Any one not familiar with various economic jargon may not understand why so many consumer industry giants from around the world are rushing to this poor country to invest in droves? This is especially jarring to the ears of poor and hungry millions in the country who seem to have been left behind in the race of the country to be a top global economic power. Alarmingly the gap between the rich and the poor is increasingly widening with the fruits of economic development cornered by a few rich people. It is not that poor has not been benefited at all but such crumbs thrown at them are minuscule compared to rich man's taking! As some critics have pointed out foreign players are more interested in consumer products industry while the much sought after infrastructure investments are far and few. In one of the most paradoxical twists in the economic development, government seems to be pumping more and more and more money into the hands of people through gigantic subsidy schemes and benefits distribution policies that even the poor people seem to have more money in their hands which are being spent for purchase of many aspirational products, normally the prerogative of the rich! Seeing this trend foreign players are trying to attract this money in the hands of the poor for reaping a rich harvest in terms of profits. Here is a take on this paradoxical situation currently playing out in India.
"From Diageo and Unilever to GlaxoSmithKline, all multinational companies want a bigger slice of the Indian consumption story - fuelled by rising income and small families, say bankers. "We are seeing a secular growth trend in all consumer-led businesses, whether it's consumer products or health care - primarily driven by favourable demographics and increasing purchasing power. That is reflected in increasing M&A deal volumes, besides higher sustainable market valuations, as foreign investors don't feel concerned about any regulatory or governmental overhang that they see in other sectors in India," says UBS Investment Bank Managing Director Ravi Shankar. The recent investments show foreign investors have completely shunned the infrastructure sector - roads and power, for example - which is facing serious issues of environmental clearances and land acquisition. A top official of US-based Blackstone said all of the company's investments in the Indian infra sector were blocked due to problems plaguing the industry. "There is no option but to remain invested in infra companies," he said. In contrast, in 2012, Indian food & beverage sales rose 21.2 per cent, while sales of home and personal care grew 17 per cent. Sales for airline and cell phone companies also grew. A Morgan Stanley report says food & beverages sales in India will rise another seven-eight per cent, while home and personal care sales will go up four per cent, ahead of a rise in disposable income over the next six years. Adding to the consumption story are rising rural wages, which have continued to grow, 18.3 per cent on a year-on-year basis as of November 2012 - thanks to the National Rural Employment Guarantee Scheme. The growth rate moved up from 10-13 per cent in the first half of 2008 to an average 19 per cent annually over the past three years. Against this backdrop, as economies across the world slow down, the Indian consumers are providing investors comfort to open their purses and put their money in companies here'.
What is unfortunate in this sordid story is that the public money amounting to more than Rs 5 trillion showered on the poor in the country, at least a significant part of it, seems to be ending up in the pockets of organized industry as it offers goodies to fulfill the emerging aspirations of this new segment of consumers. With rice, wheat and coarse grains being offered under the new food security regime at Rs 1-2 per kg, free gas connections provided under some populist schemes in a few states, electricity being practically free, what ever government is offering under various employment schemes like MGNREGA, SJSRY etc, creates surplus money in the hands of these beneficiaries which ultimately flow to the cash boxes of consumer goods selling industry! What type of equity is this where honest tax payers money is diverted to the so called poor families who spend most of it on organized industry? No wonder more and more global players are queuing up for getting a slice of this cake! Recent opening up of the retail trade to foreign investment is being trumpeted as a "win-win" situation for the country because of the restrictive clauses stipulating 30% local purchase and 50% of investment on back end infrastructure. If recent attempts by a few major retail giants to modify or eliminate these provisions clearly show their real intent of flooding the market with cheap imported goods, mostly from China ignoring the local farmers, micro enterprises and artisans. The mirage of improved infrastructure will remain a mirage only while these foreign players will laugh all the way to their banks in tax haven countries!