Food Security Bill – Another bill for poor and dollars for congress


Please ask the Hon’ble PM to give a statement on a scheme similar to the Food security bill launched with much fanfare in 1975 to reduce malnutrition . This scheme was called the Integrated Child Development Scheme (ICDS) . It has been around for the past 38 years and now again another bill to remove malnutrition ?  Despite this scheme being around for about four decades, the scenario is as mentioned below ;

It is a matter of serious concern that the mean per capita consumption of calories has never crossed the minimum threshold  for intake ( 2400 Kcal in rural and 2100 Kcal in urban areas), and still about 3/4th of the households do not consumer the minimum calorific intake (Dr.D.K.Taneja, 2013, p. 21)

Protein Energy Malnutrition (PEM) most commonly prevalent in India . 45.3 percent of children under 3 years are under weight as per NFHS -3.  Also, as per NFHS-3 , 33 percent of adult women and 28.1 percent of adult men have below normal BMI (Dr.D.K.Taneja, 2013, p. 301)

According to the information procured from the Ministry of Women and Child development via RTI through their letter dated 25 July 2013 ( F. No. 10-1/2011-CD.II(Pt.II)

Total money spend in 11th plan on ICDS was Rs.43829.53 Crore

Total money spent in 2012-13 is 15701.50 crore

During the 12th Five Year Plan, a total approved allocation of Rs. 1,23,580 crore has been made for the scheme. Any additional requirement of funds under ICDS Scheme can be met through Supplementary Demands for Grants and savings. ( Source http://pib.nic.in/newsite/erelease.aspx?relid=93731 )

I think food security bill means  ‘another bill for the poor and dollars for the congress’ .

This bill might be another money-making scheme in the name of aam aadmi .. Already, all the FM channels have been bombarded with advertisements for the Food security bill making the intentions of congress very clear that this is a poll gimmick

Rajendra Pratap Gupta

http://www.commonmansblog.com

India entering a phase of recession


Recently , very few people noticed a four line news that , Moody’s Investor Service downgraded the so-called financial strengths ratings and the baseline credit assessments of;

1. Bank of Baroda

2. Canara Bank

3. Punjab National Bank

The outlook on Union Bank of India has also been changed to negative .

This is the first indicator of ‘Gloom & Doom’ that is set to hit the economy soon. Somehow , India has missed the recession in 2008 , but India will now enter into recessionary phase that is likely to last between 3 -6 years .

Somehow , the investments that came due to ‘overselling’ the India story like the SEZs, power plants , airports are fading off and most of the infrastructure companies are under a huge pile of debt. More NPAs and job losses will follow .

I see that not a single politician or an economist can put his head out and speak the truth that India is hitting a phase of recession ( probably , they do not know it , like the American crisis ). From a high of 9 per cent growth , we are already down by 45 % in our GDP growth . How else do we define recession ? Are we already not into a recession with companies laying off people every month and our growth slowing down by 45 % ?

Let us accept the situation and plan now. Else , India will be headed for an unprecedented crisis. I am not more worried with 2014 election as much as the rapidly falling economy . On many occasions ,i have pointed my friends across political parties that they would be better off losing 2014 elections than winning them , as there is enormous crisis to be faced, and a lot of dirty and hard work to be done to reverse the falling fortunes of this country and it is not going to be an easy 2014 for politics and politicians .

Let us consider this situation ;

India needs foreign exchange – USD . This can come due to ;

  1. Exports
  2. FDI
  3. Reduced imports

Now , exports might start shrinking or remain the same , so not much can be done on that front .

FDI comes in India for

1. Either setting up manufacturing

2. Investment in corporates / stock markets

All the money that comes in FDI needs to produce profits due to either exports or domestic consumption . Both are not going to happen the way investors look at ROI or IRR on their investments as the local consumption story is missing . India has already passed off 100s of millions of poor as ‘middle income aspirational class wanting to spend’ , and this was the biggest fraud of Sonia & MMS led congress government and 100s of corporates have lost millions of dollars every month and are now exiting India or slowing down

Only way the foreigners can make money is dabbling billions of USD in stock markets . So, now FDI’s constitute 11.2 % of GDP in India (2011-12) , and FIIs can play a spoil sport for Indian Economy and generate a balance of payment crisis in any trading hour !

Also, how i could i miss writing about another direct cash transfer scheme of Congress ! Party has got a new way to make money ‘ CSR spending’ under the new companies act .Now politicians can ask corporates for CSR spending and bang ! You know why this bill got passed so easily. And if i am a corporate and i wish to get a license or avoid something  OR  seeking favours like Robber Vadra,  i will give money under CSR to a politician’s NGO….. Wow , another MNAREGA, NRHM and a wonderful legal cash transfer scheme , So who says that XYZ paid bribes , now you cannot prove it , it was just a CSR spending . So, corporates , what are you waiting for , come buy your Rajya Sabha seat , it just cost 100 crores in CSR spending ! Come and block your seats now , it is election year , and sweet -legal deals available through all state leaders and through various national schemes , we have legalised bribes and you have an option to chose your preferred medium . Hurry, this is the last congress government.  Hurry up, come , before we run out of time as Elections are  likely in November

BTW, time for any sensible politician to come out with a job creation and wealth generation model for India before thinking of FDI or going back to 9 per cent growth

Earlier we realise , the better it is . India is into a recession now !

