Obama, FDI, Manmohan Singh and lies

For U.S. President Barack Obama there could be nothing more cheering. The ‘underachiever’ now goes to the presidential polls with a lot of confidence — India’s decision to open up FDI in multi-brand retail comes as a shot in the arm for the beleaguered American economy and will obviously boost his poll prospects. 

Mr. Obama certainly knows what is good for the U.S. economy; Prime Minister Manmohan Singh also knows what is in America’s interest. Mr. Obama, for instance, wanted to stop outsourcing to protect U.S. jobs. No amount of persuasion from India changed his mind. Similarly, knowing how important FDI in retail is for him, he had pitched for a new wave of economic reforms. It was surprising to see Mr. Obama telling India what is good for us.

Aided and abetted by TIME magazine and credit rating agencies like Standard&Poor’s, Fitch and Moody’s, India finally buckled under global pressure. What is little known is that India was also under a G-20 obligation to remove all hurdles to the growth of multi-brand retail.

But is FDI in retail really good for India? Will it improve rural infrastructure, reduce wastage of agricultural produce, and enable farmers to get a better price for their crops? While a lot has been said and written about the virtues of big retail, let me make an attempt to answer some of the big claims. 

Agriculture: The Prime Minister has repeatedly projected FDI in retail as a boon for agriculture. Unfortunately, this is not true. Even in the U.S., big retail has not helped farmers — it is federal support that makes agriculture profitable. In its last Farm Bill in 2008, the U.S. made a provision of $307 billion for agriculture for the next five years.

Where is the justification for such massive support if big retail was providing farmers better prices? And let us not forget, despite these subsidies studies have shown that one farmer in Europe quits agriculture every minute.

The second argument is that big retail will squeeze out middleman and therefore provide a better price to farmers. This is again not borne by facts. In the U.S., some studies have shown that the net income of farmers has come down from 70 per cent in the early 20th century to less than four per cent in 2005.

This is because big retail actually brings in a new battery of middlemen — quality controller, standardiser, certification agency, processor, packaging consultants etc. It is these middlemen who walk away with the profits and the farmer is left to survive on the subsidy dole.

Monopolistic power enables these companies to go in for predatory pricing. Empirical studies have shown that consumer prices in supermarkets in Latin America, Africa and Asia have remained higher than the open market by 20 to 30 per cent.

And finally, the argument that multi-brand retail will provide adequate scientific storage and thereby save millions of tonnes of food grains from rotting. I don’t know where in the world big retail has provided backend grain storage facilities?

FDI is already allowed in storage, and no investment has come in. Let it also be known that even the 30-per-cent local sourcing clause for single-brand retail has already been challenged and quietly put in cold storage by the Ministry of Commerce. 

Employment: The Indian retail market is estimated to be around $400 billion with more than 12 million retailers employing 40 million people. Ironically, Wal-Mart’s turnover is also around $420 billion, but it employs only 2.1 million people. If Wal-Mart can achieve the same turnover with hardly a fraction of the workforce employed by the Indian retail sector, how do we expect big retail to create jobs? It is the Indian retail sector which is a much bigger employer, and big retail will only destroy millions of livelihoods

State government’s prerogative: Very cleverly, the Central government has allowed the State governments the final say in allowing FDI in retail. This may to some extent pacify those State governments opposed to big retail. However, the industry is upbeat and knows well that as per international trade norms, member countries have to provide national treatment. Being a signatory to Bilateral Investment promotion and Protection Agreements (BIPAs), India has to provide national treatment to the investors. Agreements with more than 70 countries have already been signed. State governments will, therefore, have to open up for big retail. Industries will use the legal option to force the States to comply.

And more importantly, let us look at how the virus of big retail spreads, even if the promise is to keep it confined to major cities. Recently, a New York Times expose showed how Wal-Mart had captured nearly 50 per cent of Mexico’s retail market in 10 years. What is important here is that as per the NYT disclosure “the Mexican subsidiary of Wal-Mart, which opened 431 stores in 2011, had paid bribes and an internal enquiry into the matter has been suppressed at corporate headquarters in Arkansas”.

