Urban India Rejects September 2012 reforms - CNN IBN Poll

I must admit I am not putting much effort in this post. I watched the results of much hyped CNN IBN Poll today in a program hosted by Sagarika Ghosh. I am going to simply post data from that poll. As per CNN IBN "the urban middle class has dealt a severe blow to the Manmohan Singh Government, giving the Prime Minister's push for reforms a big thumbs down." The Poll was conducted between 20-22 September 2012

Here is a quick set of results on each of the economic policy changes:
1) Is hike in diesel prices justified?  - 87% said NO
2) Is cap on subsidised LPG cylinders to 6 justified? - 93% said NO
3) Is FDI in retail justified? - 76% said NO
4) Faith in Prime Minister Manmohan Singh? - 67% said NO (37% want him replaced)


There was a panel discussion on the poll results which I saw. The panelists were Siddharth Varadarajan(Editor-In-Chief The Hindu), Kumar Ketkar(Dainik Divya Marathi), Vinod Mehta(Outlook Magazine), Swapan Dasgupta. What I want to mention here is about the panelist who has struck a cord with me. Siddharth Varadarajan mention that there is skepticism and people do not see exactly why FDI in retail was required. He also mentioned that given the list of scams that have come out in open during the last several years, people do not see if they can trust the government on these issues. I am paraphrasing what he said but this is roughly what he said. I saw the entire discussion but this is what struck the most to me because he seemed to have hit the nail in the head as far as I am concerned. I am also asking why was there this rush with FDI in multi-brand retail?

Readers can access a report on the result here at CNN IBN website.

Why the mainstream Indian media supports FDI in retail?

For the last one week or so I have been writing posts about the FDI in multi brand retail policy. If you have been following my posts, then you would notice that I have been quite critical of the way in which this policy was pushed. Well it was not a surprise that it would come, it was expected to come as I have written in my previous post I have argued that the decision seems to have been heavily influenced by the corporate lobbying that has gone on for opening up of this sector, as also I have argued that international pressure has worked. I have tried to put up as many facts as I could to at least make my readers pause and think. Now I must ask my readers whether they have read any such criticism in the newspapers with large circulation and in the mainstream news channels that they are exposed to barring a few.

Well of course people have different opinion about this issue. It is expected that for any economic policy there will be divergent views. But have we been exposed to all these divergent views in the mainstream media? Another question is why this reporting only now what about in the run up to these decisions. What was the reporting like then? Was there enough debate about this issue, were all the pros and cons really presented objectively based on research and experiences, was it debated whether FDI investment was the only way to bring about the growth in our rural economy and to increase efficiency in the food supply as is being highlighted as its biggest benefit? Has it been debated whether the FDI investment alone will be enough? Won't we need investment in infrastructure like roads and power that Big Retail is not going to do? Had these investments in infrastructure been done by the country would we not have better efficiency or do we still need FDI in retail? We have heard about food wastage in the current dispensation but have we heard criticism of incumbent organized retail players as to what they have done to improve the situation? Why have they not been able to price their food products and specifically fresh fruits and vegetables cheaper? Do they really pay higher price to farmers?  Have people not been suspicious as to why the private organized players who should have had reservations about foreign competition like in may other sectors, were delighted to have foreign investment? Do they have an interest in FDI because they want to sell some or most of their existing stake? Have we heard enough in the last 10 days that they have been struggling with debt? It has been reported earlier but why have we not heard about this in last 10 days and why has no one tried to draw a linkage?

Why have we not been hearing more about these issues in the main stream media? Why is the media hailing this decision wholeheartedly other than a few exceptions?  When we see the same argument being made in media again and again we do not see the other side, because we have not been exposed to the other point of view, at least not by people we can trust. When politicians make an argument then we are mostly divided based on our ideological leanings and based on party lines. We are not always open to the views of a politician who belongs to a party we are ideological opposed to, even if he or she is making a valid argument. We fear that if we accept this argument from that person then we would end up being on his side on all the other issues, we do not agree with him on. So we are extremely cynical about the political parties. But what about the views of editors and the facts that journalist are supposed to write about? 

There are many question, and well, here is the answer. We will not hear about these things in the media because the media is not exactly independent in these matters. The media  in our country today has deep links with big corporations. They will not carry articles and opinions which are critical to them in a matter which is so important to them. The business men and politicians have long realized the importance of media. News media not only reflects the facts and opinions of the people it also influences the opinions of its readers. If they brow beat an argument enough, if they twist some facts and hide some other facts or if they promote one opinion more often than another divergent view, then they will be influencing their readers who will start believing what is being projected. 

