Thursday, July 10, 2014

STRATEGIC PLANS FOR DEVELOPMENT PROJECTS IN INDIA

I HAD PREPARED A SYNOPSIS OF STRATEGIC PLANS ON INFRASTRUCTURE DEVELOPMENT AND REFORMS IN EDUCATION SYSTEM FOR INDIA AND SENT TO THE OFFICE OF THE PRIME MINISTER MR. NARENDRA MODI; HUMAN RESOURCE AND DEVELOPMENT MINISTER MRS. SMRITI IRANI;  MINISTER OF ROAD TRANSPORT AND HIGHWAYS MR. NITIN GADKARI; MINISTER OF POWER, COAL AND RENEWABLE ENERGY MR. PIYUSH GOYAL; MINISTER OF CIVIL AVIATION MR. ASHOK GAJAPATHI RAJU AND A COPY TO MR. AKHILESH MISHRA, CONSUL GENERAL OF INDIA IN TORONTO ON JUNE 10TH, 2014 FOR THEIR PERUSAL AND CONSIDERATION.  HON.MINISTER MR. PIYUSH GOYAL ACKNOWLEDGED THE RECEIPT OF A COPY OF THE STRATEGIC PLANS AND THE CONSUL GENERAL OF INDIA IN TORONTO WAS ALSO KIND ENOUGH TO ACKNOWLEDGE ON BEHALF OF THE INDIAN GOVERNMENT.

A COPY THE ABOVE STRATEGIC PLANS ARE POSTED HEREUNDER FOR YOUR COMMENTS AND SUGGESTION FOR FURTHER IMPROVEMENT.


1.    POWER (ELECTRICITY)
PREAMBLE:
Infrastructure of a nation is the most important factor in driving the economy. Best policies and governance will not be effective if the medium or catalysts to execute those policies do not exist or not robust enough to bear the load of increased future capacity.

Continuous supply of desired energy is the main factor in growing the economy but how we produce electricity is also important to consider before embarking upon the national energy policy. India has the second largest deposit of coal in the world for the purpose of firing power plants. But the use of non-renewable energy like coal, lignite, natural gas and petroleum is increasingly becoming unpopular in the modern world due to the cost and environmental issues. Therefore focus is required to make India energy surplus by the use of renewable energy such as solar power, wind power and biomass.   If I am asked then I will focus on production of energy from solar, wind and biomass which are green, easy and convenient to produce. A detailed strategic plan can be prepared or a PowerPoint presentation can be made to illustrate how India can become energy surplus within a shortest possible time.

RENEWABLE ENERGY


OBJECTIVE: To make use of the free natural resources to produce green electricity at a reasonable cost and make every household in India a trader of energy which will result in gradual reduction in the use of hydrocarbons  and other environment pollutants.
POLICY:
 Ø  Emphasis on green growth energy technology for sustainable energy future.
 Ø  Move away from import substitution policy.
 Ø  Implementation of Integrated Energy Policy (IEP) and Energy Mix with stress on Renewable energy.
 Ø  Less dependency on coal due to pollution and environmental issues.
 Ø  Focus on Solar Power, Wind Energy and Biomass.

Ø  Make every village and district energy surplus within a time frame.
Ø  Simplify the licensing process under section 14 of the Electricity Act of 2003.

STRATEGY:
v  Replicate solar power systems on the pattern of Charanka Solar Park in Patan District of Gujarat to produce 220 to 500 Mw of electricity in every district of India by promoting investments from the local businesses. This will take care of energy requirement of districts and subdivisions.
v  Connect 5-10 such solar parks in clusters for sharing power with each other and avoid collapse of power system on mega scale. Make a provision of guaranteed purchase of surplus electricity by the state or centre at a fair market value.
v  Encouragement for Installation of light weight non-reflective Photovoltaic Power Systems on roof tops of houses in India not only for their own consumption but also selling to their neighbors or contributing to the national grid at a fair market value.
v  This will provide a chance to consumers to choose their power suppliers which will in turn encourage quality, competition and reduce the cost of energy. In the process towns and cities will become energy independent.
v  Encouragement for establishment of Wind Energy, Solar Energy Farms and Biomass in rural areas to make villages and agriculture farms self-sufficient in electricity.
v  Provide tax incentives, subsidies, finance facility at discounted rate, technical know-how, and licensing for becoming energy retailers.
v  Goal should be to make the proposal so attractive that every family will look for an opportunity to produce their own electricity and make some money by selling them.
v  Every town should light their streets from the solar power or from the Biomass.
v  Every government office, hospitals, fire departments, police departments and other departments should have their own solar power energy system.
v  Incentives to manufacturers of photovoltaic for providing full proof, safe and easy to install solar power system, subject to technical and procedural considerations.

