Ban On Pepsi & Coke May Clog FDI?

The battle of nerves between the cola companies Pepsi & Coco-Cola and the Indian government arising out of the ban already imposed on them in six states is threatening to blow into a full political war. With hardening of stands from both the fighting sides, the situation is about to go out of hand. While six states have already banned sale of colas in schools, colleges and hospitals following publication of a report of their containing pesticides beyond permissible limits, the state of Kerala went one step further to ban their production as well as sales. The cola companies, in the mean time, are on the offensive claiming through advertisement blitz that their qualities are as good as their European products.
At stake is the FDI inflow to India. The imbroglio could not have been more ill-timed. A US trade commission led by Mr Franklin L. Levin is scheduled to visit India during November, 2006. The delegation is going to be the biggest US bilateral trade mission ever sent to any country. The team will participate in the Mumbai Summit on November 29-30. Thereafter, the team has the option to branch off to Bangalore, Kolkata, Chennai, Hyderabad, Mumbai and Delhi for business match-making.
However a statement given by Mr Levin that the ban by state governments on the cola companies could affect investment is likely to pour cold water on the trade Mission’s visit and add fuel to the fire of raging controversy. Just as US should not browbeat India to ignore the seriousness of the complaint of pesticide contamination in colas, the states cannot carry on summary trials without proper investigation. Only recently Ford Motors had to order recall 6.5 million cars after persistent customers’ complaints backed by federal investigation established a serious fire risk in the cars. Similarly a thorough investigation by independent and impartial experts should establish the genuineness or otherwise of the complaints against the cola companies.
The Kerala government’s jumping into the fray and banning production as well as sales without any proper investigation is just like severing the head for curing headache. The announcement through ads by Pepsi’s brand ambassador – a popular film star that he would go to USA to drink Pepsi if it is banned in India is equally preposterous. Even the news report in Washington Post that Americans drink over 100 times more colas than Indians is not going to help matters. That Indians are not very much dependent on the colas has been proved by the most unexpected gain made by tea after the ban was imposed.
If current controversy is going to affect FDI as a small section of analysts and observers believe, the trade mission may fizzle out to the detriment of interests of both India and USA. India needs infusion of foreign investments for massive infrastructural development and other key industrial growths. USA needs India to be its economic partner in global strategic planning as the 21st century unfolds and power equations shift to Asia.
For the mission to succeed both USA and India must work together closely. The serious complaints against the cola companies should be thoroughly investigated. Clean chit should be given to the companies if complaints are found to be baseless. Otherwise stringent action should be taken against them for their laxity. Just because Pepsi and Coca-Cola are two giants in USA and have lot of clout with the government, their lapses cannot be condoned lest it might affect FDI flow. Two great democratic nations, after all, have to respect the public opinions of their own countrymen. Is it not?