President Obama slips in retail googly

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President Barack Obama (White House photo by Chuck Kennedy)

President Barack Obama should have known that foreign direct investment (FDI) in the retail sector is as politically incendiary in India as outsourcing of US jobs is in America right now.

So his choosing to mildly and indirectly advise India over the question of FDI in retail has not gone down at all well in New Delhi. In an interview with Lalit K. Jha of the Press Trust of India (PTI) in Washington, the president said, “They (the American business community) tell us it is still too hard to invest in India. In too many sectors, such as retail, India limits or prohibits the foreign investment that is necessary to create jobs in both our countries, and which is necessary for India to continue to grow.”

In a broader context, President Obama also spoke in favor another “wave” of economic reforms in India. “There appears to be a growing consensus in India that the time may be right for another wave of economic reforms to make the country more competitive in the global economy,” he said. Although careful in pointing out that it was “not the place of the United States to tell other nations, including India, how to chart its economic future”, he was implicitly doing precisely that.

FDI in retail is politically toxic for Prime Minister Manmohan Singh and his coalition government with a very vocal section of the political opinion strongly opposed to it. FDI in retail is seen mainly as retail American giants such as Wal-Mart coming into India and trampling to death millions of mom-and-pop retail stores across the country. Granted that it is a simplistic view but it has great resonance in the country. That purely political construct of FDI in retail is not quite unlike how Obama’s campaign managers are hammering his Republican opponent Mitt Romney on the issue of outsourcing of American jobs.

The insistence that Bain Capital, a fund that Romney owned and ran with manifest success, also invested in companies that shipped American jobs to India and China has greatly unsettled the Romney campaign in recent weeks. So much so that it is now threatening to define him in that narrow context unless he manages to counter it effectively.

That brings me to Dr. Singh’s dilemma. As India also prepares for a general election in 2014, his Congress Party too does not want to be defined in a narrow fashion by its vociferous opponents. Although FDI in retail will happen eventually, for now Dr. Singh would like to generally reinvigorate the reforms that he himself introduced some 20 years ago. He knows the FDI in retail is an important part of that new wave of reforms but he has to tread very carefully. I am not sure if President Obama realizes that by specifically talking about FDI in retail he is necessarily putting someone he calls his close friend in a politically awkward situation.

Just how stung the Singh government felt by Obama’s comment can be illustrated by what the country’s Corporate Affairs Minister M. Veerappa Moily said: "Certain international lobbies like Vodafone are spreading this kind of a story and Obama was not properly informed about the things that are happening, particularly when India’s economic fundamentals are strong.” 

Obama knows there is something to be gained by pushing the interests of American retail giants, particularly barely four months before the US presidential elections. However, it is disingenuous that in the same breath his campaign is decrying one of the natural consequences of opening markets, namely outsourcing of jobs. If Wal-Mart has been able to sell goods so cheap, it is almost entirely because it has managed to source supplies from countries such as China and India. China is able to supply goods relatively cheap because many US companies have outsourced their manufacturing there and in the process outsourced American jobs as well. In the world of free market capitalism everyone is shagging everyone else. So there is no point complaining unless you are willing to get your hand out of someone else’s underwear. I am sorry but I had to slip that in.

I am not sure if the comments in the PTI interview were part of a deliberate strategy but they seem to have played into the larger narrative.

Speaking of the PTI interview, the wire service’s Washington correspondent Lalit has managed his second interview with the president. Lalit is one of those quintessential news agency journalists who quietly persist and produce stories without any fuss. I have known him almost as long as he has been a journalist. Not the kind to seek glamor of the profession the way some broadcast media types do, Lalit is dogged in his pursuit and remarkably distant from the more showy side of journalism.

I found it galling that many newspapers and websites chose not to give him a byline for the interview. That has been the tradition in the Indian media world where wire services are treated as merely feeders although more often than not they are the ones who provide the meat. I am sure it took Lalit considerable effort to get this interview and the least that could be done by those who used it is give him a byline for it.

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About chutiumsulfate

South Asians can infer from my name what I am. View all posts by chutiumsulfate

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