ADVANTAGES:
§  This effort will make negative impact or minimal dependency on natural resources such as coal, lignite, natural gas and petroleum.
§  Minimal dependency on Nuclear Energy.
§  India will become green and environment friendly country in the world.
§  Reduction in the demand of diesel fuel due to reduction in the use of hundreds and thousands of private power generators.
§  Savings in national oil pool account due to resulting decrease in demand of diesel oil.
§  Savings in import of expensive coal from Australia and other places.
§  Instead of import, India can become exporter of coal and other natural resources.
§  Improvement in country’s trade balance account.
§  No stealing of power, no interruption and no corruption.
§  Individual producer of electricity will be responsible for maintenance and supply of energy produced by them.
§  People will become energy smart.
§  Every household will become energy retailing businessman.
§  Employment opportunity to thousands of people in the maintenance, supply, service and installation of solar panels, wind mills and Biomass plants.
§  Once the consumer retail market of energy becomes self sufficient then energy produced by large corporations like NTPC, Tata, Adani Power, MPPGC, MAHAGENCO, GSECL, Reliance etc. can be exclusively catered to large industries and metro cities.


2. NATIONAL HIGHWAYS
PREAMBLE:
Highways are major catalyst for the growth of a country. Faster and safe movement of goods and services and container movement saves unimaginable amount of money in terms of saved man hour, fuel cost and production. Therefore multi-lane smart highway system is a necessity for growing the country. In comparison to population and future requirements, India needs at least 6 to 8 lanes highways out of which two lanes should be dedicated for container movements. In order to move containers fearlessly on highways, a stringent law including death penalty or equivalent for road hold-ups or blockage should be passed by the parliament. These measures will instil confidence in the economy and the investors.


OBJECTIVE: To build or expand existing national highways to multi-lane safe and secured circling North to South like a ring and criss-crossing east to West corridors from Mangalore to Chennai; Panaji to Vijayawada via Hyderabad; Mumbai to Vishakhapatnam; Silvassa to Raipur and Bhubaneshwar; Kandla to Bhopal, Ranchi and Kolkata etc., for the free movement of goods from one location to another at the shortest possible time.

STRATEGY:
 Ø   Widen 50,000 km of highways out of 71,000 kms of national highways from existing 2 lanes to 3 + 3 =6 lanes. (8 lanes when it is passing through metros or large cities to offset peak hour congestion).
 Ø  Existing highways such as The Golden Quadrilateral, North South and East West Corridor be converted into multi lanes ( 3 + 3 lanes) "Indian Necklace" highways encircling India from North to South bordering coastal areas and several connecting feeder highways from east to west "Indian Bracelets" in the middle (minimum 2 + 2 = 4 divided lanes).
 Ø  Highways should be free of traffic lights and crossings.
 Ø  Both lanes should be separated by crossing bars.
 Ø  Indian Penal code should be amended to incorporate death penalty or equivalent for road hold-ups or robbery.
 Ø  100% FDI investment can be invited to offset the cost of widening and maintenance of highways.
 Ø  Prepaid transponders for automatic video toll collection will reduce traffic blockades.
 Ø  Motor Vehicle Acts of 1988 may be amended and enforced strictly.
 Ø  Driver training and licensing on the model of western system of graduated licensing program should be put in place and should be made mandatory for all without exception.
 Ø  Current driving license of all types should be annulled within a time frame of 2-3 years and every driver should be asked to re-apply with their photo taken (!!) at the licensing center under the new rule after going through compulsory driver training program.

