FDI in retail – Boon or bane for India

Jan 12 • Group Discussion • 24527 Views • 33 Comments on FDI in retail – Boon or bane for India

FDI in retail – Boon or bane for India

Foriegn Direct Investment (FDI) in retail means foreign direct investment in the Indian retail business. The retail business can be either a single brand retail business or multi brand retail.  At present, foreign direct investment (FDI) in pure retailing is not permitted under Indian law. Government of India has allowed FDI in retail of specific brand of products. But the major concern is regarding the government’s decision to allow FDI of 51% under multi brand retail.

Now FDI would allow foreign companies to bring in the necessary investment to upgrade the retail sector infrastructure across the country.Since their focus would be profit they would set up efficient supply chain management systems to ensure that product deliveries are on time.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.The farmers would get a better price for their produce for two reasons. It would also lead to the removal of the middle men which would provide additional revenue to the farmers (the retail chains would buy directly from the farmers).Contractual farming would mean improved and efficient farming practices as well as higher output and better prices.It would also generate employment opportunities in the wake of improved supply chains that would be set up to cater to these retail stores.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.

Again FDI in retail will not benefit the farmers since the large foreign companies will squeeze them for lower prices in order to earn higher margins.The large foreign companies 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. Loss of livelihood for millions of small time traders who would not be able to compete with the large foreign players in terms of prices (foreign companies have deep pockets which the small Indian traders cannot match).Manufacturing sector would suffer since the foreign players would source their products from international markets in order to get low prices.A fragmented market is better than a consolidated market in India’s case simply because the retail sector in India is very small and a large number of small time independent traders and retailers are dependent on it for their survival. Also the middlemen will be replaced by large foreign players who would anyway squeeze the producer for lower prices.The investment by these foreign players will only be in their supply chain and not in developing any other infrastructure (this point can be easily countered).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.

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33 Responses to FDI in retail – Boon or bane for India

  1. Rahul Kumar says:

    Foreign direct investment (FDI)
    It is direct investment into production or business in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country.
    we all know that every coin have two side so there will be the same it must have some advantage and disadvantage too.
    so fist i going to talk about in faver ..
    1.-This will brings modern technlogy to our country .
    2-Goverment too stands to gain by this moves through more transparent and accountable monitering of goods and supply chain manegment system it can expect to receive and addtion US$ 25-30 billion by way of taxes .
    3-Reduce wasting of agricultural produce.
    Consumer will gets commodities of daily use at reduce price .
    but in our country our interest rate tuday are as high as 14% to 16% how do we compete with the economies which have 4% intrest rate .Our infrastructure our trade facilitation all these factor collectivly don’t make India low cost .So do you want India to become a center where we allow foreign companies to come and set up there larger chain which eventually instead of selling domestic products out sourcing internationally reatil source and they source from cheapest source .
    NOw coming to the conclusion , goverment is taking this decision in good faith few person and lobbies controlling the rate of food commodities in India and bring more comptition in market will bring better price for buyer as well as seller commodities.

  2. VINAY KUMAR says:

    Hello friends.
    Concerning to the topic as we know, The recent cabinet decision on FDI in retail has triggered protests by opposition and key allies of the ruling United Progressive Alliance (UPA), who are demanding a roll back of the policy. The hour-long meeting held in Parliament House failed to resolve the logjam in the two Houses as opposition parties, led by BJP and the Left, stuck to their stand and demanded rollback of the Cabinet decision to allow 51 per cent FDI in multi-brand retail. Though at present only 53 cities with population not less than 10 lakh in the country have been identified for FDI As the fourth-largest economy in the world in PPP terms, India is a preferred destination for FDI. During 2010, the country attracted $178 billion as FDI.
    I would also like to add some ponits which are following:-
    -> This will bring modern technology to the country.
    -> Improve rural infrastructure.It would help build infrastructure and create a competitive market.
    -> Reduce wastage of agricultural produce.
    -> Enable our farmers to get better prices for their crops.
    -> consumers will get commodities of daily use at reduced prices.
    -> Biggest beneficiary of this would be small farmers, who would be able to improve productivity and realize higher remuneration by selling directly to large organized players and shorten the chain from farm to consumers.
    -> Government too stands to gain by this move through more transparent and accountable monitoring of goods and supply chain management systems. It can expect to receive an additional US$ 25-30 billion by way of taxes
    -> Opening of retail can be seen as a solution for food inflation, which has been confounding policy-makers. FDI in retail would help in building much needed back end infrastructure. Additionally, he said, investments in cold storage chain infrastructure would reduce loss of agricultural produce and provide more options to farmers.
    As a overall conclusion from my side would be :-
    Government is taking this decision in good faith.Few persons and lobbies controlling the rates of food commodities in India.And bringing more competition in market will bring better prices for buyers as well as sellers of commodities. Parties protesting against FDIs in retail have choice to not allow FDIs in the states they are ruling.Government should make a regulatory body for the commodity trade as we have for cellular services .

    thnak you.

