What’s your opinion on Foreign Direct Investment? Is FDI in retail sector good for INDIA?
by Harshal Jain
Before answering that question lets look at what is basically FDI?
MEANING OF FDI:-
FDI stands for foreign direct investment i.e. investment made by the foreign companies or foreign government in India. It is mainly dealing with monetary matters. FDI is a popular mode of entering in another country’s economy. It is made by foreign countries in order to established wholly owned companies or to manage them or to purchase shares of companies in another country. It can be of two type-
- Horizontal –invest in same type of industry.
- Vertical- financial collaboration with mkt. unit or suppliers of input in that country.
CURRENT SCENARIO REGARDING FDI IN INDIA
- This is the most talked and controversial issue in the country right now. On 15th 2012 govt. has announced their new FDI policy in Indian retail sector. As per the notification by the DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION the govt. has allowed FDI in following-
- Single Brand Retailing-100%
- Multi Brand Retailing-51%
This new policy facing protest from everywhere for instance- Left Parties, Opposition Parties(BJP,SP,INLD Etc.) & from the general public also.
This is all because as much as 7.8% of India’s total workforce is engaged in retail trade. There are two type of retail stores in India. They are-
- Organized Retail stores
- Unorganized Retail stores
Unorganized retail stores are considered to be the 95% of the total retail sector of India. It is argued that these are going to effect to a large extent with the entry of big MNC in retail sector like- Wal-mart, Tesco, Correfour who sell from groceries to garments, furniture to fitness equipment item under one roof.
Now lets see some pros and cons regarding FDI in india!
Arguments against FDI are as-
- Create Unemployment
- Upset the balance of payment
- Farmers would be at loss
- Middle man would suffer the most
- Inflation will be increased
Arguments in favor of FDI or focusing light on the benefits of FDI for India.
- Benefits for consumers
- a) Good quality
- b) low price
- c) Quality of services
- Benefits for producers
- a) Low advertising cost
- b) Opportunity to go international
- Benefits for economy
- a) Increase flow of foreign currency in the country.
- b) Latest technology in production
- c) improved infrastructure facility
- d) create employment
If India want to become a superpower in world economy then it is very much important to open doors for FDI coz only then we can avail all these benefits. He also said that the govt. has announced this FDI policy by keeping in mind the interest of general public and as well as the economy by putting some restriction on FDI.
STEPS TO PROTECT ECONOMY’S INTEREST
- FDI in retail would only enter in 10 states & those cities where population is more than 10 lakh and only 53 cities comes under this criteria.
- Only those MNC who are willing to invest 500 crore, half of it in the back-end activities such as logistics, infrastructure etc. would be allowed in the retail space.
- The foreign retail stores will have to buy 30% of the product from the domestic producers.
- The unorganized retail sector would not be affected so much coz they have already created great neighbourhood & unbeatable access.
- After studying all the arguments against and in favor of FDI we can conclude that FDI can be introduce in india because it is very much important for Indian economy to grow with world’s economies and this can be possible by exploiting all the opportunity available in the intt. market and FDI is a good medium for that.
- Moreover it has more positive effect than negative effect. So, we should concentrate on the positive part and try to remove the hurdles that are in the path of successful implementation of FDI policy.
- But right now our government is more focused on MAKE IN INDIA rather than FDI. So just wait and watch.