Rajendra Pratap Gupta

http://www.commonmansblog.com

Indian Economy – econoquake waiting to happen, with disastrous seismic cracks


Indian Economy – econoquake waiting to happen, with disastrous seismic cracks

It is a known fact that when symptoms become visible for a chronic disease, complications are tough to treat and the disease is in an advanced stage, but if the disease is diagnosed in earlier stages, the diseases are easy to treat and cure.  In India, now symptoms like fiscal deficit, current account deficit, increasing NPAs, inflation, unemployment, lack of investment sentiment, withdrawing of investors etc. are symptoms of a economic earth quake (what I call as econoquake), and it is like a disaster in slow motion for India.

The Indian economy has passed through its worst phase after independence since 2004 and the rot continues to grow.

USD vs INR

Here are some symptoms that tell how serious is the disease; Indian rupee was trading at 8 Rupee to a dollar in 1973, and has become Rs. 60 to a dollar.  Does it not indicate that valuations of this country, and the fact that the economy has weakened by about 750 % in the past 40 years!  Ideally, we should have grown and become 1 Rs. to 1 US $, but the poor leadership from these ‘Text Book economists’ (Manmohan Singh, Chidambaram, Montek, Subbarao) have brought down this great nation.  Let us analyze a little more in detail

All the data or facts I am quoting are from credible sources and are publicily accessible . (http://blogs.economictimes.indiatimes.com/Whathappensif/entry/rbi-data-shows-how-upa-killed-the-rupee?fb_action_ids=10151534667996725)

foreign-debt-trebles-in-a-d

If the 10-year RBI data on short-term foreign debt is analyzed, it is fairly obvious that the UPA destroyed the value of the Rupee.  In 2004 when the Vajpayee Government was voted out, the foreign debt at $ 112.4 billion was well covered by the forex reserves.  Nine years later it has grown by 350 percent to $ 390 billion and the forex reserves cover falls 25 percent short.

over-50-percent-debt-is-sho

However the rise of foreign debt is not the only reason why the Rupee collapsed from Rs 39 to a dollar to Rs 61 for a dollar during the intervening period.  Foreign debt is a necessary evil that is needed by developing countries to push forward their needs to fund foreign capital funded infrastructure.  Usually such addition of infrastructure results in long-term asset building that adds to improved productivity of the nation.  However in India’s case the rise of external debt has been primarily to fund the current account deficits catering largely to the working capital needs and funded through the short-term loan at higher interest rates.  This short-term debt component was very comfortable at just 3.9 percent of the Forex reserves when the NDA was voted out of power nine years ago.  By 2009 when the UPA II was re- elected it was around 17.2 percent and by March 2013 the short-term external debt rose to a whopping 33.1 percent of the Forex reserves, which had fallen to $ 292.65 billion.  With the reserves further dropping to $ 280.18 billion following RBI’s intervention to stem the Rupee slide in July, the ratio would have worsened.

Debt 1

Short term debts and the External Commercial Borrowings that would need repayment during this FY 2013-14 is high and would cause large outflow of dollars and put pressure on the currency intermittently.  For example during May 22 and June 19 there was a net debt outflow of $4.7 billion, one of the prime reasons why Rupee tanked.

These ECB’s and short-term debt have grown to an enormous 56 percent of the total debt by March 2013 almost 2.5 times what they were when the UPA came to power nine years ago.  As per RBI data short term debt payable during this Financial year is $ 96.7 billion while ECB’s with 6 month to 1 year maturity that need to be repaid are around $ 21 billion, and NRI deposits maturing during the year are $49 billion.  The Rupee is catching a cold because the total foreign debt to be repaid this year works out to a massive $172 billion that is around two-thirds the foreign exchange reserves.  Even if interim measures to stop speculation are taking by the RBI it will not address the inherent weakness of the system.  Rather it may enhance volatility, as speculative traders if restricted will move offshore to short the Rupee.

USD vs Chinese Yuan

Similarly, if we compare our neighbor, China with larger population, Chinese currency has become strong.  Though, I must admit, it is not a fair comparison!  But the essence is, India is also intervening to control the rupee and Chinese central bank also intervenes, but I guess they have done a better job and the Chinese currency has strengthened compared to US dollar over the past decade and the Indian rupee has not just been weakened, it has been ‘hammered’, and continues to be the worst performing currency in Asia.  We can compare Malaysian Ringgit, Singapore dollar or UAE Dirham.  All these currencies have strengthened against the Indian rupee

Why rupee will continue to fall?

Domestic markets are failing.

CDR gives an indication that the corporate sector is crashing!

http://www.livemint.com/Industry/h7u6wQngeSZ6jL8MfCBpGL/Restructured-loans-cross-227-trillion-pace-slows.html

The latest data from the CDR cell suggests that Indian banks added Rs. 15,016 Crore of restructured loans in the March quarter, about Rs. 9,000 Crore less than what they had done in the pre ceding quarter.  On a cumulative basis, total restructured loans crossed Rs. 2.27 trillion, or 4.4% of the total loans given by Indian banks.

Gross non-performing assets (NPAs) of 40 listed Indian banks rose to Rs.1.79 trillion in December fromRs.1.25 trillion a year ago, an increase of 43.1%.  In the past, the Reserve Bank of India (RBI) had cautioned banks about the need for enhanced risk assessment tools to monitor loan quality.

Defaults in Agricultural credit in another bubble?

http://www.livemint.com/Industry/ph30HumD1FPAGaBj0XCOyH/Kisan-Credit-Cards-Bad-loan-bubble-waiting-to-burst.html

A surge in exposure to farm debt through Kisan Credit Cards (KCCs) could emerge as a risk for India’s state-run banks, according to experts.

Subsidized loans are given to farmers through KCCs by state-owned banks.  Until March 2012, the outstanding amount on such loans was Rs.1.6 trillion through 20.3 million cards, as per the latest Reserve Bank of India (RBI) data.  This may have risen to around Rs.2 trillion, bankers said.

