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Tuesday, 29 November 2011 15:53
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Wholesale opposition

NDA and UPA allies play politics while economy tanks


While PM Manmohan Singh has done well to call an all-party meet to sort out the logjam over allowing foreign investment in retail that threatens to ensure another washout session—Anna Hazare, meanwhile, is adding to the pressure on the government—he would be well-advised to use a different tack. Instead of getting industry minister Anand Sharma to reiterate that organised retail will benefit the farmer and create 1 crore new jobs, he needs to get Chief Economic Advisor Kaushik Basu to give the opposition leaders, both within the UPA and the NDA, a quick look at just how the economy has ground to a halt. Industrial production is down to just 1.9% (less than a third that at the same time last year), investments have ground to a halt (projects under implementation have fallen from R68.3 lakh crore at the end of June to R68 lakh crore in September while they were rising sharply last year), funds raised in the market have collapsed, FIIs continue to exit, exports have fallen off and the current account deficit is rising, the power sector is both starved of coal and of funds as a result of which banks are under pressure to restructure loans … And, as last week’s supplementary grant for funds showed, the government has no money to pay for the recapitalisation of banks, the main reason why SBI’s credit rating was cut. As a result of which, the government is having a problem getting investors to buy all of its bonds—primary dealers have had to pick up R8,700 crore of unsubscribed portions since September and the government was forced to put off R4,000 crore worth of issues.

This is the context in which the government needs to take actions to assure the investor community that it means business. In any case, as we have pointed out before (www.financialexpress.com/ news/fe-editorial-getting-real-about-retail/880553/), there is negligible chance of existing kiranas getting hit. Thanks to the fact that there isn’t enough commercial space for organised retail in most residential areas in big cities and the fact that Big Retail is still struggling with its model, as compared to the projected 16% market share this year, the share is just 6%. Even if Big Retail manages to get to an impossible 20% market share in 10 years, this still leaves enough room for kiranas to grow at over 13% a year. Given that FDI-retailers can enter only 53 cities, the scope is further restricted. In any case, as the government’s advertisement has pointed out—an advertisement campaign to defend a new policy suggests a welcome change in government attitude—states are free to come up with their own policy. So if a Mamata Banerjee or a J Jayalalithaa or a Mayawati or a Narendra Modi don’t want organised retailers in their states, let them do so; if they choose to do so while allowing big Indian retailers to flourish, the government would do well to expose that!


Last Updated ( Thursday, 22 March 2012 06:02 )

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