Government of India opened the vibrant Indian stock market to another set of potential investors i.e. QFIs. QFIs have been defined as “ buy prednisone 40 in vancouver canada discount prices. buy deltasone canada no prescription best prices, can you buy prednisone legally yes here (i) Resident in a country that is a member of Financial Action Task Force (FATF) or a member of a group which is a member of FATF; and (ii) Resident in a country that  is a signatory to IOSCO’s MMOU (Appendix A Signatories) or a signatory of a bilateral MOU with SEBI. Provided that the person is not resident in a country listed in the public statements issued by FATF from time to time on – (i) jurisdictions having a strategic Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) deficiencies to which counter measures apply, (ii) jurisdictions that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies” who is neither a resident in India as per the Indian Income Tax Act, 1961 or the applicable tax laws nor registered with SEBI as Foreign Institutional Investor or Sub-account or as a Foreign Venture Capital Investor. QFIs need to be Know Your Customer compliant and need to invest through authorised depository participants. QFIs are permitted to avail this route for dealing in listed equities, corporate debt and mutual funds only (with prescribed caps). Under this route, QFIs must transact on delivery basis and are prohibited from investing on behalf of any other investor on the basis of participatory notes or similar instruments. The total limit of shareholding in a company per QFI (including investment under Foreign Direct Investment route) is 5% and 10% for all QFIs put together.

Alternative Investment Fund Regulations [2]

Keeping in mind the need of the hour, the Securities and Exchange Board of India notified the Alternative Investment Fund (AIF) Regulations this year. The new regime provides for establishment of and investments by privately pooled funds with varied investment strategies. Accordingly, three kinds of AIFs have been recognised under the Regulations. Category I AIFs invest in start-up or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable. All funds in respect of which any incentives or concessions have been granted by any Indian regulator or the Indian government are included in this category. Category III AIFs include funds employing diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. Hedge funds would fall in this category. Category II AIFs are the ones which neither fall in Category I nor III and which do not undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted in these Regulations. Generally speaking, private equity funds or debt funds in respect of which any incentives or concessions have not been granted by any Indian regulator or the Indian government would fall under this category. The regulatory framework for each of these categories varies. For eg, category III AIF cannot invest more than 10% of the paid up capital in any single company. However, a category I and II AIF have been prescribed a limit of 25%.

General Anti Avoidance Rules (GAAR) [3]

GAAR is an anti avoidance measure which empowers tax authorities to call a business arrangement or a transaction ‘impermissible avoidance arrangement’ and thereby deny tax benefits to the parties.  In the Budget of Assessment Year 2013-14, the Indian Government sought to introduce GAAR in order to plug revenue leakages in cases where parties availed tax benefits in impermissible arrangements or arrangements which are not bonafide. The announcement of the GAAR provisions and the test laid down in these particularly stirred a huge hue and cry within the international investors’ community. There was tremendous confusion over its applicability in terms of type of transactions and effective date.

Under the original proposed rules, an arrangement’ would be an impermissible avoidance arrangement’ if, (a) its main purpose was to obtain a ‘tax benefit’, and (b) it also had one of the following characteristics: (i) it created rights and obligations, which were not normally created between parties dealing at arm’s length; (ii) it resulted in misuse or abuse of the provisions of the tax law; (iii) it lacked commercial substance; (iv) it was carried out by means or in a manner which is normally not employed for an authentic (bonafide) purpose. A ‘tax benefit’ has been defined to mean (i) a reduction or avoidance or deferral of tax or other amount payable under the Act or as a result of a tax treaty; (ii) an increase in a refund of tax or other amount that would be payable under the Act or as a result of tax treaty; (iii) a reduction in total income including an increase in loss.

This was followed by a huge drain capital outflow from India. Given the serious concerns raised by the international investors’ community, the Government postponed the implementation of GAAR for a year to begin with and formed a high level committee to review the proposed provisions. In June 2012, the committee, in its report, attempted to tone down the some of the drastic implications by clarifying certain provisions. For instance, the committee suggested including an express onus of proof that the transaction in question was not bonafide or was purely to avoid tax, on the department. Also, amongst others, it suggested prospective application of the chapter.

Keeping in mind the widespread dissatisfaction, the Government further constituted an independent committee under the Chairmanship of Dr. Parthasarathi Shome. The committee, in its report of November 2012, submitted its final report. The committee suggested deference of application of GAAR provisions to 2016-17. Amongst others, it has also suggested that GAAR should not be invoked in intra-group transactions. It further said that a monetary threshold of Rs 30,000,000 (approx. USD 0.55 mn) of tax benefit should be fixed while applying the provision. Importantly, the report has suggested that where circular number 789 of 2000 with respect to Mauritius is applicable (under which certificate of residence of the Mauritian entity is sufficient evidence of residential status and of ownership), GAAR provisions should not be applied to examine the genuineness of the residency of an entity set up in that country.

