FDI Reforms: Policy Paralysis End, But Results Awaited

What do the Policy Reforms Mean to Commoners?

For the common man, a hike in diesel and LPG prices means a great hit on inflation because, when the Consumer Price Index (CPI) inflation is 10 percent, such reforms are hard to digest. While for the government, it makes economic sense to rein in the deficit. A commoner understands inflation more than he understands the fiscal austerity. If the price hike were implemented over a period of time, such as hiking the price at Re.1 per litre per month, it would not have hurt the common men that much.

Moreover, FDI in retail does not seem to affect the middle-class so severely; instead if it works out well, they will be benefitted with better choice, quality, price and shopping experience; all of these only could be proved in the future.

Will the face of Agriculture Change?

The argument that FDI will provide a panacea for the nations farming ills is not that sure to happen. In the retailer shops there are only limited space (only up to 10 percent) for such products; the rest is being devoted to other consumer products.

Furthermore, FDI will build value chains for a limited supply of products to the consumer in specific geographies through contract farming. Hence it will be extremely niche segments that they will be looking at.

Thus it is foolish to think that FDI will take over the entire agriculture sector and transform it into a high yielding sector that addresses issues of land under cultivation, productivity, crop selection, output, logistics, marketing and the retail sale. Though, the FDI will improve the value chain, it cannot bring about any change in production, irrigation or productivity.