ADVANTAGES:
·         Rapid growth in container movement.
·         Industries will get their supplies and will be able to transport their products quickly.
·         It will reduce wait time and cost of production.
·     Attraction for multi-national companies to make India as an alternate to China for manufacturing of their products.
·         Re-construction and expansion will provide employment to thousands.
·      Graduated Licensing program will develop a culture of educated drivers knowing rules of driving while their driving records will be maintained by the govt.
·         Every driver will come to know traffic rules and costs for violation.
·     Driver training centres will mushroom in the country providing employment and business opportunities to thousands.
·          Increased road safety and minimal road accidents.
·    Graduated Licensing Program and by way of issuing new driving licenses to millions of people will generate crores of rupees for the govt which can be used for the maintenance of highways. Proper maintenance of driving record of every individual will also help the country in maintaining security, law and order and identifying illegal residents.
·     Government will also make crores of rupees in providing licenses to Driver Training Institutes.


3. SHIPPING & LOGISTICS
PREAMBLE:
Shipping is one of the most important factors in import or export of products worldwide. A vibrant and world class seaport on the core route of world shipping can bring enormous amount of prosperity to the country. India already has large seaports like Kandla, Navasheva and Vishakapatnam but they are already congested. To become an economic world power, India needs have a massive state of art seaport for providing transshipment facilities to foreign vessels passing through Suez Canal and going to Far-East. This will make India hub of the container activities and a natural choice for transshipment.

POLICY:
 Ø  Modernize existing seaports or build a world class seaport on the model of Dubai and Singapore for vessels movement and transshipment on one of the core routes of the world.
 Ø  Invite 100% FDI for this project.
    Ø Review The Merchant Shipping Act of 1958.

STRATEGY:
 Ø  Attract large container vessels passing through the core route of Strait of Hormuz in Persian Gulf to Strait of Malacca in Indonesia involving majority of global trade of goods and commodities for India, China, Japan, South Korea, Taiwan, Australia, Thailand, Indonesia etc.
 Ø  A world class and state of art seaport can be built in West or South West Coast (subject to maritime considerations) on the pattern of Dubai and Singapore for making it transshipment point for all size of vessels OR modernize existing seaports like Kandla or Navasheva and its access roads, highways, railways and large area of land to suit the requirement.
 Ø  http://images.fineartamerica.com/images-medium-large-5/1-world-shipping-routes-map-atiketta-sangasaeng.jpgState of art service will reduce the transshipment time and will become an obvious attraction for the large container vessels for calling upon Indian port more than the Sri Lankan port.












ADVANTAGES:
·         India will emerge as the hub of container and transshipment activities.
·         India will become a major player on core shipping routes of the world like Dubai.
·       Indian exporters will get direct vessels to major destinations in the world for their containers instead of being transshipped at Dubai.
·         Industries related to manufacturing, mines and minerals will have the direct access to core shipping route.
·         Inbound and outbound shipping cost and time will come down.
·         Indian goods will become more competitive in the world market.
·         There will be rapid growth in the seaport city as well as hinterlands due to enormous shipping activities.
·        Demand for Steel, Software, Electronics, Communication, Construction, and Hospitality industry etc. will go up.
·       A new high-tech-city can be created as per the vision of Hon. Prime Minister of India for the visiting crews of ocean liners and settlers.
·       Employment opportunities to thousands of people.


4. CIVIL AVIATION
PREAMBLE:
Connecting every small and big city by air for travelling and transportation is the hallmark of a developed nation as it provides speed and brings prosperity to connecting towns and cities. India has 454 airports in total out of which 16 are international, 97 are owned by Airport Authority of India (AAI) and 92 are operational, 28 by defence and 318 airports are non operational.

OBJECTIVE:
To increase access to every part of country by bringing non operational airports on the air map of India and also to create a national cargo airlines for moving of goods to remote areas. Expansion of state capital airports for making them a hub for regional airline services, and also upgrade them into international airports for diverting air traffic load away from metro international airports.


