Food Inflation can be Controlled without 51% FDI in Multi-Brand Retail

September 29, 2012 · Author: · Category: retail 

The new policy by the corrupt Politicians of Congress in the Government allowing FDI in MultiBrand Retail Trade – MBRT has several shortcomings. In our view, claimed benefits with respect to crop storage, preventing wastage, employment, consumer prices are
overstated.

The claimed lower food inflation ensuing from FDI in MBRT needs to be grounded to the underlying causes, which in our view are a) government policies encouraging high food prices1 since 2006 (aggressive procurement and pricing), b)
increasing input and land costs, c) rising labor cost and d) rising financial strength in the intermediation channels, resulting from aggressive credit lending and government procurements, abetting hoarding activities. Policy induced inflationary factors can be tackled immediately, even without any FDIs.

As far as the role of FDI driven food supermarkets in containing food inflation is concerned, evidence from Latin American (Mexico, Nicaragua, Argentina), African (Kenya, Madagascar) and Asian countries (Thailand, Vietnam, India) shows that the supermarket prices for fruits and vegetables and other basic foods were higher than those in traditional markets. In fact, in China, where large global retailers like Walmart, Tesco and Carrefour have
hundreds of stores, since 2004 food inflation has been an issue and in 2011 local governments offered subsidy to lessen its effect on consumers.

CPI inflation in rural India also questions the hypothesis that FDI will lower inflation by reducing multiple intermediation channels. Despite much lower intermediation and transportation costs in rural areas, the rural laborers inflation has remained persistently high. It has remained higher than the industrial workers inflation seen in the last few years.

Also read if 51% FDI in MultiBrand Retail in India will actually and really create a million jobs ?

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