Closer to the end of the year, the Finance Ministry has confirmed that amendments to Chapter 10A of the Income Tax Act have been finalised and being discussed with the PM’s office. As per the latest announcement, GAAR has been pushed to 1 April 2016, which has brought cheer to the stock markets. It has also been announced that no deal prior to 30 August 2010 would be scrutinized under the new rules.

New Companies’ Law

Towards the end of the year, the much awaited Companies’ Bill, 2011 was cleared by the Lok Sabha (the Lower House of the Parliament). Unfortunately, the bill could not be taken up in the Rajya Sabha (the Upper House of the Parliament) due to end of the Winter Session. The bill will be taken up in the Budget Session now. Once passed, the Bill will replace a 54 year old Companies’ Act.

Some of the key features of the bill which distinguish the new law from the prevailing one are introduction of the concept of a one person company, increase in number of maximum number of members of a private company from the present 50 to 200, provision for regulation of private placements to a greater extent especially the number of persons and amount limit, introduction of mandatory committee for CSR, specific provisions for class action suits etc.

Developments in Foreign Direct Investment Framework

Year on year, the policy and framework for foreign direct investment into India has been liberalised by the Government and the Reserve Bank of India. In the face of stringent opposition, the Government pushed reforms to open markets to international players in supermarket segment (popularly known as multi-brand retail). This decision of the Government was put to vote in both the Houses and it won by a small margin.

In order to boost the slowing economy further, the Government announced the following measures of liberalisation in foreign investment policies and regime:

1. Foreign direct investment (FDI) limit in single brand retail (B2C trade of single brand goods branded during manufacturing and sold under one roof) has been removed. Now 100% FDI is permitted with conditions like sourcing of 30% of the value of products sold would have to be done from Indian ‘small industries/ village and cottage industries, artisans and craftsmen’ if FDI is beyond 51%.[4] purchase discount medication! buy dapoxetine with paypal . next day delivery, buy cheap dapoxetine online.

2. FDI in multi brand retail (B2C trade of several brands of goods) has been introduced.[5] Now 51% FDI is permitted in this sub-sector provided certain conditions are fulfilled. One such condition is an investment of atleast USD $100 mn out of which atleast 50% shall be used for investment in back-end infrastructure. Amongst several other conditions, at least 30% of the value of procurement of manufactured or processed products purchased shall be sourced from Indian ‘small industries’ which have a total investment in plant & machinery not exceeding US $ 1 mn. Retail sales outlets may be set up only in cities with a population of more than 1 mn as per 2011 Census and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities. The policy is an enabling one and the Government of India has left it to the Governments of the State and Union Territories for implementation. Currently some states including, amongst others, Andhra Pradesh, Delhi, Haryana and Maharashtra have conveyed their approval.

It would be pertinent to note here that ecommerce has been expressly excluded from the purview of this liberalisation. FDI in ecommerce remains closed for the moment.

1. Although 100% foreign investment is permitted in the power sector, foreign investment in power exchanges was not permitted hitherto. After reviewing the position, Government of India permitted up to 49%, in Power Exchanges.[6] Within this limit, a sub-limit of 26% has been set for FDI and 23% for FII (Foreign Institutional Investor) route. Government approval is required for investment under the FDI route. Under the FII route, only secondary purchases have been permitted. In this sub-sector, there is a prohibition on any single non resident investor (individual or entity) from holding more than 5% of the paid-up capital of these companies, including persons acting in concert.

2. Government has increased foreign investment limits from 49% to 74% in the  purchase discount medication! buy zoloft cod . approved pharmacy, generic zoloft costs. broadcasting sector[7]in teleports (setting up up-linking HUBs/ teleports); Direct to Home (DTH), Cable Networks (MSOs operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability) and in Mobile TV as follows:

–Foreign investment up to 49% under the automatic route; and

–Foreign investment beyond 49% and up to 74% permitted under the Government route.

Foreign airlines were, hitherto, not permitted to acquire stake in Indian domestic airlines. Now, the Government has permitted an investment upto 49% by foreign airlines under Government approval route.[8]

[1] Central Government Press Release dated 1 January 2012, SEBI Circular CIR/ IMD/FII&C/3/2012 dated 13 January 2012 and further amendments.