Since the early part of last decade media companies have been carrying paid news, they have also been entering into these agreements called private treaties. What is a private treaty? Well it is an agreement where by a media group makes equity investments into the companies that enter into this treaty with. They buy a substantial share into that company via private equity placement against guaranteed advertisement and though not mentioned explicitly but is well understood 'no negative coverage'. It has been reported that Rahul Joshi the editor or Economic Times had given instructions to his reporter to write about their treaty clients in a way that enhances “the value of these companies and ToI’s (Times of India’s) investment.”.  Here is an example which is very relevant to the present situation. In 2002 Bennet & Coleman and company which  owns The Times Group, entered into a private placement agreement with Kishore Biyani the owner of Big Bazaar a retail player which will benefit immensely from the FDI policy announcement made on 14th September 2012. Can anyone in the right mind expect any criticism of the FDI in retail policy in Times of India and Economic Times? When the beneficiary of this policy is not just your client but actually you yourself. Times Group is by virtue of its ownership of Pantaloon Retail, Future Value Retail Limited and  Future Ventures India Limited a direct beneficiary of the FDI in multi-brand retail policy. No wonder we hear only praise of the government from Times of India and Economic Times for this policy move. 

The Times of India in its editorials encourages the government to 'Stand Up', not to give in to "rabble rousing pressure from opposition". It has made tall claims that "retail reform is estimated to bring in $16 billion worth of FDI in the next 3 years". It has hardly carried any opinion article arguing against the policy nor has it carried crititical reader comments. In fact as I have mentioned in my last post. Government of India almost appears to be following the script handed out by the Economic Times. The ET view as they have mentioned in one of their articles was that the government should "..open up FDI in multibrand retail quickly, and eases the rules that have curtailed FDI in single brand retail. It should explain that the provisions for FDI in multi-brand retail are enablers. It is up to individual state governments to implement them or not". Now the readers would be in no position to suspect that what they have been writing is in good faith unless the reader is aware that owner of the newspaper they are reading is a direct beneficiary of this policy why will it be critical of this policy? They will make profit when Big Bazaar makes profit.

I am going to end this post with a youtube video speech of Mr P Sainath where he explains the current state of our media companies and a state of affair he describes( borrowing from Ben Bagdekian) as "Corporate Incest within, Corporate Incest".

PS: Here's link to another article by P Sainath on how (as per his article) Times of India manipulated news about Bt Cotton at a time when Biotech Regulation Authority Bill was to be tabled in 2011. Now you can choose what you want to believe. But it is again 'for the welfare of farmer' argument similar to the current FDI in multibrand retail policy changes. So I am pretty sceptical. You can draw your own conclusions.

Corporate and US Lobbying for FDI in Multibrand Retail

ET's views had an effect

Some of the opposition to FDI in Multibrand retail stems from the suspicion that this decision was not entirely an independent decision made by the Government of India, and there were pressures by self interest groups put on the Manmohan Singh lead UPA government to make this policy move. It has been alleged that this pressure came primarily from two sources foreign governments on the one hand and big business on the other.

This Hindu opinion piece "FDI in retail — UPA ‘retired hurt’" was published after the withdrawal of this proposal in November 2011. The diplomatic cables leaked by Wikileaks and referred to in the above article as also in another Hindu article, shed light on how Hillary Clinton, who has served on the board of Walmart, which is an Arkansas headquartered company(Bill Clinton is a former governor of Arkansas), had been very interested in knowing what was the position of Commerce Minister Anand Sharma on Multi-brand retail.

The article also refers to the statement made by John Menzer, the CEO of Walmart the 2005 annual meeting while addressing shareholders, how Walmart had "energized the FDI lobby and preempted the anti-FDI lobby" in their 6 meetings with the government. He also said in the same meeting that Wal-Mart does not want to wait for policy changes on FDI and wishes to enter with an Indian joint-venture partner to "take advantage of this market while it's still developing.". Of course the Indian partner was non other than Bharti group. It is important to note that only months before the recent policy decisions the Delhi High Court had issued notices to Bharti Walmart Pvt Ltd for alleged violation of FDI norms. On July 12th 2012, Ranjan Bharti had met Commerce Minister Anand Sharma on this issue.