Agriculture is one of the largest sources of bad loans for most banks.  It is contributing 9.72% to the gross NPAs of SBI and 7% of Central Bank of India.  The nation’s largest lender SBI has the largest gross NPAs —Rs.53, 457.79 Crore, or 5.3% of loans, followed by Punjab National Bank (Rs.13, 997.82 Crore, or 4.61% of loans), Central Bank of India (Rs.8, 938.47 Crore, or 5.64% of loans) and UCO Bank (Rs.6, 711.29 Crore, or 5.53% of loans).

FDI is like mirage for UPA

Government’s efforts to promote India as an investment destination does not seem to be yielding fruits as FDI inflows registered 38 per cent decline to $22.42 billion in 2012-13 compared to the previous year.

It is clear that the UPA government is on the ventilator and no sensible MNC or investor is going to even announce investment for during this government.  Knowing well, that the next government will certainly not be either from congress or due to its support.  That is one major reason why we have seen in the last week POSCO cancelled its Rs. 30,000 Crore steel plant on July 16th, L.N.Mittal cancelled its Rs. 50,000 Crore steel plant on 17th July 2013.  This is a loss of Rs. 80,000 Crore worth of investment committed to India.  Normally, when the government is about to be re-elected, we know that practically, all the companies wants to wash its hands in Ganges, and get speedy approvals for obvious reasons.  A ‘Needy’ political party in power wants to ‘cash in’ and so does the ‘greedy’ corporates.  We have seen how business leaders get national awards like padamshree and padmavibhushan in the election years or the year preceding the election year … but this time, the scene is different.  No sensible business house, no matter how ‘greedy’ it is, will commit any investment before the next general elections.  So, I see no respite to Indian economy till 2014 end or may be, 2015.

FII’s the real culprits for rupee slide?  May be!

FDI Inflows in India and Outflows from India from 2007 to 2012: (amount in US$ billion)

 

FDI Inflows to India

FDI Outflows from India

2008-09

2009-10

2010-11

2011-12

 

2008-09

2009-10

2010-11

2011-12

 

Total

43.4

35.6

27.4

36.5

 

19.3

15.9

15.3

12.6

 

As a % of GDP

3.4%

2.6%

1.7%

2.0%

 

1.5%

1.2%

0.9%

0.7%

 

FDI Investment Stocks

125.2

171.4

204.7

203.9

 

63.3

80.9

96.4

108.8

 

FDI Investments Stocks as % of GDP

9.8%

12.7%

12.6%

11.2%

 

4.9%

6.0%

5.9%

6.0%

 

Country

2008-09

2009-10

2010-11

2011-12

Total

2008-09

2009-10

2010-11

2011-12

Total

Singapore

3.42

2.38

1.70

4.31

11.81

4.06

4.20

3.99

1.86

14.11

Mauritius

11.04

10.34

6.98

8.92

37.28

2.08

2.15

5.08

2.27

11.57

Netherlands

0.85

0.90

1.21

1.16

4.12

2.79

1.53

1.52

0.70

6.54

USA

1.80

1.94

1.17

0.91

5.82

1.02

0.87

1.21

0.87

3.97

UAE

0.25

0.63

0.34

0.33

1.55

0.63

0.64

0.86

0.38

2.51

British Virgin Islands

No data

No data

No data

No data

No data

0.00

0.75

0.28

0.52

1.55

UK

0.83

0.66

0.76

2.75

5.00

0.35

0.34

0.40

0.44

1.53

Cayman Islands

No data

No data

No data

No data

No data

0.00

0.04

0.44

0.14

0.62

Hong Kong

No data

No data

No data

No data

No data

0.00

0.00

0.16

0.31

0.46

Switzerland

No data

No data

No data

No data

No data

0.00

0.00

0.25

0.16

0.41

Other Countries

No data

No data

No data

No data

No data

7.65

3.19

2.65

1.23

14.71

Japan

0.41

1.18

1.56

2.75

5.90

No data

No data

No data

No data

No data

Cyprus

1.30

1.63

0.91

1.32

5.16

No data

No data

No data

No data

No data

Germany

0.60

0.63

0.20

1.46

2.89

No data

No data

No data

No data

No data

France

0.46

0.30

0.73

0.47

1.96

No data

No data

No data

No data

No data

References:

(1) OECD data on FDI in Figures as on January 15, 2013.

(2) Zenith International Journal of Business Economics and Management Research, July 2012.

(3) World Investment Report various issues.

(4) If there are any inadvertent errors in the data, it is regretted

Please see how foreigners are investing money in stock markets, and have taken over 100 Billion USD (108.8 Billion dollars, Which is 6 % of India’s GDP) outside India just in one year (2011-12).

How will our Finance Minister address the Balance of payment issue, which needs 75 billion USD?

11 % of GDP is in the hands of FDI / FIIs?  Are we safe?  Is our growth trickling down or trickling outward?  This is in complete deviation of the path of a self-reliant India propounded by our freedom fighters.  We are not building a West India company on the lines of the erstwhile East India Company?  Time to take a serious look at the data and take concrete actions.  It is a wake-up-call for India

Dr.Akash Mehta compiled this data on FII’s on my request.  Acknowledged with thanks Dr.Mehta.

Vehicle sales – another symptom of the anemic economy

Car sales in India fell for a record eighth month in row in June with a dip of 9 percent as economic slowdown and low consumer sentiments continue to hit demand, prompting industry body SIAM to seek stimulus package for the automobile sector from the government.