  3. Jayanta Das says:

    Foriegn Direct Investment (FDI) in retail means foreign direct investment in the Indian retail business. The retail business can be either a single brand retail business or multi brand retail. At present, foreign direct investment (FDI) in pure retailing is not permitted under Indian law. Government of India has allowed FDI in retail of specific brand of products. But the major concern is regarding the government’s decision to allow FDI of 51% under multi brand retail.Another shortcoming is that there will be no legally abiding contract between the farmers and middle suppliers which will lead to farmer’s sufferings. The relation between Walmart and farmers will be linked through middle suppliers, which means there will be no legal contract between farmers and middle suppliers. The rights of farmers are not protected and Walmart will not be responsible as a final employer. The Walmart will have direct contract with middle suppliers which is an indication that hundreds more dummy companies will be formed. The so-called creation of large number of employment will only be unfulfilled dreams.

  4. BRAJA GOPAL BERA says:

    Agriculture experts seem divided on the issue of benefits to farmers from government’s decision to allow foreign direct Investment (FDI) in multi brand retail in India. Planning Commission Member Abhijit Sen said the benefits of FDI in multi brand retail to the farmers needs to be analysed in the long run, while noted farm economist Y K Alagh said the move will be successful if it reaches the small farmers and artisan groups in the country.Consortium of Indian Farmers Associations (CIFA) Secretary General P Chengal Reddy welcomed the move saying that it would help in raising the income of the farmers. Echoing similar views, Alagh, who is a former union minister and Member, Planning Commission, said for the farm sector to grow, FDI in multi brand retail should target the demand in the big towns and not just the metros. There have been initiatives in the retail sector relating to agricultural products, but so far farmers have not gained much from it, he added. Explaining the dynamics of profit, Sen said that benefits to the farmers will increase if the demand increases.

  5. Rajiv Ranjan says:

    The recent government decision to bring radical economic reforms mainly by bringing FDI in multi brand retail is in no way going to change the India’s Economy. According to some eminent economist, the present economic growth rate of 6.5 will remain for another three years. FDI in multi-brand retail notification of government of India has many shortcomings. The government of India has not laid down any provision for autonomous regulatory mechanism for infrastructure buildings instead Walmart has been empowered with self certification. Without having regulatory mechanism Walmart has been made god in it, it will only benefit Walmart.

    The government’s argument that it will help in building world class infrastructure and save from wasting million of quantities of food grains which has become order of the day at government’s warehouses is nothing but an eyewash. Another shortcoming is that there will be no legally abiding contract between the farmers and middle suppliers which will lead to farmer’s sufferings. The relation between Walmart and farmers will be linked through middle suppliers, which means there will be no legal contract between farmers and middle suppliers. The rights of farmers are not protected and Walmart will not be responsible as a final employer. The Walmart will have direct contract with middle suppliers which is an indication that hundreds more dummy companies will be formed. The so-called creation of large number of employment will only be unfulfilled dreams. There is no possibility of creating more employment except the present small vendors becoming an employee of Walmart. The street vendors at the least may be employed by Walmart but it will not help in creating million plus employment therefore it will not help in solving the rising unemployment problem of the country.

  6. Susanta Dinda says:

    All of us need to realize that there is always 2 sides of the coin. What one needs to evaluate is the benefit Vs Loss and to my mind, in long run FDI in retail will definitely boost the economy, generate employment and help India move in the value chain when it comes to being Developed Vs Developing country.

    Personally, I believe, this is a good move by the government and everyone should support this.

  7. Sanjib Karmakar says:

    Foriegn Direct Investment (FDI) in retail means foreign direct investment in the Indian retail business. The retail business can be either a single brand retail business or multi brand retail. At present, foreign direct investment (FDI) in pure retailing is not permitted under Indian law. Government of India has allowed FDI in retail of specific brand of products. But the major concern is regarding the government’s decision to allow FDI of 51% under multi brand retail.

    Now FDI would allow foreign companies to bring in the necessary investment to upgrade the retail sector infrastructure across the country.Since their focus would be profit they would set up efficient supply chain management systems to ensure that product deliveries are on time.The emphasis would be on reduction in wastage of food items.