One need not be concocting a wild conspiracy theory to allege that there was corporate and US government pressure on the Indian government to allow FDI in multibrand retail in such a hurry. There is enough evidence in public domain for one to be suspicious. In July 2012 Economic Times carried an article mentioning the following "Wal-Mart Stores, which has been trying to set multi-brand shops in India for a long time, spent nearly $1.5 million on lobbying in the last quarter ended June 30, 2012 on various issues, including matters 'related to FDI in India.'".

 Bharti does not have a great pedigree when it comes to keeping arms length relationship with the government. The Indian organized retailers have been struggling with excessive debt on their books. Kishore Biyani lead Future recently completed a restructuring of the group's assets in order to reduce debt. The FDI policy change in mulit-brand retails has been a boon for these companies and one can imagine that while the government has been promising a possible benefits to consumers and farmers sometime in future the immediate and certain beneficiaries have been the existing corporations who have ended up in this situation because of growing 'too big too fast'.

All in all the previously mentioned Hindu article by P. Sainath has been quite accurate in predicting that the earlier failed attempt to reintroduce the FDI in retail policy was all but a temporary set back, and as he had said, the team batting for Ms Clinton was "only retired hurt for the moment".

The Hindu : Opinion / Lead : A risky strategy, born of panic

The Hindu : Opinion / Lead : A risky strategy, born of panic

I always turn to The Hindu when I hear the same clutter in other mainstream media and I immediately see clarity. I see hope that some people still realize that to better understand an issue you need to see both sides of the story first, and then you will make a better judgement. It takes courage to stand out and not simply follow the side which appears to be winning at present. UPA will survive most people agree, but democracy has lost. A decision like FDI in retail is of such enormous consequences that a simple majority should not drive it through, let alone a majority garnered by congress 'Managers'. PM Manmohan Singh could have done better, Pranab Mukharjee had the sense to suspend this decision previously in the interest of democracy.

The Hindu : Opinion / Editorial : Irrational exuberance

The Hindu : Opinion / Editorial : Irrational exuberance

Fine Print of GOI FDI in Multibrand Retail Notification

Yesterday Government of India notified the FDI in multi brand retail. One of the finer prints which was also being reported yesterday and today is that this notification does not apply to eCommerce businesses.  E-Commerce businesses were not permitted to have FDI and that policy remains in effect. The curious implication of this policy is that while Walmart can do business in India, Amazon its upcoming competitor in the US and rest of the world cannot operate in India. It makes me wonder if all the benefit of technological innovation that is being suggested Walmart like businesses are going to bring to India, can't Amazon do the same, or may be, better. When we are opening up retail then why not online retail? What is the justification for not allowing FDI in retail eCommerce?

Interestingly this came at the back of another news story, that Walmart has stopped selling Amazon's Kindle eReader devices which it sees as a competitor. Another interesting article in Washington Post is here.
The article states "Retailers have been particularly critical of the online marketplace and its contribution to the trend of “showrooming.” They complain that customers often come into their brick-and-mortar stores to see or try out products that they’re interested in buying, only to leave and purchase the goods online, where customers often don’t have to pay sales taxes. That practice gives online retailers an unfair advantage..".

Now I am not alleging a conspiracy in keeping out Amazon and allowing Walmart in India, at least not yet. But this presents a curious case of a retailing giant like Walmart which is the biggest company in the history of the world being allowed to operate freely in India and not allowing its online competitors which Walmart and Target feel threatened by, and hence are trying to limit them desperately. Some have stated that the only company which ever was as big and powerful in the history of the world as Wal-Mart is today was, The British East India Company. An interesting article on the Boston tea Party protest against the British in America in 1773 is here which uses the Wal-Mart analogy to, I must say, a great effect.

Here is an interesting book on Wal-Mart's business practices. The link opens an amazon book retail page in the US. Lets see where this takes us, we are nothing but witness to history as it unfolds. Can our actions influence it?

Can retail FDI policy really be implemented statewise?

Central government ministers have been claiming that FDI in multi-brand retail policy that has been announced on 14th September has a clause that the States which do not wish to allow FDI in multi-brand retail need not allow it under the shops and establishments act. I came across this opinion piece in The Hindu Business Line which mentions that this cannot be implemented because international agreements signed by the government of India with other countries call for a national treatment for investment from other countries.

The article says "In effect, what this means is that if a Nilgiris can operate in Chennai, a Big Bazaar in Kolkata or an Easyday in UP, the governments of Tamil Nadu, West Bengal or UP cannot prevent a Walmart or Tesco from opening shop. If the licence is denied under the Shop and Establishment Act, this can be legally challenged under the BIPA agreements. The entire country, including all State governments, is obligated under the BIPA agreements." 

