How Mamata Banerjee was always right on FDI and GST

In June 2016, the NDA government announced radical liberalisation of the Foreign Direct Investment (FDI) regime by easing norms for a host of important sectors such as e-commerce in food products, defence, pharmaceuticals etc. opening them up for complete foreign ownership/control with the professed object of “increasing employment and job creation”. However, it is highly debatable and doubtful that such liberalization in the FDI norms as proposed shall in any manner promote employment and job creation and the Mamata Banerjee-led Trinamool Congress has vehemently opposed the same. The only thing likely to increase is the growing economic disparity between the classes in India with wealth being concentrated even further in fewer hands. Such proposed “reforms” are likely to wipe out the individual, smaller investors and businesses completely from the sectors where such reforms are proposed as indigenous businesses simply wont have the capacity and funds to compete and therefore effect the livelihood of millions in India. A closer look at some of the proposed reforms show that they would merely achieve short term gains.

The new FDI policy adopted by the BJP government permits 100 per cent FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India, bringing into effect the proposal made in the Budget 2016-17. Traders have raised huge protests against the Narendra Modi-government’s decision to fully open up food retail to foreign investors.By allowing FDI in food products, the government has opened up the multi-brand retail sector in the country which will completely jeopardise the interest of small retailers. This move would put domestic retailers, including small shops, at a disadvantage because they would have to compete against players with deep pockets such as Walmart, Tesco and Amazon. This is a complete shift in stand as for years the BJP and its affiliates have been vehemently opposing any foreign investment in this. 

The e-retailers indulging in predatory pricing shall gobble up small traders. The government’s decision to allow 100 percent FDI in trading of food products – including through e-commerce through government-approved routes has not gone down well with the farmers’ unions as well. Hundred percent FDI in food processing sector will have a damaging impact on micro industries in the rural sector. There is a large population in the Indian villages who are engaged as workers in the small- scale food processing industry. With the entry of large foreign companies, these people will lose their jobs. There will be no growth in employment. In fact unemployment will go up. Due to FDI, the revenue outflow will be more and the MNCs will invest very little for the growth of local markets. Exploitation of farmers, fishermen, people involved in animal husbandry will increase and local entrepreneurship will get affected. In fact the said move apart from proving damaging for the rural economy is likely to finish of the rural indeginous cottage industry which sustains and provides livelihood to millions in rural India.

It is interesting to note that the move by the BJP led NDA is being opposed by none other than the Bharatiya Kisan Sangh (BKS), a farmer’s representative organization affiliated with the RSS which has raised a red flag against the Centr’s decision for 100% FDI in food processing and animal husbandry sectors, among others.

In pharmaceutical sector, the government has permitted up to 74 per cent FDI under automatic route in existing pharmaceutical ventures. It added that the government approval route will continue beyond 74 per cent FDI and upto 100 per cent in brown-field pharma.

The proposed unregulated relaxation of FDI in pharma will effect medicine prices as well as the indegenious industry which known for its supply of drugs at a reasonable price not only in India but to other countries. This might lead to predatory pricing of medicines and may detrimentally affect the domestic manufacturers. It will hurt the middle class and the poor, apart from the Indian industry and the medicine market.

In defence, foreign investment beyond 49 per cent (and upto 100 per cent) has been permitted through the government approval route. FDI has been announced in the strategic defence sector. The government has dropped the requirement for ‘state of art’ technology requirement to apply for FDI relaxation above 49%. This will give free hand to the private defence companies to take over the Indian defence. The national security concerns have been completely ignored. 

The local manufacturers and suppliers will not be able to stand the big funding competition and eventually will dwindle. The whole concept of self reliance in defence has been given a complete go-by. Hope Indian defence does not become a puppet in the hands of foreign players. It is strange to note that in 2011-2012, assuring support to the traders opposing the Congress-led government’s decision to allow FDI in retail, BJP had opposed the move vehemently. 

They claimed that foreign direct investment was not in favour of the consumer, farmer, trader, manufacturer and the country.  In fact, this is not the first time that such a change in stance has been seen on key policy issues by BJP. One only has to recall the volte face  on the GST Bill that was opposed by the BJP led opposition during the UPA regime only to approve the same on coming to power. This time UPA is opposed to the same GST Bill  it had advocated so strongly. In fact the see-saw on key policy issues by BJP/UPA depending on who is in opposition can be seen in all key areas from GST to FDI. While writing this piece, I came across a booklet on FDI published by BJP in October 2012 which substantially belies their current stand. Either it is a case of selective amnesia or a politics of convinience.

Only the Trinamool Congress under the leadership of  Mamata Banerjee has shown its rational and progressive stance by consistently maintaining its opposition to the above relaxation in FDI norms while supporting the GST implementation in the interest of people, industry and the nation.