Is Foreign Direct Investment (FDI) in retail sector good for India?

FDI is always welcomed in a Capital deficient Country like India but as far as FDI in retail sector is concerned, there is a lot discussion for and against the motion. Let's have a little look about that;

Arguments by those who favours it -.

1. Allowing FDI in retail sector will create millions of employment as some Giant MNCs like Walmart and Tesco will come and open their Malls and they will need man-force to operate it.

2. Customers will be able to find almost all their required items under one ceiling. They don't need to go from one place to another. It will save their time and efforts and at the same time will decrease fuel consumption as well as traffic congestion and help improve the environment (Pollution). I think this is more important for us at present.

3. Land in the centre of the city is very expensive so big MNCs may establish their building a little far from the centre (Must be connected with proper transportation). Thus, a lot of traffic will divert from centre to outside.

4. India will get a huge investment which will not only generate employment but revenue as GST and other taxes.

5. The competition will increase and thus customers will get better services. Customers will get products on competitive prices.

6. MNCs will buy retail items from India and thus can boost our domestic industry and generate employments indirectly. If they require, they can buy vegetables (to sell) from the farmer directly- this will help farmers get more prices for their products. Thus, help to double farmers income.

Arguments against it;

1. It will directly impact the employment in retail shops. The shops whose income will get down and not be able to pay even rent of shop building, they will cut man-power or it may be possible that they stop their shop.

2. There are more than 650 districts and around 4100 cities (administrative units) in our country. Suppose at least one such a big Mall is opened in each of cities give job to 50 people (the number can vary- it just an example), then 4100 Mall will give employment (Direct jobs) to 0. 2 million people almost. On the contrary, In our 13-14 million retail outlets (Wikipedia) suppose each gives the average job to 5 people (as there are some little big outlets and some small outlets) , then this sector may give a job to 65 to 75 million people (direct jobs). So the point is, FDI in retail sector may impact the livelihood of these 75 million people (not necessarily all).

3. A mall consumes a lot of electricity. It will increase the demand of electricity. To fulfil their requirement, we need to increase production which is still based on coal-based thermal power-plants (unhealthy for our environment). Thus will increase pollution (water, Air).

4. Big malls will impact competition environment in future. Some big malls can keep their prices less and get their rivals to throw out of the market and then can increase it (price). In absence of competitor, they can charge more prices on products (of course not more than MRP).

5. They can import all their needed retail products from abroad and thus, can destroy our domestic industry. It will result in more unemployment. (Govt. Can put a condition to buy at least some portion of their products from India).

Suggestions-.

1. We should allow FDI in the retail sector but there should be some limitations on it. Like as an experiment, we should allow some MNCs to open their mall in some districts in a state or in any Union Territory (no opposition from states in UTs) and then observe and examine how these MNCs impacting the retail market (retail shops) there. According to this experience, the Government should take further steps whether to allow it in the entire country or not.

2. No doubt, it will create employment but at the same time, it can generate unemployment on other places. So We have to deeply consider its pros and cons and then take any step.

Hello everyone,

I am Rajwardhan.

While Foreign Direct Investment (FDI) brings certain advantages, such as technological advancements and improved infrastructure, I believe that large-scale FDI in India's retail sector poses several challenges. India's market, being one of the top five globally in terms of consumer base and retail opportunities, requires a balanced approach to FDI. Here are three significant concerns:

1. Threat to Local Industries:

Local manufacturers and businesses form the backbone of India's economy. These enterprises may find it difficult to compete with multinational corporations (MNCs) that possess advanced technology, vast resources, and efficient supply chains. The dominance of MNCs could lead to monopolistic practices, which would marginalize small and medium-sized enterprises (SMEs) , potentially pushing them out of the market.

2. Economic Drainage:

FDIs, being foreign investments, often result in profits being repatriated to the investor's home country. While FDIs can initially boost economic activity, the long-term effect might be an outflow of wealth from India, enhancing the GDP of other countries rather than ours. This could lead to a net economic drain, undermining India's economic sovereignty and growth prospects.

3. Impact on Employment in the Unorganized Sector:

The unorganized retail sector, which includes Grocery shops, pan shops, and small vendors, employs a large portion of the semi-skilled and unskilled workforce in India. The entry of large retail chains could lead to the displacement of these jobs, as smaller businesses may not withstand the competition. This would not only increase unemployment but also disrupt the livelihoods of many families dependent on the unorganized retail sector.