  8. Amalendu Biswas says:

    Now FDI would allow foreign companies to bring in the necessary investment to upgrade the retail sector infrastructure across the country.Since their focus would be profit they would set up efficient supply chain management systems to ensure that product deliveries are on time.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.The farmers would get a better price for their produce for two reasons. It would also lead to the removal of the middle men which would provide additional revenue to the farmers (the retail chains would buy directly from the farmers).Contractual farming would mean improved and efficient farming practices as well as higher output and better prices.It would also generate employment opportunities in the wake of improved supply chains that would be set up to cater to these retail stores.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.

  9. Sourav sain says:

    Foreign direct investment (FDI) in India’s largely unorganized retail sector will help curb inflationary pressure by easing supply side constraints and revive economic growth, analysts said. It will certainly provide a stiff competition to organized retailers like “future group” as they have same customer group, but I think it won’t be much of a problem. Agriculture expert Devinder Sharma felt this policy will only help the multi-national companies. Foreign direct investment (FDI) is direct investment into production or business in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. FDI is the sum of equity capital, other long-term capital, and short-term capital as shown the balance of payments. FDI usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward and outward, resulting in a net FDI inflow (positive or negative) and “stock of foreign direct investment”,
    Conclusion
    I think from the FDI in retail will boon for the Indian economy but it will be very worst situation to facing for the small shopkeepers and farmers.

  10. Taniya Bhattacharyya says:

    Government of India has allowed FDI in retail of specific brand of products.The emphasis would be on reduction in wastage of food items. This would bring down the food prices.The farmers would get a better price for their produce for two reasons. It would also lead to the removal of the middle men which would provide additional revenue to the farmers.Contractual farming would mean improved and efficient farming practices as well as higher output and better prices.
    Again FDI in retail will not benefit the farmers since the large foreign companies will squeeze them for lower prices in order to earn higher margins.The large foreign companies 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. Loss of livelihood for millions of small time traders who would not be able to compete with the large foreign players in terms of prices (foreign companies have deep pockets which the small Indian traders cannot match).Manufacturing sector would suffer since the foreign players would source their products from international markets in order to get low prices.A fragmented market is better than a consolidated market in India’s case simply because the retail sector in India is very small and a large number of small time independent traders and retailers are dependent on it for their survival. Also the middlemen will be replaced by large foreign players who would anyway squeeze the producer for lower prices.The investment by these foreign players will only be in their supply chain and not in developing any other infrastructure (this point can be easily countered).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.

  11. khushboo kumari says:

    Foriegn Direct Investment (FDI) in retail means foreign direct investment in the Indian retail business. The retail business can be either a single brand retail business or multi brand retail. At present, foreign direct investment (FDI) in pure retailing is not permitted under Indian law. Government of India has allowed FDI in retail of specific brand of products. But the major concern is regarding the government’s decision to allow FDI of 51% under multi brand retail.

    Now FDI would allow foreign companies to bring in the necessary investment to upgrade the retail sector infrastructure across the country.Since their focus would be profit they would set up efficient supply chain management systems to ensure that product deliveries are on time.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.The farmers would get a better price for their produce for two reasons. It would also lead to the removal of the middle men which would provide additional revenue to the farmers (the retail chains would buy directly from the farmers).Contractual farming would mean improved and efficient farming practices as well as higher output and better prices.It would also generate employment opportunities in the wake of improved supply chains that would be set up to cater to these retail stores.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.

    Again FDI in retail will not benefit the farmers since the large foreign companies will squeeze them for lower prices in order to earn higher margins.The large foreign companies 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. Loss of livelihood for millions of small time traders who would not be able to compete with the large foreign players in terms of prices (foreign companies have deep pockets which the small Indian traders cannot match).Manufacturing sector would suffer since the foreign players would source their products from international markets in order to get low prices.

  12. Vipul Bhashkar says:

    Hello friends,
    According to me the measures will put farmers at a disadvantage and also result in a situation where consumers are not given the freshest produce. Once they come the farmers who now have several middleman to sell their goods will have only a few retail stores to sell in future. Usually that means price he gets will not be as competitive as it is today.Second! the same supermarkets may not actually give the best products grown in India to Indians.third! they can alter the food habits of the nation. Instead of eating fresh foods we will all be eating canned foods soon!
    Also they harm the enterprenuer and businessmen i believe that Walmart, Carrefour etc. are coming to India to uplift the condition of agricultural sector and will improve supply chain efficiency. I believe they are coming for sheer profit motives and if that means squeezing the billion+ Indians, selling Chinese goods, killing indigeneous ventures – they will do that. Today’s independent entreprenuer and businessmen will become their salaried employees.
    Also these companies Walmart especially has very bad track record in handling its own employees, developed countries US and Euros have negative statement that Multi Brand retails cut the jobs and give less returns to the farmers from what they were getting before they enter there market, might hamper Kirana’s where they will open store, may in coming years will lead to cane foods in India and at higher prices so will lead to higher inflation…. The biggest concern is that may change peoples mentality, India is country where people saves more, but after these multi brands enter, people will spent more and save less(as we all know how we behave when we enter a shopping mall).. that’s the reason why US and Euro went through 2008 melt down and still wont be able to recover and might in 2-3 years will be declared bankrupt’s.”
    It also has some positive sides but firstly we have to watch our system that it will be fit in it. We have to see that is this fdi destroying our values.