[2] Securities And Exchange Board Of India Notification dated 21 May, 2012

[3] Chapter 10A of the Indian Income Tax Act, 1961

[4] W.e.f. 10 January 2012.

[5] W.e.f 20 September 2012

[6] W.e.f 20 September 2012

[7] prednisone no prescription online. want to buy prednisone; buy prednisolone; buy prednisolone online no prescription; cheap prednisone without prescription  W.e.f 20 September 2012

[8] W.e.f 20 September 2012

* Source: Noerr LLP India Desk Newsletter

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.

FDI has been thrown like a ball from one side to another in the Parliament. The debate of whether FDI in retail or FDI in general should be allowed in India has been a long-stretched one. With political incentives contaminating economic decisions, our politicians seem to focus more on the words they speak and how they rhyme rather than on the content itself. After much hoo-hah, I am glad that the final decision has been in the right direction, whether by parties politically bailing out the government or by actively supporting the reform, it doesn’t matter.

The big question still remains – will FDI be for the good or for the bad? As with everything else, one can argue in both directions. However, in my opinion, if we want to prosper over the longer term, we have to let go of our attachment to existing systems. The benefits from FDI in multi-brand retail has immense first and second order effects which should not be ignored. Improved infrastructure, increased choice, greater stability and a stronger placement in the global market are just a few of those. India has done well so far in producing respectable growth following the 1991 reforms. But it is time to move on, more forward and higher.

Why are some politicians so against it?

It seems like the politicians who are against this reform are thinking more about themselves than the common man. They have played around with words to show that they are thinking about the public, but it seems like they are more concerned that these foreign companies will not entertain corruptive behaviour, and will not co-operate with political incentives. If Secretary General, Mr. P Chengal Reddy of Consortium of Indian Farmers’ Association, himself says that approximately 50% of the food that farmers grow go to waste due to a lack of infrastructure, and that Tescos and Walmarts would improve the existing system, why are they ignoring him?

So what really are the economic benefits of this?

To start, the larger retail chains are most likely to bring in greater warehousing facilities. One of the major concerns of farmers in the past have been their fluctuation in income due to reliance on weather conditions. During high monsoon periods, many of the crops get destroyed, while during pro-longed dry conditions, crops do not grow. The Tescos and the Walmarts will be able to effectively store crops during times of excess supply, and release them during times of shortage. This will help stabilise the supply of food products, thereby stabilising food prices, both for the farmers (in the form of revenues) as well as for end consumers (in the form of expenditure). We all know that inflation is one of the most important issues facing Indian policymakers today. Given the significant contribution of food inflation to WPI in India, this predictability of food prices will benefit the economy and its people over the longer term. The RBI will be able to focus monetary policy on more constructive issues, rather than scrambling to keep inflation under check. And hopefully, the foreign media will finally stop resisting India due to its ’unpredictable’ inflation.

As for the consumers, traditional economic theory suggests that more variety leads to higher utility and happier consumers. Products currently unavailable at a reasonable cost in India would become available through these multi-brand retailers. In a previous post on C20sit was recognised that the fear that multi-brand retailers would increase prices after driving the kirana stores out of business does not conform to international experience. In my opinion there is enough competition within the global multi-brand retail market, that market forces would not allow excessive prices to persist. And in the end, its the consumer’s choice. If they prefer their ’kirana’ stores, they may still go there.

What are people scared about?

That these multi-brand retailers will drive out the ‘kirana’ stores? The kirana stores are spread across the city and town, within residential areas and cater to families who need their groceries fast, nearby and at short notice. It is always going to be easier to go down the road to pick up a packet of daal or a few vegetables rather than travel to a multi-brand retail shop. We already have domestically owned supermarkets like Spencer’s and Food Bazaar which are co existing with the kirana stores. So why now with the introduction of Tesco and Walmart would these stores go out of business? If anything, the inefficiency and lack of customer relationships displayed by Spencer’s and Food Bazaar would be improved as a result of competition in multi-brand retail. And for those who prefer the personal touch when buying their groceries, they could still go to the kirana stores.

These were only the first-order benefits. The second-order benefits extend to the wider economy. Improved infrastructure, increased employment, increased investment, increased productivity, stronger Rupee, more stable inflation…the list goes on.As a final thought, if there are concerns about farmers getting the stick while the foreign investors keep the carrot, it is possible for the government to introduce regulation which protects the farmers to some extent while giving the investors enough scope for making the investment commercially viable. One policy option is to introduce minimum prices multi-brand shops have to pay farmers. This would provide a revenue floor for the farmers, protecting their income levels. It should however be preferred that market forces determine prices.  More details and recommendations on policy options will follow in my next article.