In India, we are aware that Wal-Mart alone had spent Rs.52 crore in two years to lobby, as per a disclosure statement made in the U.S. It has certainly paid off.

Devinder Sharma in Ground Reality and The Hindu

A slap that failed to stir the nation

The day Food and Agriculture Minister Sharad Pawar received ‘the slap’ I and Sharad Joshi were speaking at a national conference of farmers in Haridwar. A little after lunch, Swami Ramdev walked in to take his seat on the dais and expressed his apologies for being late. He said he was late because he had got busy responding to media questioning on the thappad.

The moment he gave out the news of the ‘the slap’ there was a round of applause. I think the clapping and cheering that followed was louder than the applause any one of us had received during and after our presentations. Meanwhile, the stream of messages on my mobile seemed never ending. My twitter too was flooded with congratulatory messages. I am aware that howsoever we may strongly condemn the incident, which was the politically correct thing to do, the fact remains that there was a sense of jubilation all around.

For a country reeling under an unprecedented price rise, corruption and economic policies that benefit only 1 per cent of the population, ‘the slap’ was an expression of the simmering anger and increasing frustration. While the more daring have picked up the gun (in the Maoist-affected areas) against the inequalities being continuously perpetuated with impunity, the liberal and the educated in the urban centres too are getting restless. I agree with Shobha De when she says ‘this is not about Sharad Pawar. He just happened to be the man at the receiving end of the most recent slap’.

Please do not get me wrong. I am not advocating throwing shoes to be a democratic form of dissent. But at the same time, I want you to think, and think deeply, as to why this democracy finds nothing disturbing when farmers kill themselves in order to draw the attention of powers that be to their plight. Such arrogance and indifference in a people’s democracy can’t go on for long. “The slap’ and the chappal cannot be simply dismissed as the work of a mentally unstable person. It is an expression of growing anger among the masses. Let us not wait for an Arab spring to force the Indian democracy to truly respond and represent the people. It is a question of the forgotten 99 per cent. #

Devinder Sharma in Ground Realities. Here.

Debt-ridden Kingfischer Airlines to get a bailout package; indebted farmers are left to die.

Kingfischer Airlines chairman Vijay Mallya is in trouble. His airline awaits an emergency rescue. Kingfischer Airline suffered a loss of Rs 1,027 crore in 2010-11 and has a mounting debt of Rs 7,057.08 crores. With banks reluctant to give more cash to Kingfischer Airlines, Vijay Mallya has turned to the government.

Civil Aviation minister Vayalar Ravi has been quick to make a public pitch to bailout the debt-ridden company. "I will meet the Prime Minister on his return to the country," he told the Indian Express. "I will also talk to the Finance Minister so that some assistance from the lead banks is granted. Closing down the flights affects the travelling public".

Ironically, in the past one month more than a hundred farmers have committed suicide in Andhra Pradesh, Vidharba and Kerala. All these farmers took the fatal route to escape the humiliation that comes along with mounting indebtedness. According to the National Crime Records Bureau 15,964 farmers committed suicide in 2010 alone. Put together, more than 250,000 farmers have taken their own lives during the past 15 years. Growing indebtedness had pushed them to the brink.

I haven't seen any urgency on the part of the successive governments or the policy planners and mainline economists to provide a bailout package to the beleaguered farmers. I don't understand why the serial death dance in the countryside does not evoke any reaction while all hell breaks loose when a big company goes bankrupt. Aren't the poor farmers human beings? Why is that they don't need even a word of sympathy whereas all aviation experts/planners and economists are making a strong pitch for bailing out a debt-ridden airline?