  13. Kinsuk Sadhukhan says:

    Foreign direct investment (FDI) is direct investment into production or business in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds.Foreign direct investment has a number of different forms. Broadly, foreign direct investment includes “mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intracompany loans”.In a narrow sense, foreign direct investment refers just to building new facilities. The numerical FDI figures based on varied definitions are not easily comparable.
    As a part of the national accounts of a country, and in regard to the national income equation Y=C+I+G+(X-M), I is investment plus foreign investment, FDI is defined as the net inflows of investment (inflow minus outflow) to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.FDI is the sum of equity capital, other long-term capital, and short-term capital as shown the balance of payments. FDI usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward and outward, resulting in a net FDI inflow (positive or negative) and “stock of foreign direct investment”, which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares.FDI is one example of international factor movements.

  14. Rajib Dey says:

    Foreign direct investment may be politically controversial or difficult because it partly reverses previous
    policies intended to protect the growth of local investment or of infant industries. When these kinds of barriers against outside investment seem to have not worked sufficiently, it can be politically expedient for a host country to open a small “tunnel” as a focus for FDI. The nature of the FDI tunnel depends on the country’s or jurisdiction’s needs and policies. China, starting in 1979, promoted FDI primarily to import modernizing technology, and also to leverage and uplift its huge pool of rural workers.To secure greater benefits for lesser costs, this tunnel need be focused on a particular industry and on a closely negotiated, specific terms. These terms define the trade offs of certain levels and types of investment by a firm, and specified concessions by the host jurisdiction.The investing firm needs sufficient cooperation and concessions to justify their business case in terms of lower labor costs, and the opening of the country’s or even regional markets at a distinct advantage over (global) competitors.The benefits to the host may be: creation of a large number of more stable and higher-paying jobs; establishing in lagging areas centers of new economic development that will support attracting or strengthening of many other firms without so costly concessions; hastening the transfer of premium-paying skills to the host country’s work force; and encouraging technology transfer to local suppliers. Concessions to the investor commonly offered include: tax exemptions or reductions; construction or cheap lease-back of site improvements or of new building facilities; and large local infrastructures such as roads or rail lines; More politically difficult (certainly for less-developed regions) are concessions which change policies for: reduced taxes and tariffs; curbing protections for smaller-business from the large or global; and laxer administration of regulations on labor safety and environmental preservation. Often these un-politick “cooperations” are covert and subject to corruption.The lead-up for a big FDI can be risky, fraught with reverses, and subject to unexplained delays for years .One result is that the market on what’s hot and what’s not has frequent bubbles and crashes.Because ‘market’ valuations can shift dramatically in short times, and because both local circumstances and the global economy can vary so rapidly, negotiating and planning FDI is often quite irrational. All these factors add to the risk premiums, and remorses, that block the realization of FDI potential.

  15. Kinsuk Sadhukhan says:

    Foreign direct investment (FDI) is direct investment into production or business in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds.Foreign direct investment has a number of different forms. Broadly,foreign direct investment includes “mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intracompany loans”.In a narrow sense, foreign direct investment refers just to building new facilities. The numerical FDI figures based on varied definitions are not easily comparable.
    As a part of the national accounts of a country, and in regard to the national income equation Y=C+I+G+(X-M), I is investment plus foreign investment, FDI is defined as the net inflows of investment (inflow minus outflow) to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.FDI is the sum of equity capital, other long-term capital, and short-term capital as shown the balance of payments. FDI usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward and outward, resulting in a net FDI inflow (positive or negative) and “stock of foreign direct investment”, which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares.FDI is one example of international factor movements.

