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Untenable Critiques Sowing Confusion on Supposed Ill-Effects of Retail FDI

Authors: Jagdish N. Bhagwati, Senior Fellow for International Economics, and Rajeev Kohli
October 15, 2012
The Economic Times

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Retail sector liberalisation has been revived and included in Prime Minister Manmohan Singh's package of big-bang reforms announced recently. This was to be expected as an element of the package since the influential minister Jairam Ramesh, who has access to Sonia Gandhi and is identified with her NGO-dominated set of advisers whose knowledge of economics is outweighed by their enthusiasm, had already announced his conversion to retail sector liberalisation.

As expected, Mamta Banerjee has withdrawn her support to the UPA government over the issue. Equally, opposition parties, chiefly the BJP, have opposed the move. Interestingly, the BJP opposition, as that of advisers to Nitish Kumar, is nuanced. Their argument is that this is a high-risk strategy and that the Prime Minister could have chosen other 'surer' reforms, with a higher payoff-to-risks ratio, as part of his package: e.g., further trade liberalisation as we still have ways to go in that regard, and trade liberalisation since the early 1990s has been a great success.

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