Saturday, 17 October, 2009

Thank heavens we have elections

A professor was comparing India’s reluctance to allow foreign direct investment in retail beyond a certain limit with China’s enthusiasm for FDI. “We have elections, sir, and they don’t,” I said. He smiled and that was the end of it.

Except that I fear he thought I was among the many Indians who think democracy is holding India back. I don’t.

Votes are poor people’s currency. They are the only way they can outbid the monetarily rich and economically powerful. Those who blame politicians for doing this and that economic blunder for political reasons fail to see this simple thing.

For instance, unrestricted FDI in retail may lead to huge mega-marts, jobs and much needed efficiency in supply chains. But if they harm local groceries, they’d endanger millions of jobs, not only in retail but in tiny manufacturing units, who can never fulfil supermarkets’ orders.

Also, there is no guarantee that organised retailers will treat the farmer any better than the middlemen do. 

Also, I don’t see how organised retail can do anything for the vast majority of Indian consumers who are too poor to buy the SKUs that big stores must stock.

Even the so-called middle class cannot shop as much in a trip as its counterparts in the West do. Besides, prices of staples will be much lower than in the West (for instance, a litre of milk costs more than a euro here [in France]; it costs, at most, one-third that in India).  

Yet Western investors will have high expectations from India’s middle class, not realising that the phrase means a much ill-off population. In no time, we’ll have a royal mess. 

If votes prevent the politician from robbing Peter to pay Paul, and keeps Western investors from taking miscalculated risks, thank god we have votes.

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