  16. Nisha Rana says:

    The recent cabinet decision on FDI in retail has triggered protest by opposition and key allies of the ruling UPA.The recent cabinet decision on FDI in retail has triggered protests by opposition and key allies of the ruling United Progressive Alliance (UPA), who are demanding a roll back of the policy. The hour-long meeting held in Parliament House failed to resolve the logjam in the two Houses as opposition parties, led by BJP and the Left, stuck to their stand and demanded rollback of the Cabinet decision to allow 51 per cent FDI in multi-brand retail. Though at present only 53 cities with population not less than 10 lakh in the country have been identified for FDI As the fourth-largest economy in the world in PPP terms, India is a preferred destination for FDI. During 2000–10, the country attracted $178 billion as FDI.
    This will bring modern technology to the country. Improve rural infrastructure.It would help build infrastructure and create a competitive market. Reduce wastage of agricultural produce. Enable our farmers to get better prices for their crops. consumers will get commodities of daily use at reduced prices. Biggest beneficiary of this would be small farmers, who would be able to improve productivity and realize higher remuneration by selling directly to large organized players and shorten the chain from farm to consumers. Government too stands to gain by this move through more transparent and accountable monitoring of goods and supply chain management systems. It can expect to receive an additional US$ 25-30 billion by way of taxes Opening of retail can be seen as a solution for food inflation, which has been confounding policy-makers. FDI in retail would help in building much needed back end infrastructure. Additionally, he said, investments in cold storage chain infrastructure would reduce loss of agricultural produce and provide more options to farmers.

  17. Shweta Chattopadhyay says:

    India, the third largest economy in Asia with consistent GDP growth in the range of 6% and or above for the past 15 years, this is indeed a great success story in overall developing of country while the developed countries capitulating in growth.
    Signs of global economic downturn and domestic stagnation sticking into the Indian economy, which really needs a jump start to sustain the growth we have taken granted since liberalization.
    This is going to hit hard on the mom and pop shops across the country, as the new found wealth among the Indian would opt for the foreign retail for plethora of reasons starting from quality of product and service and choices of the product. Though this approval stipulates for companies to invest into back processing operations of retail, and a mere 30% procurement from local producers may not be enough to quell the fear of displacing the existing retail with mammoth internationally experienced and efficient companies. Some would argue both can exist together which is a wrong notion.
    While acknowledging the apprehensions I would cautiously endorse the FDI plan in retail sector with safeguards in place and put to action. We badly need investment in the country though but we can not afford to take away livelihood of millions of people.

  18. Subhendu Ghosh says:

    India, the third largest economy in Asia with consistent GDP growth in the range of 6% and or above for the past 15 years, this is indeed a great success story in overall developing of country while the developed countries capitulating in growth.
    Signs of global economic downturn and domestic stagnation sticking into the Indian economy, which really needs a jump start to sustain the growth we have taken granted since liberalization.
    This is going to hit hard on the mom and pop shops across the country, as the new found wealth among the Indian would opt for the foreign retail for plethora of reasons starting from quality of product and service and choices of the product. Though this approval stipulates for companies to invest into back processing operations of retail, and a mere 30% procurement from local producers may not be enough to quell the fear of displacing the existing retail with mammoth internationally experienced and efficient companies. Some would argue both can exist together which is a wrong notion.
    While acknowledging the apprehensions I would cautiously endorse the FDI plan in retail sector with safeguards in place and put to action. This is a delicate choreography Manmohan Singh is good at it and should become like on of those WTO myths. We badly need investment in the country though but we can not afford to take away livelihood of millions of people.

  19. Sanchari Bhattacharya says:

    Foriegn Direct Investment (FDI) in retail means foreign direct investment in the Indian retail business. The retail business can be either a single brand retail business or multi brand retail. At present, foreign direct investment (FDI) in pure retailing is not permitted under Indian law. Government of India has allowed FDI in retail of specific brand of products. But the major concern is regarding the government’s decision to allow FDI of 51% under multi brand retail.

    Now FDI would allow foreign companies to bring in the necessary investment to upgrade the retail sector infrastructure across the country.Since their focus would be profit they would set up efficient supply chain management systems to ensure that product deliveries are on time.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.The farmers would get a better price for their produce for two reasons. It would also lead to the removal of the middle men which would provide additional revenue to the farmers (the retail chains would buy directly from the farmers).Contractual farming would mean improved and efficient farming practices as well as higher output and better prices.It would also generate employment opportunities in the wake of improved supply chains that would be set up to cater to these retail stores.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.

    Again FDI in retail will not benefit the farmers since the large foreign companies will squeeze them for lower prices in order to earn higher margins.The large foreign companies 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. Loss of livelihood for millions of small time traders who would not be able to compete with the large foreign players in terms of prices (foreign companies have deep pockets which the small Indian traders cannot match).Manufacturing sector would suffer since the foreign players would source their products from international markets in order to get low prices.A fragmented market is better than a consolidated market in India’s case simply because the retail sector in India is very small and a large number of small time independent traders and retailers are dependent on it for their survival. Also the middlemen will be replaced by large foreign players who would anyway squeeze the producer for lower prices.The investment by these foreign players will only be in their supply chain and not in developing any other infrastructure (this point can be easily countered).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.

