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A reason behind the urgency for FDI in Retail


The biggest riddle of last week was why would this government which could not push a simple paper legislation get down into water to fight an army of crocodiles. Why would this government beleaguered and besieged as it is, trying attacking and reforming the FDI in retail – the most contentious, with massive social impact and with no preparations?

To understand, nay to even start estimating the impact of this act, we have first chart out some simple facts:
  •         Retail is the BIGGEST sector in India and all the countries
  •        Retail directly capitalizes and monetizes large population and its consumption,
  •         Most of the present retailers are small distributed outlets denigratingly called mom-pop stores
  •        About 5% of the total population is directly or indirectly connected to retail industry for living
  •      Retail companies when they enter, will become very rich in the process and at the cost of smaller retailers and consumers. 

Having the set the tone that this particular piece of legislation is the priciest one with massive profit and vested interests, lets look at it from two angles


BJP

The FDI in Retail under a BJP-led or non-UPA government is next to impossible. For the simple reason, for most of the parties the mom-pop brigade form majority and influential voter base. It is highly unlikely these parties will propose these legislations as it is proposed currently.

So, with the current state of Congress and UPA, and its rapidly receding chances of getting back to power in next elections, this piece of legislation had to be passed by the present government – no matter how hard or impossible it is and no matter what the opposition to it is.

The wait from the retail firms – the MNCs and the Indian firms waiting to cash out – would have otherwise been very long.


Diesel Price Hike / LPG cap

Diesel price hike was a bold move, long overdue but still bold one. LPG capping was monstrous. Assuming the market price of the LPG is roughly double the subsidized rates, the capping of 6 cylinders (with assumed average consumption of one cylinder a month) would be a satanic 50% jump in the cost to these families. Considering that this expense is a direct expense, the impact of the families would be lasting and immediate.

Question is: why would the party which brought and nurtured socialistic policies, would undertake such a deep-impact policy?

Though these are necessary reforms entire act looks like a decoy. A decoy to shift the immediate attention away from the priced legislation, blunting the attack of opposition on Retail, LPG and scams

[What proportion of this change was also impacted by CAG’s perusal of studying the subsidies, and how they were/ are calculated?]


Early Elections

If the early elections are really in order as some rumors (and anecdotal incidents) suggests, these legislations had to be pressed into effect immediately before the proverbial flame-out.

And by definition Congress has given up on that election. The rich kid has to be in opposition before he makes it to PM.


Related: 

Puzzle of OMCs
The Real Hidden Monster
A view on FDI in Retail
Adamant government is a surprise.
Calling Mamta Banerjee's bluff!?

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