This is an interesting point that I have not seen being raised or clarified by the government ministers. At least HBL should allow the government to clarify on this. The bilateral agreements can be accessed here.

PS: I sought clarification from Hindu editor who pointed out that "we have already carried a story yesterday that the international agreements do not impact implementation of FDI in states. the Government had also formally issued a clarification in this regards."
The GOI clarification can be accessed here.

Mamata Pulls Out of UPA II

We have heard it today. Mamata Bannerjee withdraws support from the UPA II government. Was this the most expected decision from her? I must say at the risk of sounding opportunistic that I was expecting it to come. I have argued in past that the 14 September decision by Manmohan Singh has been undemocratic to say the least. One might argue that Mamata Banerjee was always opinionated and stubborn but she has support from the people who have democratically elected her to power. She has pro-poor views and has every right to do so. Congress has been autocratic in these decisions and has been quite arrogant in its confidence of being able to successfully horse trade with SP and BSP to keep Mamata in check.

We have to wait and see if congress is able to garner support from the SP and BSP to survive but even if they do they will extract a big price from the government. I am not convinced that Manmohan Singh can survive the full term and also effectively conduct business. The decision in FDI in retail was decision which even a seasoned and experience politician like Pranab Mukharjee did not see as tenable. If the government has to compromise with some of other parties on corruption in their states to survive then it makes another dent on its image of being weak on corruption.

Allow free market in land and natural resource too

Indian big business has been at best only a partial advocate of free enterprise. The demand by industry for government to acquire cheap land on its behalf is disappointing. I read a recent article by CII chairman Adi Godrej in Times of India. Right to Property which used to be a fundamental right in our original constitution before it was removed to supposedly allow government to under take projects for public good. Recently it is being recognized as a basic human right even by a Supreme Court Bench in 2008. The father of Classical Liberalism John Loche himself believed that right to property was an unalienable right. No where in the capitalist economies of the developed world, governments participate in land acquisition for private industry. Yes our business men sight that 'Indian realities are different' when ever it suits them.

I may not believe on all the new-liberal policies but I always believed that the ownership of the land that the population has the possession of the land they work on is older than the existence Indian Republic itself. So when I read about John Loche's argument that "property precedes government and government cannot dispose of the estates of the subjects arbitrarily". Then I agree with him completely. Unfortunately the industry with its demand for the government to acquire farm land and literally 'gift' the land to businesses in the form of cheap land as 'incentive' to set up business units.

My opinion on Mr Adi Godrej's article is that on an issue like agricultural land, the industry should be open to pay the market rate and rehabilitation costs like true free market participants. On coal block allocation when the entire process has been suspect rebidding would be the only just way out to ensure nobody got unjust benefits.

FDI in retail is too important an issue to be pushed through autocratically

Below is my letter to the the editor of Times of India which I wrote in response to and editorial 'UPA Stand UP' of Sep 17, 2012. The editorial advocates a strong stand by the UPA government for its decision on FDI in retail. It advises the government not to give in to "rabble-rousing pressure from the opposition". It mentions that the view that "FDI in retail will lead to closure of small shops is a lie". It goes on to claim "it has happened no where else in the world". Editorial says that if people fear it will happen in India then it "reveals a deep-seated inferiority complex". Citing risk of credit rating downgrade it makes a tall claim that "retail reform is estimated to bring in $16 billion worth of FDI in the next 3 years". Here is my response in my letter to the editor which I a suspect will not be printed, neither do I expect any other view questioning the ramming down of FDI in retail down the throat of the citizens of India to be printed. One wonders, what is the cause of this partisan reporting? Is it big business being able to convince the media better (Nira Radia tapes controversy comes to mind) or is it supposed pro-reform activism by some sections of the media. Both are bad but former seems more likely because of apparent half truths mentioned in the editorial. The reader has to decide.

"This is with reference to editorial 'UPA Stands Up'. While the need for efficient decision making by governments is well understood, FDI in retail is too important and issue to have been pushed without sufficient consensus. We would do well to keep in mind that UPA has only 37% of the votes cast in the last general election. Pushing though this kind of change under considerable opposition is not in line with democratic principles.