  20. preety kumari says:

    I certainly feel the need of customer service improvement and a jump start for the ailing policies leading us to stagnant growth model. Price stabilization and elimination of middleman along with competition is good for consumers and the producers. We need to find a middle ground by creating special zones, such as cities with more than million people, where these people can operate and stringent enforcement of local employment and using the money these people generate by the for infrastructure and other employment generating investments. I think we should take a cautious welcome approach, otherwise we will have to live with this stark reality of economic engine loosing steam.
    If we reduce the labor costs and can produce goods at competitive price we could emerge as an alternative to china in manufacturing sector and these foreign retailers will act as conduits for our exports giving access to world markets. Our product distribution and guaranteed price farmers and wastage of goods will be minimized with efficient operators. On the flip side we have the problem displacement of existing mom and pop shops to a level, who needs to competitive and may need to go as specialty stores and some may have to close shop.
    While acknowledging the apprehensions I would cautiously endorse the FDI plan in retail sector with safeguards in place and put to action. This is a delicate choreography Manmohan Singh is good at it and should become like on of those WTO myths. We badly need investment in the country though but we can not afford to take away livelihood of millions of people.

  21. Vivek Singh says:

    Foreign direct investment (FDI)
    It is direct investment into production or business in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country.
    we all know that every coin have two side so there will be the same it must have some advantage and disadvantage too.
    so fist i going to talk about in faver ..
    1.-This will brings modern technlogy to our country .
    2-Goverment too stands to gain by this moves through more transparent and accountable monitering of goods and supply chain manegment system it can expect to receive and addtion US$ 25-30 billion by way of taxes .
    3-Reduce wasting of agricultural produce.
    Consumer will gets commodities of daily use at reduce price .
    but in our country our interest rate tuday are as high as 14% to 16% how do we compete with the economies which have 4% intrest rate .Our infrastructure our trade facilitation all these factor collectivly don’t make India low cost .So do you want India to become a center where we allow foreign companies to come and set up there larger chain which eventually instead of selling domestic products out sourcing internationally reatil source and they source from cheapest source .
    NOw coming to the conclusion , goverment is taking this decision in good faith few person and lobbies controlling the rate of food commodities in India and bring more comptition in market will bring better price for buyer as well as seller commodities.

  22. Mrityunjay Kumar Singh says:

    Agriculture experts seem divided on the issue of benefits to farmers from government’s decision to allow foreign direct Investment (FDI) in multi brand retail in India.

    Planning Commission Member Abhijit Sen said the benefits of FDI in multi brand retail to the farmers needs to be analysed in the long run, while noted farm economist Y K Alagh said the move will be successful if it reaches the small farmers and artisan groups in the country.

    Consortium of Indian Farmers Associations (CIFA) Secretary General P Chengal Reddy welcomed the move saying that it would help in raising the income of the farmers.

    Agriculture expert Devinder Sharma felt this policy will only help the multi-national companies.

    Explaining the dynamics of profit, Sen said that benefits to the farmers will increase if the demand increases.

    “Whether FDI in multi brand retail will be able to perk up the demand needs to be analysed in the long and medium term,” Sen said.

    There have been initiatives in the retail sector relating to agricultural products, but so far farmers have not gained much from it, he added.

    Echoing similar views, Alagh, who is a former union minister and Member, Planning Commission, said for the farm sector to grow, FDI in multi brand retail should target the demand in the big towns and not just the metros.

  23. Tuhina Burnwal says:

    FDI in retail might increase the overall national income but the key question here is “will FDI in retail help the common man of our country”. Lets see..

    It will certainly create lots of new jobs both directly and indirectly in related sectors like logistics, farms etc . And as far as local unorganized retail stores are concerned, there can be some problems for them but they will continue to grow as the target customer of both are different. It will certainly provide a stiff competition to organized retailers like “future group” as they have same customer group, but as @saurav4489 has explained it won’t be much of a problem.

    Secondly, if it is ensured by our government that majority of goods and manufactured products are procured from our country, it will boost our manufacturing and agriculture sector. Agriculture sector which employs 50% of the work force yet contributes considerably poorly in country’s GDP. FDI in detail will avoid the middleman and the farmers will be able to get there share and get rid of the old vicious cycle.
    One third of the total food supply of the country rots due to inefficient supply chains, such problems will be easily eradicated by strong infrastructure and well managed service offered by foreign supply chains.
    So I believe FDI in retail with adequate safeguards will act as a bane for our economy and for the common man too.

