The Confederation of All India Traders (CAIT) drew the attention of prime minister Manmohan Singh towards the notification to allow 51 per cent foreign direct investment (FDI) in multi-brand retail which, in their opinion, will give unusual and extraordinary benefits to global retailers and prove to be draconian to Indian small industries.
CAIT also expressed its anger over the role of such industry bodies as the Federation of Indian Chambers of Commerce and Industry (FICCI), the Associated Chambers of Commerce and Industry of India (ASSOCHAM) and the Confederation of Indian Industry (CII), who have failed to highlight the fact that corporates will be the only beneficiaries if FDI in retail is allowed in India.
A sizeable number of associations comprising small industries are members of the bodies, and it is imperative that they object to such unjustified clauses as 30 per cent procurement of goods from small industries. However, CAIT was dismayed that they did not even inform the small industry about these provisions, thereby diluting the fundamental of the clause.
Praveen Khandelwal, secretary-general, CAIT, said, “It has been stated in the notification that foreign investors would have to procure at least 30 per cent of their material for India's small industries, but this requirement would have to be met in the first instance as an average of five years with effect from April 1 of the year the first tranche of FDI is received.”
“From the sixth year onwards, the requirement would have to be fulfilled on an annual basis. The purpose has deliberately been defeated to such an extent that now global investors in retail can easily win over the small industry in India which, over a period of time, will suffer self-death,” he added.
Khandelwal added, “Now global retailers will be free to outsource even 100 per cent of their procurement from anywhere across the globe during the first four years, and even the fifth year for that matter, and in addition, they would have to procure 30 per cent of their purchases from smaller Indian players at any point during the five-year period.”
“However, no yearly procurement has been made mandatory to the extent of 30 per cent from April 1 of the first year of commencement of the business. If global retailers outsource 100 per cent of the procurement in the first four years, they will outsource the cheapest goods from anywhere across the globe and flood the Indian market with such products,” he explained.
“This will create an uneven level playing field where Indian small industries, which have several limitations, wouldn't be able to compete with them, as a result of which their existence may be in peril. Some firms may be forced to shut down, and it could have an adverse impact on the jobs of those who earn their livelihoods from this sector. It will generate mass unemployment,” he said.
CAIT appealed to the prime minister to take serious cognisance of the matter and withdraw the said notification in the larger interests of the country. It was also suggested that the government carry out a debate with all the stakeholders and political parties to assess the merits and demerits of FDI in retail.
