India has come a long way on the road to liberalization and globalization since the process was first initiated in the early nineties. But the journey has not been smooth. There have been roadblocks, apprehensions and even genuine concerns about the timing and right doze of new reforms. Successive governments have taken note of these concerns and have tried to find solutions within their political constraints. But the reform process has continued and today it is no more a party issue.

Take the case of FDI. Earlier, Indian businesses as well as the Left parties had serious apprehensions about it. But the harsh impact of foreign competition on Indian businesses was softened by the government through tax reforms and interest rate rationalization. Today, even the Left governments in the states are arduously wooing FDI to develop their economies.

It is neither desirable nor possible on the part of any government in a parliamentary democracy to force the pace of reforms without taking into account genuine fears of the people concerned. It may be in this context that in the recent past the UPA government had to bow to the demands of their Left partners, even if half way, on some of the issues, such as PSU disinvestment and hike in petroleum prices.

Currently, the issue under debate relates to the entry of FDI in the retail sector. All the Left partners of the UPA government have strongly opposed the proposal. CPI(M) even objected to Prime Minister Dr Manmohan Singh’s statement at Hong Kong during the Asean meet that the government would come up with a positive proposal on this subject within the next six months.

The main concern of the Left parties, trade unions and other opponents of the proposal is that it will hurt the vast number of existing small and medium retailers in the country who account for over 80 per cent of the retail trade. According to one estimate, over 40 million people are engaged in this business.

This is, indeed, a serious matter. If a large-scale induction of FDI in the retail trade dislocates even one-fourth of the people from their existing livelihood, the government and society will have a major unemployment problem at hand with all the consequences in terms of the law and order situation.

Fortunately, however, the scenario is not all that dismal. FDI in retail is still a far cry because of lack of infrastructure for modern super-stores. In major metropolitan areas like Delhi and Mumbai, it is not easy to find adequate space for such stores with the requisite parking space for shoppers. In Gurgaon, where modern malls have mushroomed, traffic bottlenecks are a common phenomenon. In fact, infrastructure and parking problems are being increasingly experienced even in developed countries. In Germany, for instance, most new super-stores are being set up in the eastern part of the country with more open space. And even these stores are being located mainly along the

highways to avoid congestion in the cities. Whether we can try this experiment on our highways is a moot point.

There are also several myths associated with the FDI in retail. For instance, it is argued that the MNCs’s entry will give a boost to Indian agriculture. The point to be understood here is that the Indian farm sector will benefit anyway if the necessary infrastructure for cold storage, transportation and processing of the vast amounts of fruits and vegetables that go waste in the post-harvest season are created. This is, in fact, being done already and what is required is a further effort in this direction. No one will grudge if more MNCs enter the transportation and food processing business in India.

Eventually, it may not be possible to ward off MNC’s entry in the retail business, thanks to our commitment to liberalize trade and investment But efforts should at least be made to calibrate our policies in such a manner that the dislocation of existing small and medium retailers is minimal.

Lately, some Indian retailers, especially the younger generation, have also shown an initiative to fall in line with the modern times. The government’s policies towards quality control, standardization and mandatory inscription of minimum retail price (MRP) have greatly eased the old hassles associated with retailing. Further efforts, however, are needed—including easir access to bank finance-- to encourage small and medium retailers to spruce up their business.