  24. Keshav Bhagat says:

    Foreign direct investment (FDI) refers to capital inflows from abroad that are invested to enhance the production capacity of the economy. However, FDI in retail is different from the investment in corporate, manufacturing, or infrastructure sectors. Retail can be single or multi brand and may be described as a sale to the ultimate consumer at a margin of profit. While the FDI in single-brand retailing was allowed earlier, FDI in multi-brand retailing is being allowed now; meaning a retail store with a foreign direct investment can sell multiple brands under one roof. So it is the link between the producer/manufacturer and the individual consumer. India had to open up the retail trade sector to foreign investment as she is a signatory to the World Trade Organization’s General Agreement on Trade & Services, which include wholesale and retail services.

    Whether it is beneficial (boon) or harmful (bane) for India: The aspirant has to remember and be very cautious that he/she has to follow one path – either pros (boon) or cons (bane) of FDI in multi-brand retail. It will put the aspirant in a piquant situation if he/she speaks in an ambiguous tone and ideas. If one idea, fact, etc overrides the earlier one, the credit earned may be lost.

    Favor:

    > Indian retail sector is highly fragmented with around 97 percent of its business being run by the unorganized retailers. The organized retail is in its infancy. With the entry of FDI the retail sector will become organized.

    > Foreign investment in food-based retailing would ensure adequate flow of capital into the country and its productive use, multiplying the same. It will promote the welfare of farmers by agriculture growth, and thereby increasing their income level

    c> FDI in the retail sector will spur competition as the current scenario is of low competition and poor productivity. India will flourish in terms of quality standards and consumer expectations.

    Againts:

    a> The unorganized retail sector is the largest source of employment after agriculture and has deep penetration in rural India. It generates more than 10% GDP of India. There is all probability that there will be a great job loss in this sector. The worst affected would be the rural youth.

    > The foreign big guns like Wal-Mart coming with huge investment may not procure material from the domestic producers and might import the same from international market. This will add to the woes of already crumbling Indian producers.

    > The present PDS (Public Distribution System) on which a large urban and rural population depends will also receive a setback and it will be difficult to procure and redistribute the material, once the dependence on FDI increases…..

    Conclusion:
    Allowing FDI in multi-brand retail will bring about supply chain improvement, investment in technology, manpower and skill development, upgradation in agriculture sector. The government will be benefitted via greater GDP and tax income. The organized sector will lay stress on producing more, and thus generate more employment in production as well as retail industry………
    so, i say FDI is verry good for all country for there devlopement…

  25. Niraj Singh says:

    hello friend’s…
    Foreign Direct Investment or FDI is the investment in a country by some foreign country. It is usually a physical investment like building a factory or an office. It usually includes a parent company, who in the effort of expanding establishes its office as a permanent company in a foreign country. In this way the parent company gets the level of Multinational company and its investment is known as FDI for the host country. Importance of expansion is very necessary for all nature of businesses to sustain long term survival but FDI is very important for the host country as well. For example, developing countries are the most attractive growing markets for almost all kinds of businesses therefore, if a company makes FDI in developing country then it will give benefit to the company and the country both. Benefits usually increase high profits for the company, and increase in employment, economic growth etc. For the country. In addition to that there are a number of risks which are always there in FDI for both the country and the company.

    significance:- FDI enables to bring foreign investment in India as a result of which,our country can be benefitted in many ways;namely-employment oppurtunities,better quality of life,better products,better education and higher per capita income.
    Advantages :-In the global economy today, we see many developing countries competing for foreign direct investment. FDI is said to be an important factor for spurring the development of a nation.
    ->Integration into global economy – A developing country, which invites FDI, can gain a greater foothold in the world economy by getting access to a wider global market.
    ->Technology advancement – FDI can introduce world-level technology and technical know-how and processes to developing countries. Foreign expertise can be an important factor in upgrading the existing technical processes in a host country.
    ->Improved human resources – Employees of a host country in which there is an FDI get exposure to globally valued skills. The training and skills upgradation can enhance the value of the human resources of the host country.
    Disadvantages:- FDI is contribution of foriegn firms to public revenue through corporate taxes is comparatively less, because of liberal tax concessions, investment allowances, disguised public subsidies and tariff protection provided by the host government.
    ->.FDI has and adverse effects on competition.
    ->.FDI will be make the host country lost the control over domestic policy.
    ->.Foreign direct investment disadvantageous for the ones who are making the investment themselves.

