Friday, December 23, 2011

Curious case of Indian Economy - Supporting the outsourcing but opposing FDI in retail

It didn't take much time for the fear to spread its tentacles across the industry. Key people from the lines argued about the additional expenditures the US companies need to accommodate in their balance sheet, if the suggestions became law, how a common man in US needs to shell out extra money to avail the same services in the future, how it will affect the economy and erode the values like open markets, no tariff barriers etc.

Some described it as "efforts to tap anti-outsourcing sentiment ahead of the US Presidential election next year." NASCOM added that "U.S. adopting ‘protectionist' measures like these that restrict free trade and establish discriminatory trade practices". The Hindu reported that "The benefits of commercial consideration will outweigh disincentives through the legislation. Unless the U.S. economy wants to move from open economy to protected economy, these half measures may not work’, the source adds."

You may be wondering, about what we are talking? Well, its name is ‘The United States Call Center Worker and Consumer Protection Act', introduced in the 'House Of Representatives' by Mr. Bishop, Mr. McKinley, Mr. Michaud and Mr. Gene Green. Bill primarily focuses on two main points,
1. "To require a publicly available a list of all employers that relocate a call center overseas and to make such companies ineligible for Federal grants or guaranteed loans.."
2. "…and to require disclosure of the physical location of business agents engaging in customer service communications."

Well, as far as the disclosure of Physical location is concerned there are some waivers. It’s not applicable "...If the communication is initiated by customer, knows or reasonably knows that the person is not physically located in US..." This bill also gives Federal Trade Commission and Secretary of Labor the power for giving waivers and takes decision according to circumstances (although in special cases).

I was wandering how strongly we are currently opposing this anti-outsourcing bill (a way of making trade barriers) and opposing the opening of Indian multi brand retail sector for FDI (removing the trade barriers) in the same breath. The Irony is the reasons we are providing on one issue - anti outsourcing bill -  is contrary to the second one - FDI in multi brand retail. If outsourcing is so beneficial for US, then why opening of retail is not at all beneficial for India? If we are implementing innovative solutions for US business - as one of the BPO Promoter said, and helping US economy to grow, why it is not at all applicable in Indian retail supply chain?

In the age of open markets and comparative advantages, we need to fuse the technical know-how and come up with better products and supply chains. If Wal-Mart can handle the logistics so efficiently across thousands of kilometers there should be something we can learn from them. If they are coming here with their experience in handling lengthy logistics networks, efficient supply chains and implementing the same here, it will not only enhance our standards but will create a pool of people with better skills in the area.
 According to the report 'The Vegetable Industry in Tropical Asia: India' published in 2008 

Amul plant at Anand - why can't we replicate this success?
 "...Postharvest losses in India are very high—probably enough to feed at least 20% of the population. According to the Indian Government, US$ 14.3 billion worth of perishable and durable agri-produce is wasted, while > 200 million people remain underfed, and almost half of the children are underweight. Wastage occurs at various stages due to fragmentation of the supply chain, deficiencies in the Agricultural Produce Marketing Act, and inadequate infrastructure (India's Minister of State for Food Processing Industries Subodh Kant Sahai quoted on India Info Line, 2007a, 2007b, 2007c). Rolle (2006) indicated fresh produce losses ranged from 10 to 40% globally, with losses in India at the high end..."

These statistics should be enough to open our eyes towards the seriousness of the problem we are facing. In any scale wastage at the rate of 40% is not an acceptable one especially when Indian hosts the highest number of people living under the poverty line. We need to mechanize our farming sector, improve warehousing, and supply chain and logistical sector. Here is where the technical know-how of foreign companies will play a significant role. If they are investing in cold storage, warehousing sectors – which required significant amount of money, there will be improvements in these areas.

It is not the opening of the markets we need to oppose; we need that energy to be reserved for defending the open market rules, opposing predatory pricing, monopolizing the sector etc.  But for all this to happen we need to change our mind set. We can hope that one day the Oranges from Nagpur will reach the market of Trivandrum or fruits from J & K will reach that of Kolkata without significant wastage and enormous change in prices.  If implemented properly these reforms will give some air for the struggling Indian economy and brings it back it from slipping in to stagnation...  and may bring down the price along with giving a better shares to farmers. 

It is not only about opposing FDI. If we shutting down our markets for foreign entities then it will not take much time for the outside world to shut down thiers in front of us...


Photo courtesy : wikipedia

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