STRATEGY:
 Ø  Upgrading of all green airports and non-operational airports for commercial operation and for attracting investors for choosing underdeveloped towns and cities for making their industrial bases.
 Ø  Out of 120 existing operational airports, airlines are operating only through 61 airports. Leverage them to connect with the rest.
 Ø  Encourage formation of provincial or regional airlines for connecting to district headquarters with small aircraft while developing existing non-operational airports.
 Ø  Connect all districts headquarters with their respective state capitals by air.
 Ø  Increase length of air strips of non operational airports from 1500 and 3000 ft. to 5000 feet or more for Short Take Off and Landing (STOL) capacity aircraft.

(Many smaller aircrafts are suitable for these provincial or regional airlines such as Q Series (400) / Dash 8 of Bombardier, Canada with seating capacity 70-80 seats, range 800 kms, and STOL performance of 3,000 ft. (910 meter); and ATR 42 of France with seating capacity of 42-50, range 1500 kms with STOL performance of 3,822 ft.(1,165 mtrs etc.).

 Ø  Target an increase in domestic traffic from 160--180 million passengers a year to 500 million passengers a year.
 Ø  PPP (Public Private Partnership) or FDI in joint ventures may be invited for the development of Greenfield airports via the automatic route
 Ø  49% FDI may be invited in domestic scheduled passenger airlines and 100% by non-resident Indians via the automatic route.
 Ø  Creation of national cargo airlines dedicated to the faster movement of goods across India.
 Ø  Increase number of International airports from 20 to 35 by upgrading state airports like Lucknow, Varanasi, Patna, Ranchi, Bhopal, Bhubaneshwar, Dehradun, Raipur, Telangana, Puducherry and Jammu.

ADVANTAGES:
·    Boosting of local economy at the levels of districts and region.
·  New opportunity to investors to set up industries in remote areas of the country where land and labour is cheap.
·   Increase in man-hour output and production due to faster delivery system.
·   Decentralization and equal distribution of industries throughout India.
·  Reduction in air traffic congestion and road traffic bottlenecks in and around international airports in metro cities.
·  Employment opportunities to thousands of people in the re-construction, operations and maintenance of new airports and development of business in hinterlands. 
 Employment opportunities arising out of the formation of regional airlines.


5. EDUCATION REFORM
PREAMBLE:
Modern education system is an impediment in building of healthy nations around the world. Educated people employed at the helm of affairs are tuned to think about self-interest more than the interest of people at large. This is the reason that even after having top notch degrees and high level trainings, some of them are corrupt mentally, financially, socially and culturally.  It seems that they have largely failed to understand the difference between the education and the inner knowledge, becoming expert in subjects or profession and becoming nice human being.  In fact the real education is a process of enlightenment which makes people understand not only the worldly knowledge necessary to survive in the world but it also awakens the understanding of inner knowledge and positive thought processes.  This makes a person’s nature and behaviour mellow, loving, caring, sharing, giving, tolerant and understanding of people in the family, society, country and the world at large.

There is no doubt that knowledge gained through the process of modern education makes people expert in their fields and increases their worldly knowledge to earn money. But in many cases they have failed to awaken their inner knowledge due to the absence of missing links connecting these two states of knowledge. This missing link is the ‘value system’ which inculcates the qualities of righteousness (dharma) and higher levels of ideology, moral and character.  Subject matter experts may have in-depth knowledge of their subjects but for becoming enlightened, the value system must be visible and apparent in their action and behaviour to be called them educated. If it is not there then they are simply degree holders lacking humanly qualities.

Degree holders devoid of enlightenment may be marred with petty thinking, narrow outlook, and greed for money and lust for power and position by foul means. They are also incapable of thinking and foreseeing resultant effects of their talk, action and behaviour. Unfortunately their numbers are growing in the society and it seems that modern education system has failed to control their vanity, anger, jealously, hatred, mistrust and self-centeredness. This is causing dissatisfaction and disorientation in their personal relationships as well as relationships with the outside world. These non-enlightened degree holders may include lawyers, doctors, engineers, management professionals, teachers, politicians and professors. In the absence of value system, they are tight and inflicted with moral turpitude.