With actual sales in the first quarter of this fiscal turning out to be wide off the mark from what it had forecast in April, Society of Indian Automobile Manufacturers (SIAM) stayed away from revising sales projections it had made in April this year and stated that even those targets were unlikely to be met, except in two-wheeler segment.

According to the latest figures, domestic car sales stood at 1,39,632 units in June as against 1,53,450 units in the same month last year.

We know the problem.  So what next?

India has focused too much on FDI / FII’s to bring in dollars, and the capitalists countries are like Shylock (Merchant of Venice).  They will extract their pound of flesh. So, India got quick dollars from FII’s, and FII’s made quicker returns and exited the markets and today FIIs have 11 % of the investment in stocks, as I have given the data above.  The fact is that, a clutch of foreign investors can destabilize India by withdrawing their investment.  FIIs are short-term hedgers and they damage infringe long-term damage to our currency & country.  Small retail investors become bankrupt because of FIIs.  What came out as a myopic solution to our fiscal deficit and balance of payment crises has today turned into a major national security issue?

Economic Competitiveness: We need to focus on economic competitiveness.  We have lost in the last few decades.

Areas to focus, agriculture – we need to amulify agriculture (taking a cue from Amul’s experiment of cooperative movement in milk).  We need to support farmers.  Make a paradigm shift in modernizing agriculture, training, and equipping farmers to set up SME food processing units.  This should make us the top most processed food country in the world in the next decade.  The national highways project of Shri.  Vajpayee (Golden Quadrilateral Project) was the best step taken since independence for inclusive growth, and this must be pursued aggressively.  During NDA regime the road building was 20 KMs a day and under UPA it is down to a KM or two.  The Atal Behari Vajpayee government bequeathed a robust economy to the UPA.  Remember that the growth rate registered in 2003-04, the last year of the NDA regime, was an impressive 8.5%.  Foreign exchange reserves were plentiful.  General prices were well under control.  Share markets were booming.  And there was a general sense of well-being. Work on the Golden Quadrilateral highway linking four corners of India was on in full swing.  And various public infrastructure projects under the Public-Private-Partnership model were proceeding without any hitch.

Now, in the last year of the UPA-II, we are back to the Hindu rate of growth.  If the economy logs anything above 5% it would be a miracle

(http://www.sunday-guardian.com/analysis/back-to-where-the-economy-was-during-the-early-90s)

My personal prediction is, that we will be below 4 % in growth soon if the regime continues the same way and I have predicted it long back

(https://commonmansblog.com/2013/06/04/the-titanic-is-sinking-can-we-do-something/)

Tourism- spiritual tourism – Tourism is the next best bet after agriculture and we must focus on it by innovating in this sector.  I have detailed plan for creating millions of jobs and billions of dollars through employing matriculate youths in this sector.

Intellectual property (IP): India has become a sweatshop and nothing wrong in it, but we need to focus on building IP in science, technology, defense, & agriculture.  It is shame that India has not even built a software platform (operating system) and still relies on Microsoft and IOS.  Indians in software arena should take a challenge and build the best operating system rather than spending billions of dollars buying MS Office and Apple operating system or Google.  We need a search engine developed by Indians.  India spends billions of dollars on universities but the IP registered by just one company Texas Instruments (for the sake of giving example I am quoting Texas Instruments) from its Bangalore office might exceed the patents granted to researchers in Indian universities.  We need a complete over haul in our education systems that give the world the most valuable IPs, which can be monetized.

Geographical indicators (GI’s): We all are aware that many Geographical Indications like Darjeeling Tea, Mysore Silk, and Champagne across the world have become premium global products.  While protection of GIs is very important, it is all the more important to extract economic benefit out of registered GIs.  In India we have 184 Indian GIs has been registered till now but hardly a few of them have accessed global market.

On the other hand we are also seeing growing number of GIs from other countries like Peruvian Pisco, Scotch whisky, Cognac, Prosciutto de Parma, Tequila etc. have registered in India.

While it is understood that not every Indian GI has the potential of capturing global market, but many of them have.  However we have not seen enough initiative and support system for such promising GIs having healthy export market.  There must be a plan to build on the legacy of these GI’s, and targeted GI must be turned into a USD 10 billion global markets for Indians.

21062107

Boost manufacturing with a focus on SME’s:  Women’s employment has taken an alarming dip in rural areas in the past two years, a government survey has revealed.  In jobs that are done for ‘the major part of the year’, rural women lost a staggering 9.1 million jobs.  This emerges from comparing employment data of two consecutive surveys conducted by the National Sample Survey Organization (NSSO) in 2009-10 and 2011-12.  NDA, during 1999-2004, 60.7 million jobs were created while UPA Government, during 2004-2009, created only 2.7 million jobs.  (Data source: National Sample Survey Office).

Organic farming, Herbals & Nutraceuticals: The whole world is moving to traditional and complimentary medicine and India has a scientific traditional medicine dating back to 5000 years.  We can create rotation farming for herbals and organic foods and create millions of jobs and billions of dollars worth of exports.

Foreign policy: Neighbors can help.  We need not be hooked to G8 / 14/ 20.  It is time to have a strategic alliance in Asia, A-2 (India and China) on the lines of G-4, we need to create A-4, the big 4 Asian economies must come together to lead Asia.  This is where India must initiate moving from G-20 to A-4.

Lastly, it would not be wrong to say that lakhs of small and medium enterprises , and even 27 big corporate houses have 41 trillion rupee debts (http://www.livemint.com/Companies/7TnLNfHilL2UOkPVNku8UM/Kumar-Mangalam-Birla-is-the-highestpaid-director.html )  . So , this is a steriod induced survival for most of the corporate entitites be it small or big .More pain is expected by this year end. So the government needs to keeps its head low and overheads lower and find solutions to avoid NPA’s . Though, it is an another thing, that UPA has in itself become an NPA.

