London, 19 September 2012: Nothing foreign retailers do in India can help the dysfunctional UPA's electoral prospects in 2014. The electoral timeline, of eighteen months at most, cannot fit the most optimistic projection of any dramatic impact FDI in retail could have on the wider Indian economy. Manmohan Singh and his floundering ministerial colleagues are, therefore, either bedazzled by the notion that FDI in retail will eventually have significant positive economic consequences, or they capitulated to US demands for market access. A third reason could be that India's carpetbagger politicos, having read the writing on the wall, are engaged in more malfeasance to arrange handsome pensions for comfortable enforced retirements in 2014. This treasonous UPA coup on behalf of Wal-Mart and Tesco has also been facilitated by brandishing the CBI (an organisation any new government ought to instantly disband) at the irredeemable political twins of Uttar Pradesh politics although it seems nothing sufficiently compromising was found in Mamata's closet to wield against her. But this sordid triumph may be short-lived in the quagmire of India's ground-level politics. The repudiation by Indians of this disgraceful chicanery will be the final ignominy for a government without a vestige of self-respect or decency, leave aside concern for the nation and its people.

The idea that Manmohan Singh and his boss have decided FDI in retail is an answer to the abysmal economic predicament into which they themselves recklessly have thrust India is not credible. These supposed sentiments do not fit the incompetent looter's profile, which is the reputation the entire UPA will depart with, en masse, in 2014. A regime lacking imagination or political will has latched on to retail and FDI, blithely ignoring the multiplicity of complex supply-side problems that constrain the Indian agricultural sector in particular. Thus, one might conclude the UPA has succumbed to American pressure to allow majority-owned FDI in retail. When push comes to shove, the US authorities engage in every kind of skulduggery to get their way, as the Koondakoolam nuclear power plant debacle is demonstrating daily. And a weak, thoroughly discredited UPA regime is susceptible to other kinds of foreign blackmail. Information on the criminal activities of its most senior personnel, including concealment of loot abroad, can be leaked to the media.

The implication insinuated by India's purchased media that Wal-Mart and Tesco wish to invest massively in India to helpfully transform it is laughable. A financially bankrupt Indian media has been silenced by the simultaneous policy promulgation allowing a 51 per cent FDI stake in it, making it froth at the mouth with greed. Indian retail constitutes 22 per cent of GDP, is the second largest employer after agriculture, and is growing rapidly despite all the statist misgovernance that could conceivably be inflicted on it. Its current estimated worth is $450 billion and expected to reach US$ 850 billion by 2020, a quarter of it in the organized segment, which is poised for extremely profitable take off. These projections do not presumably factor in the impact on the share of the organised sector in total retail should majority-owned FDI enter it. The share of the organized sector is likely to end up becoming significantly larger as a result of the very fact of foreign entry into Indian retail, reinforcing the resolve of foreign investors to muscle in.

Foreign retailers wish to enter India because vast profits beckon. Organised Indian retail is expected to grow at 7 per cent over the next decade, not something they would have ever attempted to risk initiating at high cost. But they clearly wish to take advantage now because huge profits can be scooped up from it. Indian retail has already been identified as one of the most attractive investment prospects by international rating agencies. As a result, foreign retailers are also eyeing its mouth-watering promise, at a time when their own national markets have reached saturation point, with virtually no additional growth feasible except through increased market share. It might be inferred that existing joint ventures, like Bharti Retail-Wal-Mart and Tesco-Tata, are merely a prelude to potential policy changes that will allow 100 per cent foreign ownership, of which the 51 per cent provision is a harbinger. The foreign retailer will be the major source of additional capital and the increase in their ownership stake irresistible. The banks funding foreign retail investment in India are also flush with funds, having resumed their unprecedented historic plunder of global wealth, pre-empting 30 per cent of all US profits as rent though contributing less than 10 per cent valued added to GDP.

The operation of retail majors in advanced economies demonstrates their huge market power, which enables them to extract unusually large rents through oligopolistic pricing and manipulation of government policy in their own favour. They undoubtedly enjoy the advantages of economies of scale by virtue of operational size, but also bully suppliers relentlessly over prices of products they purchase. Indeed they routinely dictate purchase prices to even powerful producers of well-known brands. The same producers of branded goods do not sell at a similar price to less powerful, local retailers who thus suffer an unfair competitive disadvantage. And lower prices for supplies do not necessarily benefit consumers and evidence suggests that own brand products of retail giants, competing against branded goods, do not mean lower prices for consumers and instead enhance profitability. There is also the issue of increasing returns to scale that seems to create monopolies or quasi monopolies in the retail sector that wield irresistible market power, allowing them to collect significant rents from the hapless consumer.

The expansion of multi-product retail in India, with or without foreign participation, will surely administer a potent shock to the supply side of Indian agriculture. It could turn out to be equivalent to an enhanced second green revolution for productivity. The range, variety, quality and quantity of food products provided will encounter a massive challenge to adjust their entire supply chain. But Indian retail does not need to be foreign-dominated and joint ventures are a shortcut that will lead to the repatriation of significant profits indefinitely. Indian companies should take the time to build their own retail chains. They might consider hiring staff internationally and forming relationships with less prominent foreign partners, even if this means more effort and takes longer to acquire the expertise they need. Their expertise can grow with the Indian market, which would be of modest size initially. As a corollary, forming relationships with the very largest global players may be unnecessary at the outset. There is great temptation for most Indian retailers to engage in joint ventures for fear that competitors would gain a first mover advantage by collaborating with major foreign partners before them. Only government policy can ensure that such economic relationships inimical to the national interest are deterred. However, if foreign retailers cannot now be halted from entering India, though that is not yet the dilemma, legislation should compel the creation of separate corporate legal entities, quoted on the Indian stock market, for their Indian-owned operations.

The political economy of the market power of FDI in retail is an issue that Manmohan Singh and his cronies deviously disdain to foreground. Once foreign retailers and the banks financing them enter India, they will be impossible to dislodge. They will simply buy policy-making since it is clear that pretty much anything can be purchased in India today from its infinitely corruptible politicians, the greatest danger to the welfare and survival of the nation. Their economic policy advisers, intellectually and morally bankrupt medieval schoolmen, are performing their designated task of providing obscure rationales for the politically-inspired looting that now constitutes contemporary economic life across the world. Not so long ago, their professional luminaries were, much like the witch-burning medieval clergy, arrogantly announcing the end of depressions, downturns, even the business cycle, and flaunting the most corrupt of accolades, the Nobel Prize, awarded for doing so.

The existing retail network of India embodies an entire way of life and social culture, with its fragmented structure and the dependence of a myriad of families on it. It harbours and articulates distinctive local histories and personal relationships between buyers and sellers. These traits are not immutable and may not survive historic market forces, but one needs to question how policy and implicit public subsidies put them at a disadvantage in relation to new dominant players. The latter enjoy easier access to cheaper credit and public infrastructure fashioned to suit their specific needs. In the end, the desirability of a level playing field in which wider public infrastructure services are available to smaller players as well cannot be dismissed out of hand. If the big and small Indian retailer is to co-exist (though the former may assume an ascendant position), is it too much to ask that they are not ruthless corporate predators from the West, quick to unloose savage national political and military clout to get their way? Is this not what Western oil majors are doing at this very moment in the Middle East? They are destroying established State systems, with spurious propaganda about human rights, to which they have never subscribed, and replacing them with sub-state satrapies with which they negotiate lopsided oil contracts with alacrity.