Who’s afraid of FDI?

Last week, the members of Parliament, especially from the Opposition who attacked the government for its decision to invite foreign direct investment (FDI) in retail, kept on invoking the names of Tesco, Carrefour and the dreaded Walmart.

These monsters, they said, would further ruin the already beleaguered Indian farmer and finish off the small, corner kirana shops. Crores of jobs would be lost, many more businesses would be destroyed and suicide rates would go up. Some MPs invoked the East India Company, which came to trade and ended up ruling India. Others talked about how the government was succumbing to US pressure. The big bad foreigner was out to subjugate the Indian nation — this was the dominant theme. Leader of Opposition in the Lok Sabha Sushma Swaraj melodramatically declared that Walmart etc would not worry about the farmer’s daughter and Arun Jaitley, Leader of Opposition in the Rajya Sabha, raised the spectre of India turning into a land of sales girls and boys selling cheap Chinese goods. The Akali Dal, which is inclined towards foreign investment attacked Pepsi, notwithstanding the fact that the cola company has worked hard with farmers in Punjab to raise agriculture yields. Good sense often goes out in the name of politics — at least the Left is ideologically against foreign investment, but to hear the BJP and some of its allies rail against FDI in retail was simply bizarre.
On the second day of these parliamentary debates, a news item appeared in the Indian papers, which the honourable MPs, busy as they were trying to collect votes against the government, may have missed. Apple announced that iTunes, the hugely popular online store that sells music, video and applications, would now be available to Indian customers who could buy in rupees. With a few clicks, the Indian consumer will now be able to buy a song for Rs 12, a music video for Rs 15 and a full movie, which would cost anywhere between Rs 290 and Rs 490. The movie will get downloaded on to the hard disk where it will remain for a month and then self-destruct. From the comfort of their dens or even while travelling in a bus, users of Apple products — Mac, iPod, iPad etc — will be able to listen to any song or watch any movie of their choice from the huge iTunes store. To use a cliché, it is a game-changer. Not that online music buying was not available in India, but the current local players cannot boast of the same scale as iTunes.
Another international player too has been eyeing India for a long time. Amazon does have a presence in this country but only to sell books on it’s e-reader, Kindle. In all likelihood it will launch its online store in the coming year. That will shake up the publishing market and could even cause the demise of a few bookshops. Even without Amazon, booksellers, both big and small, have been feeling the heat from Flipkart and similar online stores, which offer home delivery, discounts and a huge choice. Some e-retailers could go out of business when the truly big boys arrive.
The honourable MPs, concerned as they are with the plight of the farmer, and the trader may pooh-pooh iTunes, Amazon etc as of interest only to the urban, English-speaking elite (the one bogeyman that has remained with us, steadfastly, over the decades). Real India is where the salt of the earth lives and in those parts the online
universe does not matter. Why should the representatives of the masses even care about iTunes?
But if indeed the worry is about foreign investors coming into India to make profits, then iTunes should bother the MPs as much as Walmart. The farmer’s son will soon be downloading songs on his mobile phone while the kirana shopkeeper’s daughter will rent a film on Saturday night to watch with her friends. They will not mind paying a few rupees for the convenience. They are in sync with their counterparts elsewhere in the world and they may already be celebrating the arrival of iTunes.
The retail FDI policy has many caveats built in and leaves the decision to individual states. No one is going to rush with millions of dollars if there is limited clarity about what can be set up and what cannot and if there are chances that a change in government will force them to pack up and go.
On the other hand, online sellers have much less to worry about than the brick-and-mortar stores. Their operations are less visible on the street, the digital world works in a way too mystifying for many of our lawmakers and most of all it is sexy and cool; not surprisingly our representatives clamour for laptops and the like. But the principle of selling remains the same.
As for the size and financial muscle of the big retailers, which our MPs feel will flatten the locals, there is not much to separate between the online companies and the high-street retailers — both are giants. The turnover of Walmart, at over $460 billion, is much more than Apple’s, but the latter boasts of a market capitalisation of over $500 billion that dwarfs every other company in the world. Both companies — and the likes of Amazon, too — are searching out new markets and India is a lucrative and attractive proposition for them.
The point here is not to fret about the entry of iTunes or for that matter Walmart. But it is time our lawmakers understood the inexorable logic of globalisation and the changing nature of doing business. Two decades ago, fast-food companies were seen as an evil force that would destroy Indian dhabas; as we can see, nothing of the sort happened. The Indian kirana is not going to disappear because of Walmart or Tesco; both will survive and the consumer will get more choice. Meanwhile, digital commerce is fundamentally altering the way people buy and sell and Indians are poised to take full advantage of this coming revolution.
Apple’s iTunes and retailer Amazon will have to compete in the marketplace with Indian-owned and Indian-run companies, like Flipkart. In this fast-moving landscape, if you are still worried about the likes of Walmart, you are already behind the times.