Rajendra Pratap Gupta

www.commonmansblog.com

Communal Party of India – AICC – Congress


Communal Congress- History repeats

Today’s headline in The Times of India ( 6th December 2011 ), “Centre bids to push Muslim quota ahead of polls in UP”

This news reminds me of  the 80’s , when Shri Rajiv Gandhi used to meet Shahi Imam of Jama Masjid before the elections,  for issuing a fatwa to Muslims to vote for Congress .

It is time that people realized the real communal party of India – AICC !

Rajendra Pratap Gupta 

Healthcare I Retail I Rural Economy I Public Policy

www.commonmansblog.com

 

 

FDI in retail – This is a harsh reality – Is FDI really a boon for India at this time ?


Government’s arguments for FDI in retail are a proof of the fact, that this government does not understand India, and looks at Indians from USA’s businessmen’s perspective. Congress government has become the biggest lobbyist for pursuing the business interest of nuclear & retail corporations from USA & Europe at the cost of India’s middle class

Today’s Economic Times (26th November 2011) headline ‘ Govt Sells Multi-Brand FDI with best bargains’ gives a list of reasons why the government is supporting, (rather pushing FDI ) in retail. Let me put the Common Man’s view and take on each of these arguments

1.     It will create 10 million jobs in the next 3 years

A) According to the CII report in 2007, ‘India will need 10 to 12 million skilled workers every year for the next five years to meet the growing demand from the support services and there is a need for strong intervention to ensure the availability of the workforce’. So is the government trying to say that it is only the retail chains that will create 10 million jobs in the next three years?

B) Let us examine how many jobs Wal-Mart created in America & how many jobs did Wal-Mart create in India for the past 3 years of operations both as a wholesaler and as a retailer ? How many jobs our Indian retailers like Future group, Aditya Birla retail and Reliance retail created in the past 3 years?  We will clearly see that they did not even create a million jobs!

C) Also, government does not talk how many Kirana stores will shut down in the next 5 years and how many homes will be denied of a source of income ?

D) Wal-Mart or for that matter any retailer works on the least number of workers per square feet (lean management structures ) ,and so it will kill the 50 Kirana stores thereby get at least 250 people out of jobs and then create 50 jobs per super market.  Is this factored in the statement? I am willing to prove this in the current retail scenario leave alone the scenario when the foreign retailers come in?

 2.     Several billion dollars of investment in retail

A) If retail is a great business, the government banks should give loans from domestic financial institutions and let the homegrown retailers grow and build scale and size and let the profits remain in India. Why should we give 51 % of the ownership to foreign players, as these people will sell to Indians and take the profits out of our country.  USA / Europe will solve their income and earnings problems and India will get into problems of high inflation and more volatile stock market. Also, Indian retailer being less than 50 % of their share in the retail will become servants to these MNC chains under the current 51 % FDI norms.

B) Why did the government not start with 26 % FDI in multi brand retail for the first five years? Why suddenly start with 51 %. Please justify?

C) Often it has been quoted that the foreign retailers will bring technical know how to Indian retail market and boost the economies of scale and productivity? Which technical know how is the government talking, it needs to explain? I have been a COO / Board member of a major fortune 20 company’s retail operations in India, and I can tell you that these foreign retailers only bring money and no other expertise! They work on high profits, highly automated environment and lean man power structures.  So government’s reason of the technical know how is fallacious and is showing that we Indians do not understand retail. Let us look inward and see our home-grown retailers like Future group and Aditya Birla retail .They are certainly growing . Government must bring out a detailed white paper on the so-called ‘Technical Know how’ these foreign retailers bring to Indian retail market?

D) With these billions of dollars coming in India, India’s real estate will become expensive thereby, contributing to keep the inflations levels high for the medium class not just for real estate but for all the sectors

E) Also, these billions of dollars are not charities to India or Indians . These are investments by retailers which follow a ROI ( return on investment concept ) for every dollar spent. So for sure , they people will invest in retail one dollar and take out 10 dollars from India over the next couple of years . Retail is mostly done on inventory management which is on credit from vendors . These retailers follow a credit cycle which ranges from 15 days to over month . So with a double-digit profit margin , these retailers will only be investing one time into infrastructure and then make money without investing at all ,as all the inventory is on a credit cycle . ‘Sell and pay’ is the mantra for these FMCG retailers ! Even the space which is rented by these retailers is leased to product companies for hefty display charges. These retailers charge a heavy fee for listing products in its store before selling .Our policy makers , wake up and understand the real dangerous game of FDI in retail and don’t get carried away by the billions of dollars of investment . It is not true . One time investment by these retailers will be a life long profit for their parent company’s home country

3) Farmers will get more than 12-15 % of the consumer price they get for fruits and vegetables

A)    In reality, farmers will never get a higher price but will be exploited by these MNC Chains  .In fact, these MNC retailers will push in for stringent quality checks and other prohibitively expensive conditions for these farmers thereby, forcing the poor Indian farmer out of his livelihood. Most of the retailers will take to contract farming, and thus the farmers will be reduced to being laborers in the hands of these MNC chains.

B)    The History of these MNC chains has shown the these chains are out to squeeze blood out of their vendors and farmers will certainly be vendors for these MNC chains and nothing else . Wal-Mart and other retailers are facing dozens of cases of exploitation and gender bias in developed country where the legal system is strong . Imagine what will happen in our country ?