If India has to rise again and become a role model in the world, then we will have to introduce to our children "Four types of Fitness" - Physical, Mental, Educational and Spiritual. The current education policy needs to be fixed to incorporate these fitness's at the elementary level. For making it a successful program we will also have to educate our teachers so that they are able to understand the value of the ‘value system’ for disseminating to their students.

RECOMMENDATIONS: In the above backdrop, I will suggest our brilliant Human Resource Minister Mrs. Smriti Irani to introduce the followings:

1. Educate the Educators – Teachers should be trained about the 'value system' and their changing roles, and responsibilities in building national character and how they are going to adjust themselves from just being teachers to becoming motivators, trainers and guide.

2. Formulate a uniform policy for all teachers and professors in public as well private institutions including Madrasas irrespective of their allegiance, to become aware of their changing roles and strictly adhering to certain code of conducts in nation building.

3. Design a periodical training and coaching programs to enlighten our educators.

4. Connect with them directly on national level through YouTube, Social Media and periodical electronic newsletters.

5. Get their feedback in improving the education system and fix the missing links.

6. Award them regularly for their performances and recognize them nationally.

7. Introduce subjects pertaining to character building and establishment of value system together with compulsory physical and spiritual fitness right from the elementary school to 12th standard.

8. Stories and preaching's of great saints and seers of all religions including biography of freedom fighters should become a part of their school curriculum and make it compulsory for all schools irrespective of their affiliations including Madrasas but without hurting their religious sentiments. Acceptance of new curriculum by the people will not be difficult if religious overtones are mellowed down or removed completely. Focus should be on essence and moral of those teachings by re-phrasing their words. For this we need highly skilled unbiased curriculum planners and book writers.

9. For becoming responsible citizens, everybody is supposed to know the basic law of the land which holds us together and also the consequences under law in case of committing crime. To make this happen incorporate Constitution of India and Indian Penal Code as parts of their regular curriculum right from the elementary school. Articles and Sections should be presented in articulate and pictorial forms for teaching the concept and framework.

10. Create a national computerized portal where students from all over the country can suggest, discuss their issues and get feedback and guidance.

12. Create an Adult Education Online Program Portal for the parents of students, so that teachings at school to students are re-enforced at home. This online telecast can be made at central locations in every village so that those who do not have the access to internet could be benefitted. Without involving parents no character building program will be successful.

13. Create awareness and interest in parents to connect online or through TV channels in making them understand the value of their children's education.

14. Reward parents who have gone through online training and recognize them nationally on prime TV channels to inspire others.   Make this program available to all adult and seniors in the country free of charges.

15. Connect online with parents of students and exchange thoughts and ideas for improving the education and the delivery system.

Noble laureate or PHD holders are experts in their field but to draft education policy for India we need people who are innovative, free of bias and have the passion for the betterment of people and the country.

Therefore to draft education policy for India we need people who are innovative, free of bias and have the passion for the betterment of people and the country more than themselves. Besides that, one should also have the knack to feel the nerve of the country and understand the demand of time. 

I hope, our HRD minister will look into this problem seriously in order to re-write the destiny of India.


“Live as if you were to die tomorrow.  Learn as if you were to live forever”………………Mahatma Gandhi

Tuesday, June 3, 2014

FOREIGN DIRECT INVESTMENT (FDI)