  26. abhijeet basak says:

    Foreign direct investment (FDI) refers to capital inflows from abroad that are invested to enhance the production capacity of the economy. However, FDI in retail is different from the investment in corporate, manufacturing, or infrastructure sectors. Retail can be single or multi brand and may be described as a sale to the ultimate consumer at a margin of profit. While the FDI in single-brand retailing was allowed earlier, FDI in multi-brand retailing is being allowed now; meaning a retail store with a foreign direct investment can sell multiple brands under one roof. So it is the link between the producer/manufacturer and the individual consumer. India had to open up the retail trade sector to foreign investment as she is a signatory to the World Trade Organization’s General Agreement on Trade & Services, which include wholesale and retail services.

  27. Rajan Kumar Tiwari says:

    Background
    After a long discussion between BJP and UPA Government is ready to allow 51% FDI in retail sector .FDI can be defined as ‘one company can invest on physical means such as lands, factories and mines in another company of another country to acquire lasting management interest.

    Favour
    >FDI helps in the economic development of the host country (where the investment is being made).
    >For origin and host countries, FDI provides access to new technologies, products, skills and organizational and management strategies.
    >FDI is a boon for the small companies to become more actively involved in international business activities.
    >Agriculture related people get good price for their goods as middle men will be eliminated.

    Against
    >With the FDI in retail sector, small companies and merchants will suffer a lot.
    >Technological dependence on foreign technology sources

    Conclusion
    FDI is good for any country to develop economically and also technologically. FDI in retail sector boon the country.

  28. Ankita Prajapati says:

    I think from the FDI in retail will boon for the Indian economy but it will be very worst situation to facing for the small shopkeepers and farmers..

  29. sakshi chaudhary says:

    as i think the biggest beneficial of FDI in retail would be the government of india because whenever people buy any commodities from these retails outlets they will b getting a bill and translate it into higher tax intake for the govt….so its a boon…

  30. Shaheen Khan says:

    I believe that FDI is boon in Indian retail market because
    1. Reduce inflation rate by eliminating the role of brokers
    2. Direct contact between producer & consumer.
    3. More choices available becoz more no. of company will established of network in India.
    4. Indian companies will also improve our std. bcoz now thrie competion will be with more foreign countries.

  31. Rajan Ranjan Prasad says:

    hello friends…..
    India opened its retail, aviation, broadcasting and power sectors to foreign supermarkets on September 14, a major economic reform that has been stalled for months by political gridlock and came as part of a package of measures aimed at reviving growth.
    Foreign direct investment (FDI) in India’s largely unorganised retail sector will help curb inflationary pressure by easing supply side constraints and revive economic growth, analysts said.
    However, some experts have the opinion that it could hamper firms hoping to set up shop in the world’s second-most populous country.
    A recent UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 2010–2012. India has seen an eightfold increase in its FDI in March 2012.
    As per the data, the sectors which attracted higher inflows were services, telecommunication, construction activities and computer software and hardware.
    Mauritius, Singapore, US and UK were among the leading sources of FDI for India.
    According to Ernst and Young, foreign direct investment in India in 2010 was USD 44.8 billion, and in 2011 experienced an increase of 13 percent to USD 50.8 billion.

    • Tuhina Burnwal says:

      i dnt thnk its gonna affect any of the firms..Let’s look at FDI in a simple example of restaurant sector. We allowed Dominos’, Pizza Hut, McDonalds, Subway in India but did that worsen the situation of Indian restaurants? No, we came up with multi-branch restaurants like Haldiram, Bikaner, Jumbo King Vada pav, Dosa Plaza, Sankalp and many other state-wise enterprises. Has Barista unemployed Chai walas? Infact, we answered it with Indian CCD. Have Adidas, Nike, Puma stopped the selling of Bata? No, we saw a new revolutionised version of it. Have Tommy Hilfiger and Armani made Raymond and Wills out of business? Have Mercedes and BMW out-roaded Tata or Mahindra? Then why do we think to believe that FDI in retail will affect the general stores.

      Currently, there is only 5% market of Indian malls in retail sector. Even if we allow FDI, it will at the max reach to 15% in near future. Also, these will be located in only one part of metro cities, which is accessible only to a part of people. Other than they cannot offer the trust, credit and flexibility that ‘gali k bahar ki dukan’ can offer. I am not able to understand the apprehension of cynicals.

  32. Kaushik Kumar says:

    heloo friends
    India opened its retail, aviation, broadcasting and power sectors to foreign supermarkets on September 14, a major economic reform that has been stalled for months by political gridlock and came as part of a package of measures aimed at reviving growth.
    Foreign direct investment (FDI) in India’s largely unorganised retail sector will help curb inflationary pressure by easing supply side constraints and revive economic growth, analysts said.
    However, some experts have the opinion that it could hamper firms hoping to set up shop in the world’s second-most populous country

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