Devinder Sharma in Ground Reality. Here

Occupy Dalal Street in India

The screaming headlines provide insight into the dichotomy that prevails in our society. It is reported that in Chandigarh alone (in northwest India) Rs 80-crore worth of gold ornaments and nearly 800 cars were sold on the occasion of Dhanteras. Far away in Patna, Rs 400-crore were withdrawn on the same day from ATMs. It seems buying metals on this auspicious occasion had beaten all records.

Most families consider Dhanteras to be an auspicious occasion to buy gold and silver. Unfortunately for them, the prices of these precious metals have gone through the roof in the last few months, making it difficult for many to buy even a coin of few grams. Completely unable to comprehend the reasons behind such high price-rise, many of them can be heard asking, “Why have gold prices increased so much”?

Little do they know that the unprecedented escalation in gold prices is only because of speculation in which just one per cent of the investors are raking in huge profits while 99 per cent end up paying through the nose. This in short is the essence of the slogan, ‘We are the 99 per cent’, that is sweeping across the continents. More than 950 cities in 82 countries have seen thousands of people streaming in to the roads, squares and the parks to protest against economic inequalities. What began as a silent sit-in by a handful of protesters in the Wall Street -- the financial capital of the world -- New York a month back, has now spread like a wildfire.

In India too, some groups, including the Communist Party, have launched of the Indian version ‘Occupy Dalal Street’ from Nov 4.

Well, before we follow the global trends let me take you back to the days when petrol price internationally had shot up to $ 140 a barrel. This was barely two years back in 2009, just before the world witnessed an economic meltdown. I remember even Prime Minister Manmohan Singh saying that he wasn’t sure whether it was because of a slump in production or rise in demand. The fact is the stupendous rise in oil prices was not because of supply-demand constraints. It was simply because of speculation in trading. The companies which have invested in its stocks on the Wall Street try best to garner more profits.

Oil prices subsequently slumped to a low of $ 40 a barrel. From $ 140 a barrel to $ 40 a barrel certainly proves that demand had nothing to do with prices. It was all in the game of speculation.    

Devinder Sharma in Ground reality. Here

Onions, exports and tears

Within 11 days of imposing a ban on the export of onions, the powerful traders lobby forced the government to lift the ban. Succumbing to pressure from the onion traders, who normally cry hoarse in the name of farmers, the speed at which the onion trade made the government to bend backwards is a pointer to the monumental failure to curb food inflation.

For over 4 years now, ever since food inflation has hit the roof, I haven’t seen so much of political activity as I have observed in the last few days. Triggered by protest by Nasik onion traders, who had refused to partake in daily auction to demonstrate their anger against the sudden imposition of exports ban, the NCP chief Madhukar Pichad had first written to Prime Minister Manmohan Singh and the Commerce Minister Anand Sharma. Maharashtra Chief Minister Prithviraj Chavan had deputed his Agriculture Minister Radhakrishna Vikhe-patil and some of his colleagues to meet Finance Minister Pranab Mukherjee and other concerned ministers.

Devinder Sharma in Ground Reality. Here

Year 2008-09
Onion production: 13.56 million tonnes
Fresh onion export: 1.67 million tonnes
Raw onion that is dried and exported: 0.19 million tonnes
Total raw onions feeding into exports: 1.86 milion tonnes or approximately 14 percent of the country's production, which is huge for any single commodity. This naturally makes exporters a very powerful lobby. And when exporter join hands with hoarders (in many cases they are the same), they are unstopable. This is what has happened this year as I found during my tour of APMC mandis earlier this year.

Q. Who wants ban on onion exports?
A. Govt. because it wants it to cool down prices and dried onion exporters as they are unviable if price paid to farmer goes above Rs. 10/kg.