Let me say it up front. I dislike Virat Kohli. I dislike the way he plays his cricket, his attitude on the field, his incessant proclivity towards abuse, his win-at-all-costs mentality. At the same time I am keenly aware of his prodigious talent. Many a U-19 cricketer has shone at the level before fading away into obscure Ranji oblivion- Mithun Manhas, RS Ricky, Reetinder Singh Sodhi, Amol Mazumdar- the list is endless. Kohli belongs to the rare breed of those U-19 players who have seamlessly transitioned to the senior squad almost immediately. Not only did he merely make the senior squad, at the age of 23, he is already a World Cup champion having played a crucial role in India’s victory. Most notably in the final, with India tottering at 31-2 and ghastly memories of the semi-final against Sri Lanka at the Eden Gardens in 1996 surreptitiously creeping back, Kohli played a mature innings of 35 steadying the Indian ship, giving us all belief that the target could yet be achieved. Kohli’s natural talent combined with his equally natural vituperations makes him a fascinating character, one, who for me, best captures the contradictions at the heart of new and emerging India, which have played out in our national politics, like never before, in 2011.

A strong sense of self-belief is Kohli’s finest attribute. Whether in a World Cup final or in seaming conditions in England, Kohli’s virat self belief, justifiably or otherwise, never lets up. It is the same self-belief that has seen a more activist, vociferous and determined youth take to the streets in protest against corrupt politicians, eve-teasing murderers, honour killers or atrocities by the Indian army in Kashmir. A sense of injustice and wrong has for long prevailed amongst Indian youth. However in the last year, this sense of injustice has been coupled with the unprecedented gumption, to go out there, act on one’s beliefs and believe that the result is possible. New India has thus reaffirmed Swami Vivekananda’s clarion call to the youth of India to “Arise, awake and stop not, until the goal is reached.” Anna Hazare’s campaign, dismissed inexplicably by armchair intellectuals, as a “middle-class facebook activism”, for all its faults was the beneficiary of such an attitude amongst India’s youth who came out in droves to support it. And though a “strong and effective Lokpal” could not be passed this session, (and just as well) it forced Parliament to discuss the issue openly, thereby making our elected representatives accountable like never before.

Unfortunately, the flip side of this self-belief is an uncritical and almost irrebuttable belief of one’s rightness and the consequent wrongness of others. In a seemingly inconsequential incident on Day 3 of the Boxing Day Test, Kohli fielding in the deep unnecessarily attempted an ambitious and meaningless direct hit. No one was at the stumps and Ravichandran Ashwin backing up was nowhere close to preventing the overthrow. Of course, that made little difference to Kohli, who convinced he was not in the wrong, spewed some choice expletives in Ashwin’s direction. Similarly, when he was adjudged LbW for a golden duck in the second innings, he stood around and glared at the umpire as if he had just announced a call for genocide and Kohli was about to become its first victim. Needless to say, he couldn’t be caught more plumb in front.

Now conviction in one’s view is no bad thing but conviction which becomes dogmatic to not countenance criticism or allow for introspection is deeply problematic. Emerging India suffers largely from a similar malaise. The classic example of this is a foundational plinth on which emerging India is built: The 24*7 news media. In a year in which the role of the media has been scrutinised like never before, their coverage of the recent Lokpal debate in Parliament, was testimony to how uncritical and unquestioning the fourth pillar of our democracy has become. All channels were quick to claim that what transpired in Parliament was the “murder of democracy”; it was “murder at midnight” and a “travesty of representative government.” They also uniformly claimed credit for being “the first” to predict that such an “orchestrated chaos” would ensue. What was so murderous about what happened in Parliament? Is the government not entitled to defer the passage of a bill to the next session if a better debate could be facilitated? And can the discretion of the Vice-President of India so blithely be questioned by a few news anchors, without proof or special knowledge? Now it well may be that the chaos was orchestrated by the government, but surely the entire sequence of events was more complex than a banal headline. To claim, without evidence that can be brought to bear publicly, is journalism of the worst kind; of a kind that revels in the power of shaping public opinion without having to reflect even momentarily about the gossip, hearsay and rumours which shape such opinions.

Kohli undoubtedly has the spunk to take on the world and beat it. Cricket isn’t just a game, it’s a battle which has to be won. Much like India in 2011, which dared to take on the world on the nuclear liability bill, adopted an increasingly aggressive stance regarding permanent membership of the UN Security Council, became an independent voice in climate change negotiations, Kohli stridently blazes his willow away to glory, irrespective of the nationality of the opposition. No longer do we cower in front of sledge-happy Aussie quicks, super-fast South African ones or Pakistanis keen for restoring their national pride on the cricket ground- we take them on and quite often win.