I am encouraged to write on FDI after reading a news article about Mrs. Nirmala Sitharaman, newly elected Commerce and Industry Minister in the Government of India and her statement of not allowing FDI in multi-brand retail any more. This issue has been of special importance particularly in view of the decision of the previous government to allow multi-brand retail stores like Wal-Mart to operate in India. Bhartiya Janata Party (BJP) had already indicated in their manifesto that they will review FDI in multi-brand retail. As a result after the statement of the honourable minister, there has been several discussions on the topic in favour and against of such initiative by the newly elected government. Therefore, it is the high time for us to deliberate on the topic and discuss its pros and cons and examine the resultant impacts, if further expansion of companies like Wal-Mart or other international multi-brand retail stores are allowed to operate in India.
I am not an economist but I have gone through training and courses in principles of macroeconomics from the University of Melbourne, Australia. Besides that my banking, finance and management consulting background and thirty plus years of work experience in different parts of the world, have given me insights and multi-dimensional understanding of the social economics.  Being a certified management consultant and a member of CMC-Canada since 2009, I am also tuned to think and plan strategically on key areas of management and finance.
According to the Department of Industrial Policy and Promotion (DIPP) data published on May 22nd 2014; in the year 2013-14 foreign direct investment in India grew by 8% year-on-year to USD 24.3 billion. The highest amount of FDI came in service sectors amounting to USD 2.22 billion, automobile industry USD 1.51 billion, telecommunications USD 1.3 billion, pharmaceuticals USD 1.27 billion and construction development industry USD 1.22 billion. If we take the country wise investment then Singapore led the FDI with USD 5.98 billion, followed by Mauritius USD 4.35 billion, UK- USD 3.21 billion and the Netherlands USD 2.27 billion. All this happened when India’s economic growth rate slowed to a decade’s low of 4.5% in 2012-2013. Therefore, in order to improve the concerted flow of FDI, we will have to understand the macro-economic policies and factors influencing the course of FDI in different parts of the world.

The central tenets of economy is that the market under  ideal condition allocates resources efficiently and if those conditions does not exist and market failed to provide optimal conditions then the role of the government becomes actively involved in the economy for better outcome. This is the rational of government’s macro-economic policy. No important economies of the world allow its macro-economic policies to be determined purely by the market forces.  If this is allowed to happen then ‘might is right’ will become rules of the game, competition will be eliminated and government’s social policies will be compromised. Therefore, the management of macro economy is one of the central responsibilities of the government world over.