Q. Who don't want a ban on exports?
A. Farmers, hoarders, exporters. The latter two work in tandem while the former plays into their hands with the false hope that s/he would get a higher price. Exporter gains from higher international prices, hoarder from temporary spike in domestic prices, which is why both do not want a ban on exports. Between the two, hoarders gain more as opening up exports gives them a legitimate reason to further jack-up prices by claiming supply constraints. The farmer, as usual, goes back home with barely 2.5 percent of the retail price of his/her produce.

Q. Why does the government ban exports?
A. Because it does not want to act against hoarders. Free market principles does not regard hoarding as illegal and the govt. is following them. On the other hand, the same govt. goes against free market principles and bans exports to increase supply into domestic markets and cool prices because this is politically more palatable and is also easier to enforce.

Q. Does this work in principle?
A. At times it does. The price-crisis period is generally during Sep-Oct and this is when hoarders make a killing. Kharif onion has higher moisture content as compared to Rabi onion and therefore the shelf life is less. Due to this reason exporters also compete against hoarders during this period as they want to ship out their stocks before they spoil.

Q. Why did Pawar open exports this year?
A. One, lobbying by exporters-hoarders lobby. Two, even as I am writing this, farmers in Nasik district are sitting on roadsides with piles of onion which they are unable to sell at anything more than Rs. 2/kg (I have asked a consultant out there to take a few pics and mail them over. Will share them as they arrive); Pawar does not wish to be pelted with onions second time in a row. Politics rather than a non-existent supply-demand mismatch is what dictated the govt.'s hands.

Q. Will farmers now gain since exports have been cleared?
A. Nope. They will still be forced to sell their produce at Rs. 2/kg or marginally higher.

Bhaskar Goswami of New Delhi comments in Ground reality. Here and Here

Is India's GDP growth for Real?

Now, consider this. Assume that the 2009 drought had not happened. With the monsoon behaving normally, foodgrain production would have hovered around 232 to 234 million tonnes. If the foodgrain production had remained around twhat was achieved in 2008-09, this year's foodgrain production would not have shown a quantum jump of 14 million tonnes. Under the best of conditions, India could have claimed an increase in foodgrain production by say 2-3 million tonnes.

If the foodgrain production last year had remained at 230 million tonnes or more, the agriculture growth this year would not have been 5.4 per cent but somewhere in the range of 0.5 to 1 per cent. If the farm growth rate had remained at 1 or a maximum of even 2 per cent, the country's GDP would have been around 6 per cent.

The GDP estimates for 2010-11 therefore are fake.

As I said earlier, mere fluctuations in foodgrain production is not growth. In agriculture, it is wrong to compute growth based on annual production figures (now it is being done on a quarterly basis). Growth in foodgrain productions has to be estimated on a long-term basis, in any case not for a period less than an average of 5 years, to know whether there has truly been any growth or not.

Devinder Sharma in The Huffington Post. More Here.

Bhopal Gas Tragedy, Manmohan Singh and Obama

I thought the day Bhopal verdict came, Manmohan Singh should have stood up and addressed the nation. He too could have assured the people that he will leave no stone upturned to bring the guilty, including the corporates involved, to pay for their misdeeds. Like Obama, he too could have assured the nation that he would ensure that Union Carbide/Dow Chemicals/Eveready pay for the human lives lost, maimed and also for the toxic clean-up.

It requires a courage of conviction to stand up and be counted.

Manmohan Singh could have promised to also go in for a political clean up. He should have sacked by now P Chidambaram, Kamal Nath, and Montek Singh Ahluwalia for being party to the exemption that Dow Chemical wanted. He should have simultaneously launched an investigation into what went wrong, and that includes the faulty lines in the Indian judiciary, and at the same time taken all political parties into confidence to bring corporate accountability. People have the right to know the names of political leaders, bureaucrats, judges, and the business tycoons who betrayed the nation. Even if it includes former President Giani Zail Singh and the former Prime Minister Rajiv Gandhi, so be it.

After all, Prime Minister is the head of the government. He can make the nation, and its judiciary, behave. He does not have the option of any excuses. He must deliver or be made to quit.


