Thoughts on FDI in Retailing

Here are two columns I wrote late last year, reflecting on the political process and economic analysis associated with India's attempt to open up multi-brand retailing to FDI. The first column also has some thoughts on developmental objectives and social opportunity, based on some new work by Yale economist John Roemer.


Development and Opportunity

The furor over the attempt to open up FDI in multi-brand retail reminds us of several things about India. But the true lessons may not be the seemingly obvious ones. It is certainly possible that the government’s handling of the policy change was not the best it could have been. On the other hand, those with long memories will recall numerous occasions where policies have been floated, reversed, modified or even transformed. At one time, all FDI and disinvestment were controversial—now the discussions are more nuanced (even if political rhetoric remains strident).

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Retailing and Reform

In my last column, I mused on India’s economic reform process and inclusive growth, in the context of opening up multi-brand retail to FDI. I want to return to the question of political capital, and policy thinking about reform in the retail sector.

On using up political capital, I think ongoing events have proved me wrong. Opposition to opening up multi-brand retail has come from the same quarters as opposition to other reform measures, including the Pension Bill and Companies Bill. On all these, the government has openly looked for compromises that will lead to acceptance of the reforms. If that is the case, then moving on multiple fronts may give the government more chance of getting some changes through, not less. The government has also reset its approach to FDI in retail, marshaling interest groups that might benefit, and saying more to make the case for the positive consequences of the change. So even if it lost some political capital initially, it should recover it quickly.

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Entrepreneurship and Jobs in India

India needs more jobs than it is creating. Without enough job creation, its demographic dividend—adding a million people to the workforce every month—will become a disaster. One possible source of job creation is entrepreneurship. Recently, Ejaz Ghani, William Kerr and Stephen O’Connell (GKO) have been systematically exploring this hypothesis for India, in several research articles. What do we learn from their work?

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How Competitive is India?

The latest Global Competitiveness Report of the World Economic Forum ranks India 56 out of 142 countries. This is a much better rank than India gets on the UN Human Development Index or the World Bank’s Ease of Doing Business Index. Is this a good sign about the country’s future growth potential? Probably not.

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Keeping the G20 Real

The G20 wants to change the world. More specifically, the G20 gives national politicians a chance to put forward ambitious global agendas. This is good for their careers. But it can also be good for the world. The balance and weight of the G20 allows it to have some influence on other, older global organisations that may be less able to take a comprehensive view of what needs to be done in today’s risky world. What exactly is needed?

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Europe's Crisis is Political

As Europe’s debt crisis drags on, it is clear that underlying the economic and financial mess is a deeper political problem. The financial problem is clear: private and public sectors in various parts of Europe borrowed more than was sustainable. In this sense, the problem was similar to that of the US; indeed, it was partly created by what was going on in the US. But Europe’s economic problems are compounded by its politics, in ways beyond what a single country would face, even one like the US, with its current dysfunctional polarisation.

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Building a New India

When the UPA came back to power in 2009, with what seemed to be a stronger and more reasonable coalition structure, I was very optimistic. The global economy had dodged the bullet that might have wounded it critically. India had managed to grow robustly, even in the throes of the global crisis. There was a chance for experienced leadership to return and continue its work. Halfway through the government’s term, things appear much less rosy. What has happened and why?

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Diaspora, Development and Democracy

The title of this column is the title of a new book by Devesh Kapur, head of the Center for the Advanced Study of India at the University of Pennsylvania. The book is about how Indians who have emigrated have influenced the country they left behind. It is a fascinating study, broad in scope and full of new insights. Kapur argues that the economic, political, social and cultural consequences of international migration imply a richer framework for thinking about globalisation and related ideas such as ‘openness’, than just focusing on movements of goods and capital. He asks, “Is a country with substantial trade, but with few citizens who move around the world, really more ‘open’ in a broader … sense than a country where trade is more limited but whose citizens live and travel internationally, thus remitting foreign exchange and ideas to a much greater extent?”

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