4) Consumers will get producers at Cheaper Prices, as competition will bring down the prices

A)    Even without competition the prices will come down by a few paisas or may be a few rupees, but, all these chains will increase the MRP  (Maximum retail prices) of the products, and so the consumer will end up paying more than what s/he pays today. Take an example of the MNC pharma companies. Since there is a ceiling of price increase by 10 %, so every year the pharma companies increase the prices by 9-9.5 % and thereby, circumventing the price increase regulations.

B)    It is clear that the consumer is not a winner, no one pay’s from its pocket OR profits to the consumer. If there is a price increase on the input costs, the same is passed on to the as an increased MRP or the quantity is reduced for the same price. So the consumer’s pocket is always ripped apart by these retailers

 

5) 30 % mandatory sourcing from small-scale sector will help small industry

A)    This has not been a convincing argument, so we are trying to tell that a small company out of Varanasi will compete with HUL and win? Come on Dr.Manmohan Singh, are you trying to fool Indians? I understand that you studied at Oxford, doesn’t mean that rest of the Indians are going to get carried away with these statements

B)    Also, these MNC chains will put conditions that are either too stringent to be complied to or prohibitively expensive to be implemented by these SME’s, and so finally, these chains will find a reason to evade buying from these SME’s. Also, that the SME’s are not just limited to India, but across the world, so probably, Chinese SME’s would benefit more than Indian SME’s

C)    These retailers charge a heavy fee for listing products in its store before selling. How will SME’s afford that ? The fee currently for Indian retailers varies from few thousand to over a lac for products for companies . SME’s will never be able to benefit from these chains even if they are able sell to them, as they will pay for listing and then cry for the payment – which will depend on the vendor payment cycle varying for weeks to months and small vendors (SME’s ) cannot survive this big box retail game

6) 70 % of retail is in food items and these are mostly sourced locally

A) If 70 % of the retail is in food items and this is sourced locally, why allow 51 % of the profits to go out of India? So FDI should not have crossed more than 30 %!

B) Local Indian retailers (existing Kirana stores ) must be trained to deal in these food items and deliver better value for the country and its economy.

C) This argument of the government goes against its own policy. So whereas, 70 % of the products would be food items, 51 % profits from these categories would go out of our country, thereby, clearing pushing the inflation higher perpetually for the next couple of decades. As there will be less money in our country chasing more goods ( as money would have found its way to parent MNC)  – Simple economics Mr. Kaushik Basu!

 

7) Ikea already sourcing 30 % of inputs from India

A) So if Ikea is already sourcing 30 % inputs from India, let other chains also do the same before starting their shop in India.

B) If these MNC chains buy from India and sell in India and take 51% of the profits abroad, what is India’s gain? The government must come out clean on this?

8) Approval only after investors meet all conditions, including 50 % investment in back end

A) This statement of investment in backend is a foolish statement. Already 100 % FDI is allowed in wholesale, why justify it for retail and link it up? Let these retailers first invest in back-end for the first five years and next five years invest in front end

B) Government has FCI (Food corporation of India) godowns and what is the government doing for enhancing the efficiency of this biggest warehousing corporation – Can this FCI not  become the Cash and Carry for small retailers ? A drastic improvement in supply chain of FCI godowns can bring down the wastage of food grains by hundreds of tons if not thousands of tons. Please pursue the project of Mr.Atal Behari Vajpayee of Golden Quadrilateral and link up all the FCI godowns, and start a national Agriculture produce transport corporation to start weekly transport during the harvesting season from the farms to FCI and nearest towns. The farmers co-operative and IFFCO should manage this. With this, farmers will not only get good prices but the wastage will be reduced substantially. Why are you looking at FDI to solve this simple problem of inflation . This can not only solve the inflation problem but also improve productivity at all levels , create more jobs ( may be , millions of low & middle-income but high productivity jobs ) and reduce inflation .

C) Learn from ‘operation flood’ by AMUL and how it solved the shortage of milk problem of our country and created a world-class brand. See what M.S.Swaminathan did with ‘Green Revolution’ to increase the production of grains in our country. Please do not justify that foreign retailers will help you bring down inflation. Remember that ‘Inflation is reversible but FDI is not’ and do not sell our country to foreigners for a short-term gain of a few billion dollars to our economy. This is anyway not the dollars to our economy, but the investment of dollars to take back dollars. I am sure that all these MNC chains a ROI (return of investment) method of calculating the investment returns. So I wish to ask our government that what does the ‘retail FDI dollar’ bring to India, which Indian government cannot do with its own money?

9) Government will have the first right over procurement of farm produce

A) This statement has no value. Government has shown no concern for farmers except considering them as voters and leaving them at the mercy of rain gods.

Questions that the government must answer

  1. What has the government spent to train local Kirana stores in the past five years?  When yesterday only the government asked for Rs.56000 crore of the tax payers money despite a huge budget deficit, why did it not ask for even a Rs. 1000 crore for retailers training and up gradation?
  2. Why did the government not start with FDI in retail at 26 %? Why suddenly at 51 %? Has the government become a lobbyist for MNC chains?
  3. Has the government done its own independent studies for the impact of retail chains on Kirana stores?
  4. The biggest plank of allowing the FDI is that inflation will come down. So despite allowing FDI, if the inflation does not come down, will the government revoke FDI in retail? Does that rider appear in the CP (Condition Precedents) for allowing FDI in retail?
  5. Government needs to prove that FDI in retail can create million jobs every year. How and why, and which retailer will do that. All this must be put in the business case for allowing FDI? Why is government becoming the spokesperson for these MNC retail chains? What is the deal?
  6. Where and how much wills the retailers invest in back-end? This has not been specified?
  7. Why has the government not capped the retail margins of foreign retailers in India?
  8. See point 5 B, why have women self-help groups / handicrafts been excluded from being the beneficiaries of the retail entry
  9. Why are retailers not mandated to invest in retail training ?
  10. More questions to follow

Rajendra Pratap Gupta

Healthcare I Retail I Public Policy

Email:  office@rajendragupta.in , office.rajendra@gmail.com

Post Pone FDI in retail for another five years


Prime Minister Dr. Singh,

Yesterday , I attended the meeting of CAIT ( Confederation of all India Traders ), I felt really bad seeing the plight of the traders, and the hell they would be subjected to , should FDI be allowed in India at this point .