     The editorial expresses strong views in favour of FDI in retail. The figure of $16b investment in 3 years should be studied, Kishore Biyani had recently mentioned $10b in 8-10 yrs. These figures have been mentioned but empirical evidence has not been shown and we don’t know how they will benefit our productive capacities or just lead to more imports from China in the long run. Monopolistic retail chains do threaten local businesses; a case in point is the recent example of New York's refusal to allow Wal-Mart for the same concerns. TOI should allow a more informed debate on these issues by presenting views from both sides. This is too important an issue to be pushed through autocratically by any government, Congress or BJP."

Opposition to Big Retail in the developed countries too

Came across this Roger Moore style documentary on Wal-Mart's business practices and ill effects of big box retail monopolies on local communities in the USA. Case in point is that there has been opposition to companies like Wal-Mart even in the country of their origin, and people have been affected adversely just as there is so much opposition in India. Yet the present central government has gone ahead and made FDI in retail policy changes without bringing everybody on board.

Wal-Mart: The High Cost of Low Price paints a sorry picture of monopolistic tendencies and unfair business practices of Wal-Mart by interviewing former employees, managers and small businesses affected by the opening of Wal-Mart stores in their towns. Big foreign stores faces stiff opposition even in the country of their origin because of monopolistic predatory pricing, shortchanging employees, squeezing suppliers and storing imported Chinese products(Chinese suppliers provide Wal-Mart with close to 70 percent goods that it sells globally each year).

Since it was clear to the Manmohan Singh government last time around when it tried to take this decision, how much opposition existed to FDI in retail, they should not have gone ahead with it. The current government may very well survive because of political horse trading with its allies but democracy has lost, when a government which got only 37% of the votes cast in 2009 general elections has taken such a fundamental decision greatly influenced by foreign governments and corporate interests. 

Pushed to a corner Manmohan does a do or die again

Friday the 14th has been a momentous day in more ways than one. Not only were several huge policy decisions on foreign direct investment in aviation, broadcast and multi-brand retail made, it is also quite clear that the Monmohan Singh government has taken this decision without support from its allies. Essentially what Prime Minister Manmohan Singh has conveyed to everyone is that you have pushed me to a corner and made me take this decision and I don't care whether you like it or not. If these decisions are palatable to you then accept them if not then I dare you to take me down.

Now one can go on arguing about whether these policies are going to benefit us in the long run or not but what is quite clear is that they have been undertaken in desperation, perhaps to ward off the immediate troubles that UPA has been facing. One economic decision after another taken by the government has taken us from one scam to another. The nuclear deal with the US, and the decision to build large number of nuclear power plants with foreign investment has faced immense opposition from people. The government tried its best to dilute the national nuclear liability bill but could not do so to the extent it wanted. The telecom scam highlighted the crony capitalism that prevails in our country. Common wealth games scam left us with a huge bill to the exchequer with no real economic benefit.

The coal allocation scam has finally pushed Manmohan Singh lead UPA government to the brink. Sitting on one failed policy after another, the coal scam has finally pushed the government to a desperate situation. It first decided to bring in the caste reservation in promotions bill and now has brought about these economic policies on foreign investment. That the prime minister is ultimately responsible for the failings of his government can not be denied. It has emerged that when it is convenient for the present government, then they would sight lack of political consensus as a reason for not taking a decision, as in the coal allocation and mineral mining acts. But in the case of FDI in retail they have gone ahead with the decision fully aware that people are opposing it, their allies are opposing it, and state governments are opposing it. There was no need for broad based consensus now.

I personally do not see the merit in the arguments how FDI in multi-brand retail will necessarily benefit us. There is no denying that our public distribution system is in shambles, but then which government department is functioning efficiently and not mired with corruption. What the political leaders of our country need to understand is that the problems we face are of our own creation and no amount of foreign investment will root out the real problems we face. These are the problems that are fully in our control and are squarely our responsibility. How much of the exchequer is being negatively affected by these scams and by wrongly conceived, poorly implemented welfare policies? How much of the public funds, are being eaten up by unsustainable PSU's like Indian Airlines? Is FDI the only source of foreign exchange and capital, what about increasing exports, and reducing reliance on imported fossil fuels for our energy requirements?

These are some of the issues that the central government should be occupying itself with, but unfortunately they have found themselves cornered with scams, specifically the coal scam and have chosen to fight back with a potential political hara-kiri, rather than address the problem of political corruption and a series of scams that citizens have witnessed in recent years. We will come to know in the coming weeks if the congress government survives. Either way my prediction is that we will be witness to several turmoil in our national politics in the days to come and next general elections will be fought on all the issues covered in this article including and most importantly political corruption.