Thursday, December 13, 2012


India is currently going through a crisis that has the potential to cause civil unrest unless some thing dramatic happens to pull back the country from the brink. While the government is getting increasingly isolated because of its wrong moves, actions and financial mismanagement, the alternative option to the citizens seems to be not rosy with every political party being tainted with corruption wherever they are in power. It is a reflection on the sorry situation prevailing in the country that economists and policy pundits are more concerned about rate of GDP growth which is anticipated to slide down to five percent plus from a heady nine percent plus 3 years ago rather than the crushing burden on the "aam aadmi" or the common man caused by inflation all around. The inflation may not be staggering measured by standards used for rating in the world of economics: it is nonetheless a frustrating situation to more than 90% of the population that takes pride as being Indian.

Ever since the opening up of the Indian economy (what ever that means!) in early 1990s, the country has seen the lot of poor people getting worse progressively because the environment created then was just the one needed for corporates to make money through the so called crony capitalism route. The public sector organizations were systematically destroyed in the name of under performance and practically every policy that encourages small scale industry was cast away. The process of enrichment of a few citizens was started by the government of India by favoring its employees as as well as the pensioners (also those in State governments) with massive increase in salaries and perks unheard in the annals of Indian history or any where in the world. With more money in their hands this segment of the population became part of the elite society with high buying power. On a conservative estimate these employees with their families form a substantial part of Indian population, about 50 million.The trading community with more than 30 million members was given a unrestricted environment to make money by slack enforcement of the laws of the country. If those in the corporate world are also added the total "consumer" population which can buy whatever they want can run to more than 100 million, sufficient to get attention by any investor in the world for a slice of the pie that is called Indian market.

The above factor is precisely playing out currently with GOI opening up the retail market to foreign investment. Those global giants are not pitching their tent in India to help Indian citizens but to sell their products to the rich Indians with plenty of cash living in comfort in towns and cities across the country. Interestingly GOI has laid down a condition in its policy orchestration that foreign retail stores can be opened only in urban areas as if it is a stringent condition! Even a child knows that more than 80% of the rural population can never aspire to step into a Super Market or a Mall with their limited income and the stipulation contained in the policy declaration is some what hollow. It is never clear as to which side the big retailers will take when it comes to clash of interest between the farmer and the consumer? If farmer is to be paid decently for his produce, consumer price will reflect that and if it is the other way of reducing consumer price, the farmer can never be paid what he deserves! Past history of big retailers tells a different story with both farmer and the consumer suffering equally, the only gainer being the "super middleman", viz the retailer!

For any one going around the Indian market will  be struck by
the incongruous situation prevailing in the country vis-a-vis prices of various products prevailing in the country. How can a common man buy an apple, priced Rs 25-30 a piece or any other fruit which costs not less than Rs 50 per kg? Even the common man's fruits Banana sells at Rs 3-5 a piece if it is a smaller variety and this can shoot up further during Hindu festival seasons (at least a dozen every year). Papaiya which was sold at Rs 10 per kg till recently shot p to Rs 40 per kg during the Ramzan season and never came back to the original price. It is unbelievable that a piece of cashewnut or Almond, those aspirational foods, can be as high as Rs 3 per nut, the retail price being in the vicinity of Rs 800-1000 per kg. According to nutrition pundits an average adult in India is supposed to consume daily about 300 gm of cereals, 30-60 gm of pulses, 0-30 gm of meat, 300 gm of vegetables, 100 gm of fruits, 300 gm of milk and milk products, 20 gm of sugar and 20 gm of fats for maintaining the health. How can a family of four (parents plus two siblings), belonging to low income categories can access to these essential foods with their current income at current prices? If one draws the graph of price fluctuations that is experienced during different part of the year, it may look like the print out of an EEG or ECG of a person with several peaks and valleys occurring with a sickening regularity! Unless GOI comes out with policies that will make available these foods to these vulnerable population at affordable prices, the country is bound to slide into a situation where proportion of undernourished and malnourished citizens will reach unbearable levels, affecting the quality of human resources required for nation building.

Leave out the fruits and nuts and shift the focus to vegetables which are supposed to fill out half the plate during a meal. It is just maddening to see tomato being sold at Rs 5/kg one day and within a few days it climbs to Rs 25/kg. Same is true with practically every vegetable grown in the country. Interestingly many studies have shown that the farmer who grows these produce does not get even a fraction of the consumer price, the majorportion being being swallowed by the so called middle men! Will the new players who are being offered a red carpet by the government help the farmer by putting more money in his hands. Experience in other countries where these high profile market oriented monoliths work shows that farmers will be the least beneficiary in this charade.

Maximum Retail Price (MRP) declaration is often touted as the instrument of GOI to control prices. This is a hollow claim because this provision of the law applies to packed products whereas only a small percentage of foods is branded and sold in sealed packs. Here again MRP indicated cannot be taken at its face value because many smaller brands inflate the same allowing the retailers sizable elbow room to reduce the actual selling price, some times as much as 50% of MRP, but still keeping sizable margin! Besides many retailing giants have their own in-house brands and they can always print inflated MRP figures with scandalous margins. Interestingly the much touted Package Commodities Act is a curse for the most unfortunate citizens in this country because, the moment the food is packed and sealed it enables the packer to add "value" which is nothing but a higher profit in disguise! For example a kilogram of Atta costs around Rs 40 if it is branded but at the street corner petty shop it is available at about 25 per kg.     Sugar when it is branded costs the consumer upwards of Rs 54 per kg while the small gives the same at Rs 30 per kg. This happens across the food spectrum and the high end retailers earn a killing profit in the name of better quality and shopping ambiance!

According to the National Planning Commission an income blow Rs 32 per day for a person is the cut off level to define him as belonging to the below poverty level group. Probably this is enough to buy adequate food to keep the body and soul together! But what about the other needs like shelter, clothing and other daily essentials? Unfortunately GOI seems to think that keeping the people alive is the only responsibility vested on it and by providing subsidies worth three half lakh crore rupees every year to its citizens, the people will cruise comfortably in the turbulent waters, that is called life! According to some statistics, almost one third of Indian population earns less than Rs 32 a day putting them in the category of people below the poverty line for whom the
supermarkets do not make any sense. Imagine how a country where only 3% of the population (about 35 million people) pay income tax can gloat over the entry of multinational retailers from western countries where more than 50% pay taxes regularly?

Looking at the statistics a little bit closely, the bitter reality can dawn on many honest citizens in this country that GOI is opening up the retail sector only to serve the top 6.2 million families, each earning an annual income of the order of 2, 15,000 per year plus and to a limited extent a small percentage of the so called middle class families of about 91 million, earning between Rs 45,000 and 2,15,000 per year. It is debatable whether even at this level of income these families can afford to buy an apple every day! Families with annual income below Rs 22,000 numbering about 102 million are never counted in GOI calculations. After the opening of the economy, between 1996 and 2010 there was a 419% jump in the number of top earning families which will be the focus of all foreign marauders getting into the country in the name of helping the nation to attain prosperity and upliftment of the poor!   


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