The reform on foreign direct investment in the retail sector might have got the support of the Bharatiya Janata Party if the government had sequenced it correctly, said Arun Jaitley, leader of the opposition in the Rajya Sabha, on Monday.
He was speaking on the government's supplementary demands for grants.
How could the government have countenanced bringing reform in retail without first liberalising manufacturing, he asked.
Making it clear his party was not opposed to all FDI, Jaitley explained its reservations.
"India's manufacturing sector, at best, is modest.
International investors will source internationally and most merchandise sold, in the first instance, would be sourced from the low-cost economies of the world.
It will be ill-advised to open the sector till such time we can implement effective reforms to reduce the cost of our own manufacturing by introducing steps such as affordable interest rates, better infrastructure, better trade facilitation, low cost of power, etc." he said.
There was no point in opening up retail when all that stores sell will be cheap Chinese products.
Jaitley also said structured international retail does not create additional markets. It will only displace existing markets.
"It will cost India jobs, both in manufacturing and in retail."
He said in an economy, where 58 per cent belongs to the services sector and 51 per cent of the work force is self-employed, "it would be ill-advised to displace this work force, without reforming significant sectors of the economy".
Jaitley also said there was no guarantee the elimination of middlemen
In India, where the milk sector developed its own cold chains and back-end support, 70 per cent of consumer rupees spent goes to the milk producers and in case of cooperatives, the figure is as high as 80 per cent.
"We need to replicate the Amul model, rather than blindly allow FDI in retail as at present," he said.
Jaitley also spoke of the management of economic reform and the people who lead it. He said "a twin leadership is counterproductive to governance. . . . The United Progressive Alliance-I model and structure of the government was defective.
In UPA-II, we find this crisis has worsened."
"Whereas in UPA-I, the chairman (of UPA) and the Prime Minister appeared to be on the same page on most issues, during UPA-II they appear to be even ideologically on different pages.
"On many issues which are on the government's priority, the support of the party and the alliance has been lukewarm."
Jaitley also criticised the government's handling of the economy, the proposed Goods and Services Tax and the fact that it had paid only 'lip service' to disinvestment.
He said what was frightening was the slowdown in manufacturing.
"The quarterly growth rates which increased from a low of 4.3 per cent in the first quarter of 2009-10 to a peak at 15.2 per cent in the last quarter of 2009-10 declined steadily during 2010-11.
"In October 2011, the growth in manufacturing slid into negative zone at (minus) six per cent as compared to a high of 12.3 per cent in October 2010 (a decline of 18.3 per cent)."
The effect of this slowdown would be evident six months down the line, he warned.
