FDI in Retail Sector in India

India is a country that has been able to reinstate investor buoyancy in its markets, even during the hard-hitting of times. Augmentation in capital inflows, foreign direct investments (FDI) and overseas entities’ chipping in replicate the verity that Indian markets have fared well  off late. Besides, foreign companies are screening the South-Asian nation as a premeditated center for their maneuver and investments outstanding to investor-friendly strategy milieu, constructive bionetwork and mammoth prospective for development since more than a decade. Recently, it was reflected again when government of India decided to allow multi brand retailers to operate in India. A lot of hue and cry was made, with everyone singing his own tune and a lot of confusion was created. Big giants like wal-mart, Carrefour, metro cash and carry etc. have been lobbying since long for establishing their foot hold in India. Being a country with 1.2 Billion people, most of them from middle Income group, India emerges as one of the prime attraction for these companies.

Those who oppose the decision say that because of it 4 crore people working in retail shops will be affected. Also they argue that deep pockets and cheap prices, these companies can create monopolistic markets which is never considered to be a healthy sign for a sound economy. The opposition is also sceptical of the decision because the retailers will be contacting the producers directly thus eliminating the middleman leaving them jobless. Also they have been saying that it will create an outward flow of Indian money in hands of the foreigners creating situation similar to medieval times when East India Company took control of the country in the similar way.

The government is supporting the decision for the sake of high economic growth rate. The companies which come to operate in India will also contribute to the nation by creating retail infrastructure needed for them thus giving a boost to real estate sector. Also in order to get the products cheaper they will approach the producers directly eliminating the middle. This will have a twofold effect, firstly people will get goods at a cheaper price and secondly the farmers will get better price for their produce. Also a lot of jobs will be created for carrying out the operations of these companies which makes government ride high on the decision. Also another condition that is imposed on these organisations is that of procuring 30% of their sale from small Indian enterprises thus giving them a share of their pie to them. This will help those organizations grow and will have a positive impact on the economy.

After analyzing pros and cons the overall concept comes out to be favoring Indian economy, although having some minor negative impacts. FDI in multi brand retail can contribute to greasing and oiling of the growth engine of our country, but it needs to be tuned a bit more finely that it is being done now. If handled properly it can create a structure where farmers will get proper rates for their produce and people will get things at proper and affordable prices, But if  given loose hand to operate then it might end up creating disaster for retailers and monopolistic markets where we will be trapped into buying whatever they sell to us.

Posted by Gayatri


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