In conclusion, while FDI can contribute to economic growth, granting complete liberty to FDIs in the retail sector is not beneficial for India. The government must implement regulations to protect local businesses and ensure that the benefits of economic activities remain within the country. Initiatives like "Vocal for Local" and "Atmanirbhar Bharat" are crucial steps toward fostering self-reliance. By supporting local manufacturers and MSMEs, we can drive sustainable economic growth and elevate India to new heights.

Yes it is essentially required for a developing country like INDIA. To start with, I want to comprehend the fact that we grow as a person by learning new things but in a disciplined manner. In the process of learning new things, we should not deviate from the primary objective of our life. A similar rule can be applied for the introduction of FDI (foreign direct investment).

Foreign direct investment can be made through single retail or multi retail stores. The government has allowed 100% ownership stake for single brand retail foreign direct investment and upto 51% ownership stake for multi brand retailers. And in addition to that, a minimum Rs 500 crores investment is required for investing in foreign nationals on multi-brand retail outlets.

It creates employment opportunities for many and is advantageous for the growth of logistics sectar as well. Apart from this, our farmers can also benefit from the advent of FDI in India as it creates greater transparency and they can get direct payment from those foreign players. It creates efficiency in the organised as well as unorganised sectar of the country. It prevents wastage of supply of perishable food items as they invest heavily in the construction of warehouses and cold storage facilities. It creates a strong infrastructural base for the country due to heavy capital inflow.

Disadvantages are very few though if we consider careful examination of the relevant facts and information. It definitely shifts a major chunk of our revenues to foreign investors. Plays a part in reducing entrepreneurial activities. Loss of livelihood of small retail owners. And last but not the least it is still hard to forget about the harm caused by east India company when they entered INDIA for exploring trade opportunities in the country and ended up changing the fate of the entire country, But exploring international opportunities isn't a bad idea when we want to grow as a country and improve the standard of living of its citizens.

FDI in sectors such as an automobile, education, manufacturing is greatly beneficial for India because it leads to investment not only in terms of money but also in terms of technology. Take for e. G. The partnership between Maruti and Suzuki, Hero and Honda, Mahindra and Renault. All this has led to the creation of powerful brands that produce vehicles of high standards and efficient manufacturing systems from Japan and other European countries. Maruti Suzuki is the largest car seller, while Hero and Mahindra have established themselves as strong Indian brands. Similarly, the investment and signing of MOUs have led to the establishment of institutes like IITs and IIMs which are world-class colleges producing world-class engineers and managers. Similarly, investment of technology or money in manufacturing industry strengthens them and enables them to compete with the foreign market.

However, allowing FDI in retail will be a huge mistake because retail industries or commerce shops are too simple to operate and doesn't need huge technological or economic investment. This is the reason why we can see so many Indian shops and malls operating in various places of India. Also the Indian IT industry is strong enough to help management of shops or malls easier by state of art software and computer systems. By allowing FDI in retail we increase unemployability of people because small shop owners will find it tough to compete with large retail giants and will lead to the closure and firing of employees. Also the companies investing here for retail are most likely to send the profit to their home countries. There is a benefit for farmers if the retail industries can give farmers a better price for the produce but even this is less likely and might lead to exploitation of farmers.

Therefore we can conclude that FDI in industries requiring technical know-how is a good option but FDI in sectors such as retail has huge drawbacks and should be implemented with due caution.

1. Integration into global economy: Developing countries, which invite FDI, can gain access to a wider global and better platform in the world economy.

2. Economic Growth: This is one of the major sectors, which is enormously benefited from foreign direct investment. A remarkable inflow of FDI in various industrial units in India has boosted the economic life of country.

3. Trade - Foreign Direct Investments have opened a wide spectrum of opportunities in the trading of goods and services in India both in terms of import and export production. Products of superior quality are manufactured by various industries in India due to greater amount of FDI inflows in the country.

4. Technology diffusion and knowledge transfer " FDI apparently helps in the outsourcing of knowledge from India, especially in the Information Technology sector. Developing countries by inviting FDI can introduce world-class technology and technical expertise and processes to their existing working process. Foreign expertise can be an important factor in upgrading the existing technical processes.

5. Increased competition - FDI increases the level of competition in the host country. Other companies will also have to improve their processes and services in order to stay in the market. FDI enhanced the quality of products, services and regulates a particular sector. Linkages and spillover to domestic firms- Various foreign firms are now occupying a position in the Indian market through Joint Ventures and collaboration concerns. The maximum amount of the profits gained by the foreign firms through these joint ventures is spent on the Indian market.