Over the last few months, you have rallied all associated departments and ministries to build a case for FDI in retail. I feel sad that you & your government have ignored the fact , that FDI in retail at this juncture will put a big question mark on the means of livelihoods of over a Crore traders in the country .

I have seen that you / your government has been saying that inflation will come down as Wal-Mart , Carrefour , Tesco’s of the world come to India ( Wal-Mart has already come in few years ago ! ).

Prime Minister , remember, that Inflation has not come down despite Wal-Mart being in India . Your government’s logic that supply chain will get strengthened and prices will fall is fallacious . FDI in retail is a wrong justification for strengthening the supply chain , as FDI in supply chain is already allowed, and a lot of wholesalers are already around and more can come in without needing FDI – Why are you fooling around Manmohan ji ? How low will you stoop now to push to agenda of foreigners !!

Even those who are operating Cash & Carry business , are issuing cards to individuals to buy from them, thereby , stabbing the small retailers . Shut down Cash & Carry immediately after a proper investigation . I go to Sam’s Club in the US ( For your information , Sam’s Club is Wal-Mart’s Cash & Carry Venture in the US). Anyone can buy a card for USD 40 and start buying from Sam’s Club. I have gone twice with my friends to Sam’s club and brought goods from the store , my friends are not retailers , but Indian professionals working in the US . So when these retailers do the same in India , what will we do ???

Your government has failed to understand the cause of inflation , and firstly , you said that recession caused inflation ; then recession got over but inflation did not come down. Then you said that irregular and deficient rainfalls are the cause of inflation. Last year , we had good rains and inflation still did not come down. Realizing that there was no answer with your US educated ( read brain washed ) consultants ( Rajan ,Montek, Kaushik & Sam ) , your government said that inflation was due to high growth and it would continue . Study our next door neighbor – China . They have had high growth with less than 5 % inflation !! All your predictions have failed !!

Also remember dear economist, that ‘inflation is reversible but FDI is not’ . What I mean to say is that , when BJP comes to power, it will bring down inflation , but if you permit FDI ( As your government is hell bent on it ) , we will not be able to reverse FDI . So think before -hand !! Don’t jump like the nuclear deal & do another fiasco !!

Sonia Ji is shouting aloud on NAC podium for poor people on one side, and on the other side , both of you have already done a deal with major international retailers , and are hell bent on cracking the back bone of small retailers by allowing FDI

Government has a flawed policy with regards to FDI, as you are saying that you will allow FDI in top 35 towns to start with. This goes contrary to strengthening the supply chain. If you really want to strengthen the supply chain then please ask this big giants to start retail in ‘C’ class towns and then come to B & A class towns !!

Your statement that farmers will get better value because of FDI in retail : Wal-Mart’s of the world are known for extracting even the ‘blood’ of suppliers !! Their labor policy record needs to be closely examined , and how many times they have been fined !

Also, Wal-Mart is failure in Japan ( social dumping & doubts about its quality ) , Korea ( Wal– Mart failed to understand local customers) , Brazil ( Lack of understanding about local culture ) & Germany ( due to cultural insensitivity ) .

I am producing an excerpt from a report

‘Walmartization does not travel well’ Clearly, neither Wal-Mart’s business concept nor its social dumping – the so-called Walmartization – work in developed economies with a social dimension. Many consumers shun the Bentonville giant and prefer to do their shopping in stores where they know that workers are treated correctly and with dignity. There is also more and more uneasiness and suspicion about many of the products sold. Squeezing the last drop from suppliers can hardly promote safety and quality. There is also a growing aversion against buying, consuming and using products which could well have been made under inhuman conditions. That the tide is fast turning against Wal-Mart at home has not gone unnoticed abroad. Consumers start to know that the retail giant denies its American workers their fundamental rights, and many of them vote with their legs, going to other stores if they have a choice. The poor business results in Germany, Korea and Japan should be taken seriously in Bentonville

Another report : This article appears in the November 21, 2003 issue of Executive Intelligence Review. Wal-Mart Collapses U.S. Cities and Towns by Richard Freeman

During the last 20 years, Wal-Mart has moved into communities and destroyed them, wiping out stores, slashing the tax base, and turning downtown areas into ghost-towns. This is accomplished through Wal-Mart’s policy of paying workers below subsistence wages, and importing goods that have been produced under slave-labor conditions overseas. Often, communities will even give Wal-Mart tax incentives, for the right to be destroyed. Wal-Mart both reflects, and is, a major driving force for America’s deadly implementation of the Imperial Rome model. Unable to produce physical goods to sustain its own existence, the United States, like Rome, sucks in imported goods from around the world, using, in this case, a dollar that is over-valued by 50-60%. America has been transformed from a producer to a consumer society.

I believe that Wal-Mart destroyed American Economy and now it is here to kill ours !! Also, since we know that Wal-Mart is a failure in four countries , please produce a report on those four countries .