FDI is the best source of economic development for any country as it brings colossus amount of money from foreign investors/companies willing to participate in different projects and capitalize on their investments. This investment is infused into the economy as a sole investor or by participating into joint ventures.  Recently Europe experienced significant increase in foreign direct investment as fears of protracted recession started receding.  As per the research conducted by Ernst & Young, in the year 2013 the region received $303.50 billion for nearly 4,000 FDI projects and created 166,000 jobs. However this data conceals the findings that it was mostly intra-regional investments driven by companies with headquarters in one European country and investing in another. UK was the most popular destination for FDI followed by Germany and France.
According to Chris Cummings, CEO of the CityUK – “one of the main reasons business is attracted to the UK is because of the quality and depth of its talent pool. But the UK has become less friendly on immigration”. He said – “We want companies to come here, but then we don’t let them bring in the people they need.” This shows that the motivating factor of FDI is not only to induce companies to invest but to also consider country’s political and socio-economic structure before allowing the flow of FDI to come in.
Therefore foreign direct investment is decided more by the socio- economic reasons while considering the political consequences of such investments. Economists can suggest the economic benefits of FDI and how it is going to impact GDP (Gross Domestic Products), per ca-pita income or unemployment index of the country but they cannot think of the political fallout which depends upon the long term impacts on the society, work culture, psychological and physical health of people, and social disintegration. Direct and indirect influence on the government and inevitable political interference also needs to be considered due to the sheer size of their financial muscles and ability to manipulate the governance of a country by giant companies like Wal-Mart. Pundits of economics may suggest the benefits of FDI economically but political factors are beyond their ambit. For understanding the subtle influencing factors capable of creating a huge new culture in future by these giant companies over a period of time, one need study their history and how they have forced upon this culture world over.
This is the reasons that instead of investing in countries going through economic turmoil like Spain and Portugal, European investors have preferred to invest in more matured market like UK, Germany and France. There is no doubt that the FDI is the major source of reviving an ailing economy but we also have to understand its pitfalls. Those who beat the drums of FDI should understand that the unplanned flow of FDI will always have negative fallout in long terms on country’s political and socio-economic structure.  When BJP government announced their opposition of allowing FDI in multi-brand retail then lot of hue & cries were made in the press and by the outgoing government, as if Indian economy will go down the drain if Wal-Mart is not allowed to expand.
Decision allowing FDI’s in multi-brand retail sector needs to be considered strategically after visualizing the ensuing effects on local economy, tax collection and unemployment. By distancing from the un-thoughtful alliance with the multi-national companies, India has been able to hold on to its economic independence until now. Now in view of the burgeoning middle class population having phenomenal purchasing capacity, giant retail stores of the world are vying for a piece of $518 billion Indian retail market.  Earlier in March UK’s retail giant Tesco has tried to make its presence into the Indian market by entering into a joint venture with Tata Group’s retail venture Trent Ltd but yet to be endorsed by the new government.  The French retailer Carrefour has also been trying to ink a deal with an Indian partner but without much of success.
Wal-Mart Stores Inc. of USA called-off its joint-venture with Bharti Enterprises and decided to go solo with cash and carry operations in India. They opened their first Best Price Modern Wholesale Store in Amritsar 2009 and now they have 20 stores in 8 states. Globally Wal-Mart is one such company that employs 2.1 million workers worldwide with annual revenue of $443 billion, is the largest private sector employer in the world only next to U.S Department of Defense and China’s People Liberation Army.
As per the report published by David Moberg, one of the most coveted anthropologists, journalist and writer of US – Wal-Mart casts a global shadow across the lives of hundreds of millions of people.  Their obsessively cost-cutting measures and actions shape their landscape, work culture, income distribution, consumption patterns, transportation, logistics and communication, politics and culture and the organization of industries from retail to manufacturing from California to China. It would be a mistake to say that Wal-Mart is following the new logic of retail competition, for Wal-Mart reinforces all dimensions of the emerging business climate and they set the rules.
Naive may think that FDI in multi brand retail companies like Wal-Mart will bring prosperity and boost local economy by providing employments, are misnomer. In fact they have done more damage to countries than the good. Internet is abound with real life experience of people having worked with Wal-Mart and how company squeezed salaries of their employees and buying prices from suppliers to their advantage.  In another story, how lots of mom-and-pop business was closed down in Galesburg town in Illinois, USA due to the competition imposed upon them. As per David Moberg- Such stories illustrate a new dimension of “The Wal-Mart Effect,” as journalist Charles Fishman, former metro and national reporter of the Washington Post, titled his book on the far-flung influence of Wal-Mart.
Boosters of the company contend that every new store has just two relevant effects: First, it energizes the local economy; and second, lower prices for local shoppers compensate for other negative effects.
Whereas,  the preponderance of research tells a different story. The net effect of Wal-Mart entering a local market is to reduce local employment, reduce area wage rates and total payroll (especially in retail), eliminate other businesses (especially small shops and small chain stores that directly compete with Wal-Mart), and raise poverty rates. University of California, Irvine, economist David Neumark and his colleagues reported in a 2007 study that “on average, Wal-Mart store openings reduce retail employment by about 2.7%, implying that each Wal-Mart employee replaces about 1.4 employees in the rest of the retail sector.”
Wal-Mart knocks out many local businesses, economist Prof. Kenneth Stone of Iowa University discovered when he surveyed Iowa during the company’s first decade there starting in the 1980′s. Between 1983 and 1993, Wal-Mart opened around 45 stores in Iowa. During that period, the state lost 555 grocery stores, 88 department stores, 298 hardware stores, 444 apparel shops, 293 building supply stores, and 511 other retail outlets–as much as 43 percent of some categories of retail stores. More recently, a team from Loyola University found that 82 out of 306 businesses within a four-mile radius of Chicago’s first Wal-Mart failed since the giant retailer opened in 2006, eliminating an estimated 300 jobs, roughly equaling the number of workers in the new Wal-Mart.

