FDI in retail: Impact on India?

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Foreign Direct Investment (FDI) has been a major issue in the countries like India. And the recent decision of the UPA government to allow 51 per cent FDI in retail has been opposed by various political parties including the opposition BJP.

It is believed that the FDI in retail will have adverse effect on the existing retailers in India. On the contrary others do feel that it will create jobs and boost the economy.

The Upper house and Lower House of Parliament will debate under the rule 168 & 184 and vote over the FDI in the retail in this week. The current political scenario has been something that is not clear, whether the UPA-2 will get the majority to pass the move on FDI in retail.

Parties like Bharatiya Janata Party (BJP), Let Parties, Trinamol Congress (TMC), DMK have been opposing the FDI in retail. While other parties live Samajwadi Party has not unfolded their card yet. In the current political scenario, it is very difficult to predict the fate of the FDI in retain in India.

Plan of FDI in Retail:

According the new norms, which are to be finalised, 51 per cent of foreign direct investment will be allowed in single brand retail sector. This means, any foreign retail company can set up and do business in India with allowing 49 per cent stake to a domestic retails.

This FDI in retail will be allowed in the major cities having more than 10 lack population i.e., in the 53 cities of India, where shopping mall will be established for the purpose of retail business.

The customers of these cities will get more facilities in form the retail shopping malls like – WalMart and other, from where they can purchase retail goods.

Statistics related to FDI in India:

As per the Fact Sheet on Foreign Direct Investment (FDI), there was Rs. 6, 30,336 crore FDI equity inflows between the period of August 1991 to January 2011.

There are 53 cities in India having more than 10 lack population; those will attract the FDI in retail investment. And the state government of concerned states have right to act on the matter of FDI in retail sector business.

Statistics related to FDI in World:

Top 10 investing FDI investing countries in India are Mauritius, Singapore, U.S.A, UK, Netherlands, Japan, Cyprus, Germany, France and UAE.

There are around 20 international retails those hold major portion of FDI in many countries like Norway, Switzerland, United Kingdom and Portuguese.

China has allowed Foreign Direct Investment in retail in 1992 which boosted the jobs in retail sector to 52 million from 28 million.

Let’s have count on Advantages of FDI in Retail:
  • Experts believe there are some major advantages from the FDI in retail sector in India.
  • It will boost the jobs in the retail sector, particularly the selected cities for the investment purpose;
  • It will make FMCG good cheaper in these cities, and across the country if expanded;
  • Not against the interest of domestic retailers, they are not going to hit;
  • Consumers will get good quality goods with a reasonable price in the retail market;
  • Farmer can sell their goods directly to the retailers avoiding mediator at mandi; and may get good price for their crop;
Disadvantages of FDI in retail in Single brand:
  • It will harm the grocery shop owners and small domestic retail businessmen of the country;
  • FDI in retail will hit the job market and many will lose their jobs;
  • Particular groups of investors will be holding the entire stock of retail market in India; as there only 20 international retails in the world investing in this sector;
  • It is against capital formation in the economy, rather there will be capital flight to other nations from India;
  • It will boost the shopping-mals culture in the country hitting hard on the small grocery shops across the country;
The bottom-line is every coin has two faces so as with the FDI in retail. It is always on the top priority for any government to have capital formation and job creation in land rather depending on foreign companies.




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