Also, let us examine that how many small mom & pop stores have shut down with the advent of Wal-Mart in the United States ? Similar study we must do in China .

Let me also tell you why Biyani’s & Ambani’s of the world are wanting FDI ?

Let me ask these retailers one question ? If the retail trade is so good and profitable , why they have the problem in raising money , investing and growing their business – why do they need foreign investment ? The talk that these MNC retailers bring latest technology is also misleading , as Indian retailers are working in a different environment and all foreign CEO’s have been an utter failure so far in India . You can see the example of Reliance Retail ; How many CEO’s have been brought from outside India in the last four years ? I understand that recently a new CEO was hired from Wal-Mart China !! These traders are actually looking at exiting the business by selling their business to these multinationals to make a quick buck !! That’s the real reason they need FDI .

Once FDI comes , farmers will cry for a good deal and Wal-Mart would never give them a fair deal . On one side , farmers are forced to sell land and other side whatever is left with land & cultivation , they would be forced to sell to these MNC chains at a wafer thin margin .

Congress is a killer party for the poor !! Prime Minister Singh , where is your plan to upgrade the current Kirana stores ? Why are you not excited with their welfare . Give them FDI ( Finance from domestic institutions ) , and provide them training .

I call upon Shri Nitin Gadkari , President BJP to stand behind these standalone Kirana store and oppose FDI . We should post pone FDI for another five years and then revisit the issue. A massive peaceful agitation is called for to stop FDI in Retail for the next five years .

Mail is marked to Montek, Raj Jain of Wal-Mart , CAIT and all leading retailers & political parties in India

A Common Man

Rajendra Pratap Gupta

http://www.rajendragupta.wordpress.com

Nehru Gene , Congress & Faulty Policies – Let’s move on or else suffer more !!


March – April meant a lot of travel and meetings for myself , but the most interesting part were a few conversations that I will never forget !!

Whenever I am travelling to places within India and abroad , I make sure that I interact with people and ask them how much they know of our great country and what they feel about it . I am always proud to be born in this great country . May be , this drives me to find some answers to questions that need not be stated here !!

One conversation I had was  with a senior columnist in Kashmir during my visit last month . While we were talking , the issue of partition came up ( this topic is close to my heart as my mother was born and brought up in Lahore , now in Pakistan ) .

This columnist had an interesting point : He mentioned that due to the insatiable lust for power in Nehru , India got divided . His belief was that, Jinnah was at his fag-end due to cancer  , if only Nehru would have waited for one more year ( It is not good to have a wish that one dies of cancer but…)  , we could have saved ourselves from partition . The columnist went on to add , how could India leave Khyber pass and partition India and give away the pass to Pakistan ;The only way to reach Europe ?? I do not know geography so much , but he had an interesting point !

Other discussion I had was with my cab driver on the way from Washington DCA airport to the hotel . I figured out that the driver seemed to be from our part of the world , So I asked him where he belonged to ? I was right , he was from Pakistan but settled in the US for over 28 years !! While we kept talking about our countries before Partition and the sad story of strained relations now . He shared some very interesting information of why India got partitioned ? 

According to this cabbie . India had the maximum number of Muslims , and Nehru & Congress party knew very well that,  if India remained united , the vote of Muslims would swing to Indian Muslim League and not come to congress , so Nehru used his proximity with Edwina Mountbatten and planted the thought of partition in Jinnah. Well, I never thought of this angle !! Further this cabbie informed that, if you see the history of Jinnah a few years before freedom , he was never in favor of a partition . It was a congress and Nehru’s game plan and they never wanted to share a few states with IML ( Indian Muslim League ), which would have garnered power in some states, as some states had Muslims in majority , and Hindu’s & Muslims lived in complete harmony .

I completely empathise with this cabbie . I can only state that my mother’s family stayed in Lahore and Karachi , and I have seen my grandfather writing letters in Urdu , it never was an issue . It was planted by congress and today both nations are paying a price for the naked & insatiable lust of Nehru & his congress for grabbing power in 1947 .

The amount of money both these nations have spent on armed forces and conflict would have made this region developed in just 25 -30 years after freedom . But what we got was freedom for Nehru family to rule this nation and not for India !! Now we can well understand why Gandhi ji was in Calcutta during Independence and not with Nehru !! Gandhi ji died at the right time. Had he been alive , he would have revolted against Nehru .

AICC should have been dissolved after independence : Gandhi ji was never in favor of AICC continuing after freedom , In fact , he made a suggestion that since the objective of the congress were achieved by getting freedom from the British , it must be dissolved . But we know that Nehru had a different plan and India continues to ruin under this party !!

One of the interesting viewpoints I can share is from LKY ( Lew Kuan Yew , Father of Modern Singapore ). He has openly criticized Nehru for aping the central planning of the Soviet Union . LKY went on add that Nehru was a good writer & poet but not a great leader for India . Nehru kept promoting the non-aligned movement for the developing world but strongly sided with the soviet Union ( that is , he said one thing and did just the opposite , this is what I call the ‘Nehru Gene’ , which by the way is a legacy of the Gandhi family and its congress ) , and in the end, Nehru  caused more harm to India than any other leader ! Nehru had a great opportunity to change the course of the nation immediately after freedom as he had a free hand and people believed in him , but he missed the opportunity .

Indians know that Nehru was the one who took Kashmir to United Nations , he was the one who promoted industries and not SME’s & agriculture ! Nehru guided India towards a disaster with his short-sighted policies ‘Nehru gene’ still rules the Gandhi family and the congress, and it is time to let this party be out of power for at least two terms so that the country can be brought back on track

Rajendra Pratap Gupta

http://www.rajendragupta.wordpress.com