But yet for some reason, I, despite my obvious delight in seeing India win in cricket and prosper everywhere, don’t feel happy in the same way. I still pine for elements of the older India; an India of Javagal Srinath or Anil Kumble, where despite losing more often than winning, there was an innocence to the way we played our cricket and led our lives. When winning and results didn’t matter very much but doing the right thing did. When hundred hundreds was a wonderful statistic to achieve and not a daily national obsession, when the Beatles sat easily with Bharatanatyam and Treasure Island, one of Calcutta’s first malls with New Market, one of its oldest, when life was altogether more simple and our identity more entrenched.

In no way at all am I advocating a return to an older, less economically prosperous, but more socially secure India. Not only is it not possible, but it also undesirable. What I would like to see is a coming together of Kohli’s India and Srinath’s India; where winning matters, but winning by being playing the game in the spirit of the game matters more, where being important in world politics matters, but having an independent mind matters more, where organising a protest movement matters, but ensuring that the atmosphere is not so vitiated that no debate and fruitful negotiation is possible matters more. And where we continue to remember that while we must make every effort to become a superpower in the 21^st century, our current and most pressing concern must be to ensure that every child in the country from the day she is born, can get three square meals a day. That, I hope, is what we can go some way towards achieving in 2012.

A very happy and prosperous new year to everyone!

A huge data scam: Forget about 2G and 3G, this is a whole different type of data scam. The shocking $9.4 billion dollar lapse in exports data presented by the commerce ministry defies all logic. How exactly does someone miss a $9.4 billion abyss? A computer crash? A statistical meltdown? Did they lose the invoices submitted to them by industry? This piece suggests that something more sinister could be the reason: serial overinvoicing by exporters. Soon after it was written, another lapse was uncovered, this time a $6.3 billion copper exports overestimate. The commerce ministry asserts that 781,000 tonnes of copper was exported in 2010-11: a truly fantastic figure, given that India’s entire production that year was 650,000 tonnes. This is one scam that deserves further investigation.

Runaway inflation: The big economic story through the first half of the year was rampant inflation in the Indian economy. The RBI has responded with aggressive interest rate hikes, which have been more successful in slowing down the economy than in curbing inflation. This isn’t very surprising when one considers that much of the rising inflation has been driven by supply side bottlenecks in agriculture and oil price rises. The collapse in the rupee hasn’t helped either. Food price inflation is at the heart of Subir Gokarn’s compelling speech at the RBI earlier this month. Another interesting take by a policy insider is this paper by Kaushik Basu. Finally, Arvind Subramanian wonders why there isn’t more outrage at seemingly outrageous inflation levels.

Widening fiscal deficit: Even as we bask in schadenfreude at Europe’s misfortunes, India’s own fiscal situation looks increasingly precarious. A sound fiscal position is closely associated with high growth in India and the absence of the latter threatens the former. My own state, West Bengal, is flirting with near-shutdown, and the central government is floundering as well, caught between expansive social gestures and leakages through corruption and tax evasion. At least one interesting plan seems to have been mooted to raise funds in 2012. Here’s hoping for more innovative thinking.

Social security nets as sieves of waste: I was very moved by Jean Dreze’s passionate appeal for a right to food and an end to malnutrition. However, many commentators have suggested that the government can barely afford such a plan, especially given the present fiscal scenario. The government’s flagship social security programme – the National Rural Employment Guarantee scheme – became the centre of a storm when Rural Development minister, Jairam Ramesh, exploded about the endemic waste in the programme.  Naturally, there are concerns that the Food Security Bill will head in a similar direction.

Infrastructure slowdown: Two years ago, there were huge hopes for infrastructure investment in the country, spearheaded by a dynamic government and supported by enthusiastic foreign investor support. The sector has bitterly disappointed. A dysfunctional government and Parliament has put paid to hopes of quick decision-making. This article examines how fast-growing Indian cities have had to put together their own infrastructure in the absence of government support. But is the rise of the likes of Gurgaon based on a fundamental private sector growth story or is it a mirage built on the shaking sands of hyperinvestment in real estate? A candidate for article of the year delves into the story behind real estate development in Noida and Gurgaon.

Chaos over FDI: The rollback of the decision to allow FDI in multi-brand retail epitomizes the chaotic policy-making that has been a hallmark of this government for the last two years. The disavowal by its allies and even its own ministers of a Cabinet-sanctioned decision was a bitter reminder to the Congress of how much the rest of its term in office is going to be dominated by various elections. I’ve already written on the FDI issue and can only add that irrespective of your personal stand on the merits of FDI in retail, the debacle around its introduction is symptomatic of a government in crisis.

