FDI in Indian retails- Boon or Bane?

FDI in retail means foreign direct investment in the Indian retail business. It is the intent and objective of the Government of India to attract and promote foreign direct investment in order to supplement domestic capital, technology and skills, for accelerated economic growth. As we are in the category of developing country and to develop properly we need to control the country’s economy very carefully. If the % in FDI in retail sector (multi-brand) is increased, then the investment in India’s retail market will be from foreign investors and the profits are also drained to the investors. And moreover in INDIA, the retail sector mainly depends upon the agricultural sectors and the producer and if FDI is increased then it is going to affect the agricultural sector of the Country very badly and which will affect the country’s economy. And if the % of FDI is increased to 100% in retail (both single and multi-brand) sector then government will lose the control over this sector completely and then it cannot help in controlling this sector with its rule and regulations as the whole retail sector would be privatized. And this privatization can make a very serious effect on the country’s economy.

                One of the most disadvantage of FDI in retail sector is that as we know that the retail sector is one of the major employment provider and permitting FDI in this sector can displace the unorganized sector and leading to loss of livelihood the most favoring example is if wall mart (ABCD) entry in retail sector is allowed then it will kill the millions of local shops and jobs. The global retailers would exercise monopolistic power to raise prices and monopolistic power to reduce the prices received by the supplier. Hence both the consumer and supplier would lose while the profit margin in such retail change would go up. So from the above points i can say that FDI in retail sector is not good for India.

Advantages:

 1. It is mandated in the policy that 50% of any investment over a $100 million would be in the backend infrastructure which would benefit by creating jobs as well as infrastructure for a developing country like India.

    2. Contractual farming would also mean improved and efficient farming practices as well as higher output and better prices.
    3. Foreign players will bring in the necessary investment to upgrade the retail sector infrastructure across the country.

  The emphasis would be on reduction in wastage of food items. This would bring down the food prices which have been a major cause of inflation in the country as well as a source of public dissent against the government.

Disadvantages:

  Will not benefit the farmers since the large foreign players will squeeze them for lower prices in order to earn higher margin.

  The large foreign players work on wafer thin margins since they offer their goods at low prices. In that scenario they would procure their goods at the lowest possible price to get the maximum benefit.

   Manufacturing sector would suffer since the foreign players would source their products from international markets in order to get low prices.

  The policy states that State Governments can take a decision about FDI in retail. But FDI is not a State Policy matter. Hence this is not possible. The central government will take the final call.

Advantages of FDI in Retail in India

Ø  Growth in Economy

Ø  Job Opportunities

Ø  Benefits to consumers

Ø  Lack of Infrastructure

Ø  Cheaper Production facilities

Ø  Availability of new technology

Ø  Long term cash liquidity

Ø  Conducive for the country’s economic growth

Ø  FDI opens up a new avenue for Franchising

Disadvantages of FDI in Retail in India

Ø  Impact on Local Markets (Kirana Shops)

Ø  Limited Employment Generation

Ø  Fear of Lowering Prices

Ø  Negative Impact on Indian Economy

Ø  Negative Impact on Indian Domestic Market