Reform, but Resolve too....

In the wake of major economic decisions by the Government of India many emotions, passions, opinions and expressions are flowing around. It is indeed commendable to what is happening - or rather most of it. Today, I am thinking of visiting in short all the major decisions of the past few days trying to explore as I see them and inviting opinions and counter-arguments if any. At the end of the blog today, I have shared a discovery of a unique and beautiful model; a middle-ground between the warring arguments of FDI in Retail. While doing so, I believe we can also dwelve on the difference between Idealistic & Practical schools of thought, the importance of a dual front - short and long term.

Diesel Hike: A good decision in my opinion given the rise of fiscal deficit to 6% levels over from 5.1%; nevertheless I believe it is more a pushed to the wall reform much like in 1991 rather than a conscious choice. A huge Rs. 5 hike will boost inflation in the short term and hence a staggered hike over a few years would have been better but a more practical approach of safeguarding political interests was followed then.

LPG Cap: The cap of LPG per household is also a bold and correct decision given in the context - thus more practical rather than ideal; An ideal decision I believe would have been to cancel subsidies for high income households and gradually increase subsidies as we move down the income pyramid with an eventual target of subsidies just over the economically backward. This is highly impractical as it would involve rationing and the very cleansing of the system to not leave it open for manipulation/black marketing and hence would need a few decades. So a right decision for now, but I hope this long term solution has been drawn out and we would move towards it one day.

As far as fuel goes, we as consumers (as knowledgeable and learned consumers one might say) should accept the reality rather than opposing it; our population is not shrinking, the currency is depreciating adding to huge trade deficits and downward pressures when it comes to importing of crude and yet we want to recklessly spend fuel! There has to be some discipline from our side too; this is an extremely late move, still....

Well, moving to the FDI part of the decisions --

FDI in aviation was needed, no doubt in my mind about that! Our Airlines sector was taking a beating due to price wars and unnecessary government meddling. Ever since they robbed the first airlines from Tata, they have caused huge problems to the sector in general in a sorry attempt to keep supporting Air India. Infact, I believe a certain degree of approved cartelization must be permitted given the huge costs incurred for running such businesses. This degree below which no airline can slash their air fares (much like a bank's base rate one may say!) In an economy, consumer is not everything! It is a trade - what a consumer pays is the livelihood for the seller and in-turn the entire supply chain. Every member in this chain deserves to be treated with care and a collectively positive decision is a must for the economy to survive.

FDI in retail is a grey zone - it is the only aspect of these reforms which I believe are not necessary. When FDI in retail was first announced in November 2011, I had written about it in my blog Retail: A Past Re-tale. I will not elaborate on my opinions on foreign retail FDI here as I have already expressed it in the above mentioned blog. Though my views about Chinese goods' invasion and encroachment on the suppliers are same, I have something more to add to it; Let us say a better  model than FDI which can safeguard interests of a wider clan. As I have been searching and thinking for an example for a better model, I have also come to terms to a possibility that giving kirana stores a run for their money won't be bad. That is the only change in stance as far as my prior blog is concerned because the concern was for agro-products and now a better solution is in sight.

London Farmers' Market is an interesting place in light of the current developments in India. Their website proudly says, "we grow it, we sell it." Before I go about it in detail, it is best to get a perspective; following data is in the format --

"Country(% of GDP contribution by Agriculture, % Labour employment in Agriculture)"

USA                   (  1.2, 0.7)

UK                     (  0.7, 1.4)

Germany             (  0.8, 2.4)

France                (  2.1, 3.8)

China                  ( 10.1, 36.7)

Brazil                  ( 5.5, 20)

Russia                ( 4.5, 10)

Singapore           ( 0, 0)

Australia             ( 4, 3.6)

India                   ( 17.2, 52)