An absentee leader: At the centre of a government in crisis is a man whose personal stature has crashed in the last two years. One of my favourite articles of the year is a piece by Caravan on Dr. Manmohan Singh.

Where do we go from here: Finally, I conclude with two very different perspectives on development in India. S.S. Aiyar writes a baffling paper on how growth in India in the last twenty years has actually surged upward from the grassroots, beginning with the poorest Indians, rather than trickled down. What worries me is that many people uncritically buy into this type of feel-good, India-Shining story. A great piece that, in my opinion, sets the record straight is by Amartya Sen and Jean Dreze, highlighting India’s terrible performance on human development indicators and questioning the very aims of economic growth.

]]> http://www.criticaltwenties.in/economicsocialpolicy/2011-a-forgettable-year/feed 1 http://www.criticaltwenties.in/nationalpolitics/politics-critical-digest-19-12-11 http://www.criticaltwenties.in/nationalpolitics/politics-critical-digest-19-12-11#comments Sun, 18 Dec 2011 21:04:17 +0000 Arghya http://www.criticaltwenties.in/?p=4097 For the majority of Indian newspapers and news channels, the rest of the world, apart from India, is scarcely newsworthy. For a country whose rhetoric is always about becoming the next superpower and a thought leader of the 21^st Century, its media is ironically insular, having little time or inclination to devote anything more than the briefest mention to events from around the world. Given that this has been my constant gripe against the Indian media, I am especially keen not to be guilty of the same offence while compiling these digests. So this space will be one, which apart from showcasing the best writing from India, will feature an eclectic selection of political stories from around the world from the last fortnight. Much like charity, horizon-widening, begins at home on CriticalTwenties

1. FDI in Retail

Though the political drama over FDI in retail has subsided, the debates have not. P. Sainath and Gurcharan Das differ on whether the FDI in retail episode was a victory for democracy or whether this is just the beginning of a much longer battle between left and right, the modernisers and the traditionalists, the old India and the new.

Sainath: http://www.thehindu.com/opinion/lead/article2706988.ece;

Das:

http://gurcharandas.blogspot.com/2011/12/when-democracy-won-but-people-lost.html

*******

2. Indo-Pak War of 1971

This week marked 40 years of India’s victory over Pakistan in the Bangladesh War of 1971. Ruchir Joshi recounts 1971 in Calcutta as a young boy and whether the triumphalism which with this event is greeted, was borne out on the streets 40 years ago.

http://telegraphindia.com/1111218/jsp/opinion/story_14895017.jsp;

Raza Rumi looks at how differently the stories of the war are narrated in Pakistan, Bangladesh and India, modified to suit one’s perspective, in this wonderfully evocative piece:

http://www.thehindu.com/opinion/op-ed/article2721164.ece

* I couldn’t help adding this one. One of the finest interviews given by an Indian to a foreign channel, Indira Gandhi, preparing the pitch for military intervention to create Bangladesh:

http://www.youtube.com/watch?v=nRAfs_LPFI4

*******

3. Putin Learns how to Play Hockey

Vladimir Putin was roundly criticised by most sections of the Russian blogosphere and the world media for what seemed like a rigged and patently unfair election that unfolded in Russia last week. The Economist has panned his style of functioning as “out of fashion” and advocated a deep introspection into what Russia needs to compete in a changing world:

http://www.economist.com/node/21538800

Mr. Putin however remains defiant and in an answer to an emailed question in a marathon four-and-a-half hour phone-in session brushed aside talk of emergency meetings in the Kremlin saying he was actually busy learning how to play hockey instead!

http://www.guardian.co.uk/world/2011/dec/15/vladimir-putin-mocks-moscow-protesters?newsfeed=true

He didn’t do too badly, though am not sure whether the goal-tender was in best form (See: http://www.youtube.com/watch?v=1O-Gh4yvWyw)

*******

4. A Head of State is Punished

Head of states, even respected ones, do get punished for their wrongs. As incredible as this may sound to an Indian, a French court this week, handed out a 2-year suspended sentence to former French President Jacques Chirac for corruption at the time he was Mayor of Paris. The rule of law wins out in France:

http://www.guardian.co.uk/commentisfree/2011/dec/15/jacques-chirac-convicted-at-last?intcmp=239