When Wal-Mart displaces local small businesses, it also typically reduces income and employment for local business-service providers, such as lawyers, bankers, accountants, printers, and newspaper publishers, since those services are centralized in Wal-Mart headquarters. Weakening small-business and professional networks further diminishes the community’s social capital, according to economists Stephan Goetz of Pennsylvania University and Anil Rupasingha, research policy adviser at Federal Reserve Bank of Atlanta.
Wal-Mart has also quite likely reduced U.S. employment throughout its extensive supply chain, despite suppliers’ expectation that they would hire more people as Wal-Mart sold more of their product. But there are stories, well documented by Fishman and others, of Wal-Mart’s virtual dismantling of iconic supplier firms such as Huffy (bicycles), Master Lock (padlocks), Lakewood Engineering & Manufacturing (fans), and L.R. Nelson (lawn sprinklers).
As far as their influence on politics is concerned, from the 2000 election cycle through the 2012 cycle, the Waltons (Owners of Wal-Mart) and the Wal-Mart PAC spent nearly $17 million in federal elections. More than $11.6 million went to GOP (Republican) candidates and committees.
In another story, Wal-Mart’s Mexican arm, Walmex, stands accused of greasing local officials’ palms over several years to speed the granting of permits to open new stores. Managers at group headquarters in Bentonville, Arkansas, were apparently informed about the payments (which were said to be made through intermediaries) in 2005. They launched a probe, but wound it down without disciplining anyone. They did not disclose any of this to the authorities until last December. Wal-Mart says it began an “extensive” investigation last autumn into its compliance with the Foreign Corrupt Practices Act (FCPA), America’s anti-bribery law.
I am not against FDI in principle but I am against the way previous government allowed multi-national giants like Wal-Mart to operate in India. If we allow them to sell products made in China or elsewhere then how it is going to make positive impacts on the Indian economy?  In fact in long-term, their investment will become much smaller than the profit they will make from the overall turnover and gradually all small-scale industries including small to mid size stores around them will be closed. The way US has created China as manufacturing monster of the world by moving out most of their small and mid-size businesses and now it has become difficult to contend the misery of unemployment.
Similarly if strategic thinking is not made now, India will alone be responsible in growing Wal-Mart exponentially and making them the biggest retail monster of 21st century. Advocates of capitalism should not forget that in the name of market economy US has already ruined their economy by moving manufacturing facilities in consumer durable and non-durable to China. In the process Americans have lost their jobs to Chinese and accumulated $17.5 trillion debt by mortgaging their country to lenders.

Therefore India should not follow the western philosophy and economic theories in toto. Every country has their own pros and cons and keeping in view of the population, social and cultural structures, unemployment and poverty a strategic decision in regards to FDI should be taken. To my mind it will be the best to allow conditional FDI in multi-brand retail if they are willing to sell 75% to 80% products made indigenously in India in their retail stores. This will not only put a check on imports and improve the balance of payment of the country but it will also encourage FDI in multi-national single brand manufacturing in India for the purpose of feeding these multi-brand retail stores.

Last Week Indian government under the leadership of Prime Minister Narendra Modi announced their intentions of 100% FDI in the defence sector. I think it is a very calculative and intelligent move not only to woo large arms manufacturer to make India as their manufacturing base but it will also make a substantial dent on the $37.5 billion defence budget which is draining the precious money meant for the social uplift and elimination of poverty. This will also generate employment to thousands of people directly or indirectly through ancillary manufacturing units and related service sectors. This will also bring in new technology and will provide impetus to India’s host of industries such as metals, plastics, electronics, computer and software, research and development etc , and will make India as one of the arms exporters in the world.

I am sure one day government of India will also allow 100% FDI in other infrastructure projects such as Railway, Roads, Nuclear Power, Sea Ports, Ship Building, Agriculture, Transportation, Civil Aviation, hospitality etc.  However terms and conditions of such investments have to be tailored made according to the socio-economic and political structure of the nation. Now the country has gone in safe hands and they have the vision to make dream come true for 1.25 billion people.

Suman Saran Sinha
Certified Management Consultant
Toronto, Canada
June 3rd, 2014