The closest which comes to India is China as far as the above numbers are concerned. It is in-appropriate to compare between the two as the latter is a command economy as against the free market economy that we are. Policy enforcement is at a much advanced stage in China as compared to us. Plus on all parameters like GDP, GDP per capita, reserves and technical superiority they beat us comprehensively. The only thing we can say is our potential and hope to be better! Bringing it back to the topic, my motive in putting up these stats was to point out that policy changes impacting agriculture are much more severe in India as compared to anywhere globally at least for the major economies. What applies in these countries can't always work here and hence has to evaluated before employing. It may seem practical to usher in the FDI in retail with an argument of bettering prices for consumers but is the cost of farmers' lives acceptable to us as a country is what we must ask. Again, I have stressed enough in my earlier blog on Retail so I will move towards the model I have discovered in a hope that it as a solution solves not only our supply chain management and bottle-neck issues which lead to huge wastages but also the major concern of farmers getting the right price for their products rather than be sacrificed at the altar of foreign retail giants who seek profit margins at their expense or the home-grown hyenaic dalals who savour the cream of their efforts!

So, London Farmers' Market is an innovative concept in existence in London for at least 12 years from what I could find; Once every week, all the farmers, bakers, fishermen and growers gather at a set place to sell their produce directly to consumers cutting out the middle-men. Some of them also have agreements with restaurant owners and other retailers but the Market ensures all of them get a fair price for their product and are not cheated because of competition or margin reduction on the side of the retailers or restaurants. The market is FARMA (Farmers' Retail and Markets Association) certified having strict rules and regulation ensuring a smooth and fair functioning. There is stress on advertisements and citizens are encouraged to purchase only from such certified markets. Their website too carries details on market locations, schedules, products available and even registered producers! It is an amazing and innovative concept and I would love to visit and study it if I ever get an opportunity to visit London! As for now, I have sent them a mail to enquire if they can share with me how this concept was born and who contributed - people, NGOs and especially the Government! Why can't this be done here? I am sure with the right intent, it can be; Even allowing tax sops and granting benefits for the same would be an ideal promotion strategy. Farmers can be encouraged to enbloc into a unit to sell their produce and an organization similar to the above mentioned FARMA can be established to govern all matters.

Selfishness is bad, self-interest is धर्म (duty) The latter is being sensitive to others and not profiting at the expense of others. Setting up Farmers' markets is ideal and a long term benefit if set up efficiently; FDI is an escape to not bring the evil 'dalals' to book. The marathi movie हापूस sheds light on this aspect. Dalals will stand to lose in the short term while farmers will benefit (if implemented) - a short term positive. In the long run, the squeezing will start from the retailers' side and the situation of the farmer will be no different from what it is today. We as consumers will benefit and manifold will the foreign players - is this the growth of a nation? I don't think so. A classic repeat of history where our former PM Indira Gandhi fell to the monster she created - Jarnail Singh Bhindranwale. It is a realistic world, I agree; but it is idelogies which survive eternally. We can be ideal and pragmatic at the same time; and once we can, we can take great collective strides towards our goal of a super-power in such a way that every contributor to the economy prospers and prosperity for one is not poverty for the other. It is raising the plane of standard of living which is the key, and not the occasional factions. Irrespective of whether they are pushed to the wall decisions or not, I am glad for the actions albeit the last one. It will be too soon to comment whether retailers would actually come to a fragmented place as ours since the decision is left to individual states to decide for Retail FDI, so let us see. Meanwhile, it has worked as a perfect decoy against the Coal Scam! Nevertheless, some other day! These are different issues, and no system or no policy will work if there is absence of intent. Economic intent from the PM won't suffice; all of us still look for that ray of hope - political intent at the centre. Reforms are needed and welcomed; but with a clear intent to resolve issues and not transfer them from one entity to other. It reminds me of Ajay Devgan, portrayed as Bhagat Singh in the movie 'The Legend of Bhagat Singh' (translated), "Just Freedom is not our ultimate objective; What is Freedom? Is it shift of power from Englishmen to a few powerful and wealthy Hindusthaanis? Will this anyway change the life of the common man? Will the conditions of the Labour force and farmers change? Will they get their rights? No. Freedom is just the first step, comrades; our mission is to create and establish a nation."

Jai Hind!