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For profit, not people

The UPA’s GenNext reforms will maximise earnings for foreign investors. But India needs reforms that promote State-funding, create jobs and expand domestic demand, Sitaram Yechury writes.

india Updated: Dec 10, 2012 23:08 IST
Sitaram Yechury

With UPA 2 having carried the day on the motions disapproving foreign direct investment (FDI) in India’s multi-brand retail trade sector, the crescendo for a fresh round of GenNext reforms has reached a higher pitch. The editorial in this newspaper titled The slog overs have begun (Our Take, December 10) states, “Now that FDI in retail is through, the UPA must push ahead with other reforms.”

The Congress-led coalitions have, indeed, mastered the technique of converting a minority into a majority on the floor of Parliament. Such expertise in ‘manufacturing majority’ (with due apologies to Noam Chomsky, Walter Lippmann et al who spoke of ‘manufacturing of consent’) has, in the past, exposed the JMM bribery case (1993) and the ‘cash for votes’ scam (2008). In this instance, the parties who openly opposed FDI in retail in the discussions had an absolute majority in both the Houses in terms of numbers. But during voting the situation reversed. Time will, surely, expose this mystery.

No sooner did this happen came revelations of the global retail giant Walmart having spent around R125 crore during the last four years on its lobbying activities, including issues related to “enhance market access for investment in India”. The Indian retail market is estimated to be worth $500 billion currently and is pegged to cross the $1 trillion mark by 2020. The Rajya Sabha could not transact any business beyond question hour on Monday with the demand for an inquiry into this report — a demand supported by some of the parties who helped to win the vote the other day.

This revelation comes on the heel of the commerce ministry asking the Reserve Bank of India to investigate allegations that Walmart had “clandestinely and illegally invested” $100 million in an Indian chain of convenience stores owned by Bharti Enterprises, Walmart’s partner. According to media reports, this investment by Walmart would give it a 49% stake in the joint company. This probe in India comes amid intense scrutiny over Walmart’s international operations. The New York Times recently reported that Walmart had been made aware eight years ago that Walmart Mexico had paid millions of dollars in bribes to local officials to expedite permits for its operations in that country.

Likewise, Walmart has been criticised in several countries for a series of anti-worker policies. With close to 22.2 million employees worldwide, Walmart faces a torrent of lawsuits with regard to its workforce on issues such as low wages, poor working conditions, inadequate healthcare, anti-union policies etc. Unfortunately, this was well-known to the Indian Parliament.

The call for GenNext reforms, mainly hiking the FDI ceiling to 49% from the current 26% in India’s insurance sector and allowing FDI in pension funds, is being justified on the grounds that higher flows of FDI will provide the much-needed finances to build our infrastructural requirements. International experience shows that FDI is keen to make quick profits in the service sectors rather than allow itself to be locked in infrastructural projects with long gestation lags. For instance, FDI in India’s power sector accounts for just 5% of the total FDI inflow.

Despite 26% being allowed in the insurance sector, the FDI that came in was just around R6,700 crore over a period of 12 years for infrastructural projects. On the contrary, the Life Insurance Corporation contributes nearly 90% of the total funds deployed by the insurance companies in infrastructure. The truth of the matter in FDI’s keenness to have greater entry into the Indian market is that the insurance penetration for the year 2010-11 in India was 4.4% as compared to 4.1% in the US and 3.5% in Germany. India ranks number one in global life insurance and number three in general insurance. It is this market that the FDI is keen on exploiting in the times of a global recession.

This access to India’s huge insurance funds means that the FDI could deploy these anywhere in the world for profit maximisation and not in India’s infrastructure. This would also jeopardise the economic security of crores of Indians who have invested their lifetime savings and who will face the volatility of the international financial markets.

The economic ruin of people who depend on pensions for their post-retirement survival becomes inevitable with the privatisation of pension funds giving FDI greater access. The Chilean economic research centre, CENDA, says between 2007 and 2009, retired people in Chile lost 17% of their pension earnings due to the global financial meltdown.

The HT editorial concludes by saying, “In the final analysis, profit maximisation, policy reforms and politics should cease to be mutually exclusive objectives. The slog overs of the second innings of India’s reforms have started”. Rather than politics determining policies that favour the aam aadmi and improve the quality of life of the country and the people, what is being advanced is the maximisation of profits as opposed to the maximisation of social good. The reforms that India requires in favour of the aam aadmi are those that vastly enlarge employment through State-funded investment in infrastructural projects that would, at the same time, expand domestic demand and improve people’s livelihood. This will create a stable growth trajectory.

The solid foundations built in an innings allow us to win in the slog overs. India has lost many a match when the slog overs demolished the solid foundations built in the early part of the innings. We must learn. The GenNext reforms agenda will only favour profit maximisation for FDI and, may be, sections of corporate India at the expense of further widening the hiatus between the two Indias.

Sitaram Yechury is CPI(M) Politburo member and Rajya Sabha MP
The views expressed by the author are personal