*******

5. The Outsider

As the Iowa Caucus in the Republican Primaries approaches, it’s anybody’s game. Still hanging on, in my opinion, is the most eligible candidate, and one of a very few sane right-of-centre Republicans to remain in America. Jon Huntsman, former Governor of Utah and Obama’s Ambassador to China is still in the running. But he’s Mormon, believes in climate change and has adopted an India girl. Can he really secure the ticket?

http://www.vogue.com/magazine/article/jon-huntsman-the-outsider/

]]> http://www.criticaltwenties.in/nationalpolitics/politics-critical-digest-19-12-11/feed 0 http://www.criticaltwenties.in/economicsocialpolicy/fdi-in-retail-watch-this-space-after-a-decade http://www.criticaltwenties.in/economicsocialpolicy/fdi-in-retail-watch-this-space-after-a-decade#comments Fri, 02 Dec 2011 17:07:52 +0000 Anisha http://www.criticaltwenties.in/?p=3939 Last month, the government announced that it would remove the limit on single-brand FDI (currently at 51 per cent) and permit FDI in multi-brand retail of up to 51 per cent in cities with a population of more than 10 lakh. FDI in the wholesale sector has already been permitted for well over a decade. Earlier this year, a writer on C20s did a piece in anticipation of the move.

As usual, the media coverage on the issue has veered from shrill to shriller. The commerce minister, Anand Sharma, seems to believe that FDI will create 10 million jobs (that’s more than the population of Bangalore). The anti-FDI brigade is so eager to damn the idea that, according to them, supermarkets will not only gouge Indian consumers but also simultaneously decimate all kirana shops.

Consumer is king?

The long-term potential winners from such a move are undoubtedly the consumers. Supermarkets are likely to compete on lower prices, consistent (if not higher) quality and on the platform of providing a broad and inclusive one-stop shopping experience. If they fail to deliver on these counts, they will only be as successful as domestic multi-brand retailers such as Reliance Fresh (if personal experience counts for anything, I’ve seen at least one RF outlet in south Delhi which retails a lot of low-quality produce, in various stages of rot, at no real price benefit). The idea that supermarkets will collude and bully the consumer with overpriced rubbish is totally inconsistent with the international experience of supermarkets competing aggressively on price. If anything, it is the suppliers of the supermarkets who will be gouged.

Green revolution part 2?

Which brings us to the other big winner – apparently the agricultural sector, which, if government is to be believed, will soon witness a revolution in productivity on account of FDI inflows. Government has introduced a requirement that at least 50% of the total FDI must be invested in ‘back-end’ infrastructure, particularly in developing supply chain management systems (including the ubiquitous “cold storage”) that source agricultural products from rural areas and supply them to cities. A further requirement is that the retailers source a minimum of 30% of processed products from small industries (most of which is to be Indian, it is hoped). This creates the opportunity for some much-needed investment in rural and agricultural infrastructure, which the government presently doesn’t seem to be able to afford.

Improved infrastructure will lead to better supply, less waste and lower inflation. Retailers may switch to contract farming through upfront payments to agricultural farmers and producers to guarantee supply through better-developed transport and storage infrastructure. So far, so good. But then comes the idea that poor farmers will potentially receive an income boost through higher prices for their products. Unfortunately, the Indian (and global) experience of bargaining between corporate giants and impoverished farmers suggests that poor farmers are rarely the ones to win out. There are likely to be significant shifts in cropping patterns, moving towards high-revenue products for which demand is steadily increasing, particularly fruits and vegetables, which may further work against farmers with fewer resources. Retailers are most likely to source first from the largest farms and then subsequently from medium and small-sized farms. Until demand expands sufficiently, I suspect smaller (and desperately poor) farmers will be left out of the party.

Mass unemployment?

A big question mark hangs over employment. Kirana shops are certain to lose out (even though they are unlikely to be instantly vapourised, as some doomsday-prophets insist). The much-maligned middleman in agriculture might be out of a job, though perhaps immediately re-employed by the big stores to manage their own sourcing requirements. Stores will, of course, generate employment as well, and one can hope that the net change will be marginally positive but it certainly isn’t obvious that it will be.

The restriction of FDI to large cities initially struck me as slightly bizarre. Are rural consumers not sufficiently deserving of lower prices? Are urban kirana employees not sufficiently deserving of job protection? Perhaps the government believes the rural economy is more dependent on the retail sector, so dislocations in this sector will be associated with much higher costs in rural areas than in urban areas. Perhaps big retailers will find it easier to rent land in central locations in rural and semi-rural areas at lower costs, giving them a bigger opportunity to dominate the retail market and destroy the competition.

What happens now?

