first. Not being a license raj babu, but can't we first open up Aviation? Why the hell do we even need an Air India. On its part instead of bailing out Air India the government should focus on railways and open up aviation to FDI.
Retail can come later.
The farmers and local manufacturers are already swindled by the retailers. Atleast now they have the option of bargaining with the local vendors. FDI will only remove that option. The prizes will be decided by somebody sitting in an A/C corporate office keeping the profit margin in mind. As can be seen already, the supermarkets of big indian retailers are chewing up the small scale bussinesses. People go to BigBazaar rather than the local cloth shop. The small cloth shopwallah being only a sales person is left with no income. FDIs are necessary but where needs careful answering.
"Allowing FDI in retail will boost sentiment" !!!
Is he the Cheif Economic Advisor or the "Chief Psychology Advisor" of MMS and the country???
He is now talking about "sentiment"!!! or "emotion" or "feelings" etc etc ?
The so called "economix" and the "economixers" are the voodoo and mumbo jumbo peddlers of modern civilization!
Central government has to take some difficult but bold steps to tackle
the slow economy. It may be the Eurozone crisis but its the individual
country that has to control the policy.
Mr. Basu, government has no job to manage market sentiment. The primary job is to govern so harmonious growth can take place.
I reject the idea of FDI in retail to improve market sentiment. Before FDI in retail is permitted, APMC Act needs to be repealed, export or import quotas for commodities like Onion, cotton and sugar need to be removed. Eventually, reforms and deregulation shall take place ..... but the advantage should be given to local players and not to the foregin players who are not suffered from government policies and can demand only reforms to suit their business. It is unfair to local players.
FDI in retail but what do get return better visa regime for Indian professionals, market access for Indian commodities ... definitely market screwed up by government so it needs to not one thing but many things. Such narrow and shortsighted approach will hurt economy.
Allowing FDI in retail will not boost sentiments. On the other hand, to add fuel to the unemployment, it will harm crores of indirect employment in channel and distribution. Further, It will affect the local retailers. Not the least it will also harm local markets in long-run.
Allowing FDI in retail would really be a major blunder. The Walmarts and
Tescos and the like are big storehouses of GM and junk foods. In the
long run these could spell doom on the economic and physical health of
the nation.Are we not already suffering with Colas and KFCs and more
recently with Red Bull and Monster?
FDI in retail should be allowed but policy announced was defective.
There should be maximum amount of investment so that nobody become
WALMART like and can squeeze producers first, employees and later
consumers.
I would have thought the worst economic downturn was due to the global
scenario... But, with is argument I'm inclined to believe that the
current crisis in India is MANUFACTURED by Dr. Singh's Govt. to usher
in FDI in retail which has met a series of protests in India.
I'm not a retailer. However, I'm in France where these retail giants
are well established. I buy a box of strawberries from Auchun for 8
Euros only to find them spoiled on bring back home. Legal proceedings
are too expensive to request a recourse. Now I'm buying fruits in the
farmers market, where I can choose my fruits after the advise of my
french colleagues. The foods (frozen and processed) lack taste and
nutrients and with the corruption in India, this will only give these
giants to DUMP their products. Personally, this bid is only to benefit
UPA and the Retail giants at the cost of common man...
This was a trigger to decide not to return to India...
Please Email the Editor