How AAP got this one wrong...

Tue, 21 Jan Pre-Open

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Once the Arvind Kejriwal led Aam Aadmi Party (AAP) came to power in Delhi, a series of populist measures were announced. Power tariffs were slashed and free water supply (with certain threshold) was made available to households. In yet another populist move, AAP has now opposed FDI in retail. However, we feel that AAP has got this wrong by a wide margin. The rationale given by the party in opposing FDI is that it will result in large scale unemployment. In fact, the same rhetoric is given by every political party which is opposing the move.

True, that FDI will result in unemployment as small shops will be unable to compete with the likes of Wal-Mart and TESCO. But this entire episode is blown out of proportion. Take the example of China. Both super markets and traditional mom & pop stores thrive there at the same time. And India could be no different. Also, it should be noted that India already has quite a few large retail outlets. Many are into losses and are unable to compete against smaller kirana stores. Hence, the fear that kirana stores will be out done by foreign retailers is not completely true.

The fact that kirana stores are easily accessible is their biggest advantage. Also, the shopping habits of Indian consumer may take some time to evolve. Many still prefer single purchases as opposed to bulk buying. This is another factor in favor of kirana stores.

Again, it should not be forgotten that if FDI results in job losses it will also create employment elsewhere. As retail network expands, more and more employment opportunities will be created. Investment in back end retail infrastructure would mean that wastages and pilferages would reduce. Most importantly, the end consumer will be benefited the most as he will get the product at relatively cheaper prices. This shall increase his spending power and thus standard of living.

Hence, the move to oppose FDI does not make perfect economic sense. In fact, the opposition is more due to a natural human tendency of being averse to change. Remember, when computers first happened to be a part of the commercial system it was feared that it would result in job losses. While a few clerical jobs may have been lost it has improved productivity and made our lives easier. It is natural that any technological or market changing move will face initial resistance. But such decisions eventually benefit the society as a whole by improving productivity and standard of living of the citizens.

Lastly, if the political parties believe that large scale unemployment could indeed be a significant problem once FDI steps in, they should think of alternative skill development programs to absorb the unemployed work force. Stalling a move in the name of unemployment is just a measure to woo a certain section of vote bank.

AAP is new to the political landscape. It has changed the political discourse in India by banking on issues like clean and honest governance. However, when it comes to policy making the party has a long way to go. Just ideologies and political will are not sufficient for success. Experience and knowledge of policy making is of equal importance. Sooner the AAP learns this lesson, the better it is.