The fact is that India has no standards. Call it a 'systemic failure', the fact remains, as intrepid journalist Rajdeep Sardesai often reminds us: "is hamam main sab nange hain" (everyone is naked in this spa). Indians lack compassion, and are selfish to the core. Everyone, more so at the top, is trying to exploit the lesser children of the god. The more the bold and powerful you are, the more you are willing to slit the throat of others. Corporate India is doing it to the poor tribals. Manmohan Singh is only using State power to make that possible.  

From Devinder Sharma's article in his blog. More Here.

Bhopal, Corporate America, Warren Anderson and Manmohan Singh

With 15,274 dead, 5,74,000 affected, and a verdict that should have been delivered in 26 days taking 26 long years, and that too a mockery of justice, no heads have rolled. While the newspapers are splashed with reports of the Bhopal verdict, I find Prime Minister Manmohan Singh quoted in a separate report from Srinagar, which he visited yesterday, also published on the front pages. Isn't it amusing to read the PM saying: 'Will Safeguard human rights in Kashmir.'
You couldn't even safeguard the rights of the Bhopal victims, Mr Prime Minister.

I don't understand how come the Prime Minister does not feel morally compelled to submit resignation over the injustice delivered in the world's worst industrial disaster. He will not. Because he is busy laying out a red carpet for Corporate America. He has an 'incomplete task' on hand. How can he apologise when he is busy fine tuning the Nuclear Liability Bill, to be introduced in the next session of Parliament, for which he may receive an honorary doctorate from the Harvard.

Last time, he was conferred with an honorary doctorate from the Oxford, Manmohan Singh had showered praise on the British for what they did during the days of the Raj !

You may have forgotten something that still remains embedded in me. When the Securities Scam burst in India, and I am talking of the period when Manmohan Singh was the Finance Minister, it was not only stock broker Harshad Mehta who was involved. Two foreign banks, including Citibank, were also involved. I still remember vividly when Manmohan Singh refused to initiate any action against the erring banks, saying: "It will send out a wrong signal."

Didn't I say Company Raj is back.

Seeking extradition of Warren Anderson, Union Carbide CEO at the time of disaster and until his retirement in 1986, was never pursued vigorously because it would send a wrong signal. And yes, Manmohan Singh did send a 'right signal' when he said that "India loves George Bush".

From Devinder Sharma's post in his blog. More Here

Killing two birds with one stone, isn’t it? But who cares?

Isn’t it shocking that after 63 years of Independence, only 12 per cent of the rural households have drinking water taps? This is despite the National Rural Drinking Water Programme being operative, for which Rs 8,000-crore was provided just in 2009-10.

What is more shocking is that while the drinking water taps are going dry, there is never a shortage of water supply from tankers? Not only Mumbai, cities across the country are under siege by tanker mafia. In the rural areas too, the water mafia has been continuously at work. If the water sources are drying up across the country, I wonder from where the tankers get water. Every one knows that the tanker mafia is leaving the countryside parched and dry, but who cares?

Well, the corporate sector certainly gives an impression that it cares. ITC for instance has launched a project in Gurgaon to teach housemaids on how to save water while cleaning the utensils. Teaching the maid servants on how to save one mug of water is surely some responsibility!

What the corporate sector refuses to point at is the recent decision of the Andhra Pradesh government to allocate 21.5 lakh litres per day from the Krishna River in Guntur district to Coca-Cola. While several hundred villages in Guntur district are grappling with acute drinking water shortage, the government perhaps thinks that rural poor can quench their thirst from drinking Coke instead. To justify its exploitation of water, Coca-Cola claims to be buying mangoes for its Maaza brand under Corporate Social Responsibility (CSR) initiative. Killing two birds with one stone, isn’t it? But who cares?

From the forceful pen of Devinder Sharma on mounting crisis of scarcity of water. In Deccan Herald.

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