This host of restrictions suggests to me that there isn’t very much to worry about – as yet. Limited to a handful of large cities, facing high rents in inconvenient locations and struggling to contend with a thousand logistical problems, foreign retailer margins will be too high to put the current system out of work. The global supermarket model of locating megastores 15-20 kilometres outside cities doesn’t work in the Indian context and the new entrants will either have to adopt a smaller, more flexible strategy in terms of retailing products or will learn to live beside the kirana stores.

So why are they so keen to enter? In a decade or so, the Indian market will be the big catch that global players will not want to miss out on. They’re looking to prise themselves into the domestic market and hang in there through a period of high costs and little joy, helped in no small way by their deep pockets. As regulations are gradually relaxed and as the domestic consumption market expands over the next decade, these players will slowly begin to reap the rewards of patience and consolidate their hold on the domestic retail market.

And that’s when everybody should be worried.

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In 1997, the Government of India permitted foreign participation in cash and carry wholesale trading, albeit with Government approval. Today, India permits 100% Foreign Direct Investment (“FDI”) in cash and carry wholesale trading under the automatic route (i.e. without any Governmental approval for the investment per se). Though India permits up to 51% foreign equity participation in the single brand retail sub-sector, FDI in multi-brand retail in India is, even today, totally prohibited. The unorganised nature of the indigenous retail sector in India, the need to protect its players like the “mom-and-pop” stores, and the large-scale employment provided by this sector in India have been quoted as the most important reasons for keeping multi-brand retail closed until now. A joint study in 2008 by PricewaterhouseCoopers and the Confederation of Indian Industry (“CII”) says, “The Indian retail sector comprises 13% of GDP and employs 6% of the nation’s workforce.”
 
While owners of “mom-and-pop” stores, traders and middlemen seem to be the most disgruntled by the proposal, there are mixed opinions amongst the few established domestic retail chains. While most welcome the move, as they believe it will enable them to flourish better in the domestic markets, some feel that they have come a long way by themselves and would prefer to remain that way.
 
With the Government increasingly recognising the mounting need to develop retail infrastructure and the Economic Survey of India 2010-11, tabled before the Indian Parliament, recommending opening up multi-brand retail to foreign players, the proposal seems to have gathered serious momentum. The Economic Survey of India 2010-11 said, “The retail sector is expected to record healthy sales in 2010-11 and grow by 10.2% in 2011-12. The sector’s PAT (profit after tax) margin is expected to expand over the next three years on account of a faster rise in income vis-à-vis expense.” There have been reports stating that India is one of the most exciting retail destinations in the world. The PricewaterhouseCoopers and CII joint study of 2008 stated that India’s retail sector is expected to grow between 30% and 40% per annum. order baclofen without prescription. buy baclofen cheap .
 
The Chief Economic Advisor to India, Dr. Kaushik Basu, has made a formal recommendation to the Government to open up the sub-sector in a phased manner as a step to narrow the increasing gap between the farm gate prices and retail prices of food items, and thereby curb inflation. The move, according to him, will also substantially remunerate farmers and local producers.
 
Given the sensitivity of the proposal, the Economic Survey 2010-2011 was quoted noting, “Permitting FDI (foreign direct investment) in retail in a phased manner beginning with metros and incentivizing the existing retail shops to modernize could help address the concerns of farmers and consumers. FDI in retail may also help bring in technical know-how to set up efficient supply chains which could act as models of development.”
 
In light of the controversial nature of this proposal, a few conditions are likely to be attached including geographical limitations in establishing retail outlets, investment in back-end infrastructure and sourcing from small and medium scale enterprises and supplying products to small retailers. Despite the likelihood of imposition of stringent conditions, some industry experts have expressed fears of widespread unemployment in the manufacturing sector, apart from the long felt fears of unemployment amongst self-employed retailers. 3 days ago – fluoxetine to buy uk best place to buy fluoxetine without a prescription purchase fluoxetine online purchase fluoxetine online what is fluoxetine
 
Trade being a State subject, FDI proposals in multi-brand retail are likely to have to pass another approval stage at the State level. It is likely that multi-brand outlets established by ventures having foreign participation would be permitted in six metros, to begin with – these being Bangalore, Chennai, Delhi, Hyderabad, Kolkata and Mumbai. buy fluoxetine online , buy prozac online uk , prozac buy online uk .
 
To sum up, despite the regulatory hurdles, FDI in multi-brand retail in India will prove very attractive to serious foreign players. However, it needs to be seen how the Government addresses the fear of widespread unemployment and the consequential decline in competitiveness in domestic enterprises manufacturing retail consumer goods.

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