Earlier this month, the Indian parliament voted in favor of allowing foreign companies to invest in the country’s multi-brand retail sector.
But the drama continues. Last week, the parliament was in uproar over Walmart spending $25 million lobbying United States lawmakers for “enhanced market access for investment in India.”
Some politicians are demanding an inquiry into whether the global retail giant spent money in India. The Indian government has offered to set up a probe.
Walmart, refuting accusations of bribery, has pointed out that U.S. laws require American companies to disclose lobbying expenditures on a quarterly basis. “These allegations are entirely false,” it said. “The expenditures are a compilation of expenses associated with U.S. federal lobbying contacts and include staffing cost, association dues and payments made to consultants, all in the U.S.”
SmartPlanet has followed India’s tumultuous road to eventually allowing foreign companies to invest in its multi-brand sector. We have spoken with analysts about its pros and cons.
To summarize, those in favor of FDI have argued that allowing multinationals to invest will boost India’s economy, which has seen a slowdown to 5.5 percent from nine percent from a year ago.
Companies like Walmart, they say, will bring jobs, reduce agriculture waste by introducing better storage facilities and secure better incomes for farmers who are exploited by middlemen setting prices in the market.
Rebuffing these arguments, Jayati Ghosh, a top Indian economist, said: “Why do we have to rely on multinational companies to do our job for us?”
FDI opponents, however, warned of massive unemployment with millions of mom-and-pop stores shutting down. Others say that small traders can co-exist with “faceless” corporations in a country of 1.2 billion people reflecting diverse consumer needs.
“In fact, small stores bring convenience to consumers via free home delivery and interest-free credit,” said Manoj Pant, who teachers Trade Theory at the Jawaharlal Nehru University in Delhi. “Given their much lower labor costs, I don’t think large retailers will be able to compete.”
India has also seen country-wide demonstrations protesting the government’s decision. In September, Prime Minister Manmohan Singh made a televised appeal for public support and confidence in FDI.
In a heated debate last week, politicians likened modern-multinationals to British colonists who first set up shop in India as traders.
Sushma Swaraj, leader of the opposition party, even said that McDonald’s bought potatoes for its fries from outside the country because Indian potatoes are too small.
The multinational food chain has refuted her remarks.
“We confidently and proudly state that ingredients used in our products are sourced locally, that includes the French fries,” it said. “We import only on rare occasions when local supplies run out.”
Speaking after the parliament vote at the Punjab Agricultural University last week, the prime minister said that foreign direct investment would introduce new technology and investment in marketing agricultural produce.
“India, I sincerely feel, must take full advantage of modern technology and the operational and management experience of big supply chains in the food retail business to make this happen,” he said. “I am confident that it will benefit our farmers, and the consumers of our country.”
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