6. Employment - FDI has also ensured a number of employment opportunities by aiding the setting up of industrial units in various corners of India. So according to my knowledge FDI is good for India. Because it helps to utilize the resources of our country, provides job opportunities and helps to build our country strong in economically.

Technology dependence on foreign technology sources is just the facade that has been created to build a political case to avoid FDI in retail, lot of this software that run in the background are being made and serviced through the IT companies that have their bases in India which in a way is a source of employment to our fellow countrymen. Currently, rise of inflation in commodities is largely due to Agri sector's heavy dependence on seasonal rainfall coupled with various middlemen in the supply chain who hoard the commodities contributing to high levels of inflation. Creating a leaner supply chain in marketing will ensure that goods are reaching the consumer directly from the producer or manufacturer. With more middlemen involved in the supply chain, we end up adding their margins to the end cost of the commodity at the time of purchase by the consumer.

Moreover looking at the consumer behavior and the demography of the Indian market small retailers will always have a prominent place. Certain examples of placing my point; Indian consumers by and large depends on touch and feel of the product before buying it. Particularly the everyday fast perishable items that we consume like Milk, Veggies, and Fruits we always prefer to go to the local store and pick up. Certain products that are needed immediately or are unplanned purchases, I would resist driving 3 km's to a mall to purchase it, I will largely depend on the corner store to complete my immediate need. Another glaring example of the divide in the Indian society or I must say the rich and the poor divide, the Indian middle class will perhaps go to the mall for their planned purchases, however the daily wage earner will still depend on the local Kirana store to fulfill his daily needs, it again is the source where this daily wage earner can pick up his ration on credit as well.

FDI is Foreign Direct Investment in which a company which has its base outside India will set up its branch in India and start doing buisness. It can be advantegeous from point of view of consumer and goverment. This is because because of FDI many companies will come to India with their own products thus the customers will get a wide variety of choices and in terms of prices, and from the point of view of government when a MNC will come to India then it will buy land and give taxes to our government which will increase our economic growth. The other merits of FDI is that when a company set up its branch then it will introduce new technology so in order to operate these machines it will hire people thus it is providing employment to the youth and at the same time exposure to our young generation. But as we know every coin has its two faces in a same way there are some cons of introducing FDI in retail sector as for example if it is providing employment to our youth then at the same time it is a major cause of unemployment as it will ruin our small scale industries which is directly or indirectly employing lakhs of people so if these industries are closed then a huge amount of people will get unemployed.

Thus in conclusion we can say that FDI should be introduced in some percentage in retail sector not 100%.

Some strict rules and regulations and at at the same time government should support the local industries until.

They get economically strong so that they can compete in the global market.

Given the topic to discuss on FDI, the first point I would throw light upon is international relationships. India has a long history of foreign investments dating back to the establishment of East India Company in Kolkata. After that the tie-ups of MNC's with Indian workforce to set up a vast chain of foreign companies in the Indian subcontinent. All this have time and again proved how foreign trades, investments, and establishments in India has always catalyzed Indian workforce giving rise to innumerable employment opportunities. Furthermore, cash flow through foreign investment strengthens the Indian economy, boosting the India economic framework. Foreign investments strengthen international relationships which results in international tie-ups, MOU's between these countries. Recently, in the Ahmedabad-Mumbai Bullet Train project, Japan has funded 88000crore. These are direct results of FDI channelizing through various sectors since ages in India. Funneling down to impact on the retail sector, FDI however, has some negative effects on the industries with a small turnover in India and indigenous production items. The surplus inflow of foreign goods does impact retail industry resulting in poor performance of indigenous goods. Hence FDI though beneficial to Indian economy in lot many ways should be strategically implemented in India keeping in mind its impact on every Indian industry.

Hi Guys,

Yes, "Foreign Direct Investment (FDI) in retail sector is good for India" because India is a developing country and there is need of these types of process as these are helpful to grow our nation towards best possible manner. With the help of "FDI" not only money comes but also many things come from country to country and each thing becomes useful for the nation whether it be technology or any better idea for manufacturing process. Customers always try to find out better things at lower price and this particular mind set up is possible with the help of "Foreign Direct Investment".

As we all know that unemployment still is the biggest problem of our developing country and FDI is one of the best way to overcome this problem from the stages. Retail sector is that sector which interacts directly with the consumers whether it be on line or off line overall I can say that all benefits are being received by the end user I mean end user is effected directly under this process.

And on base of these types of investments there is a healthy relationship which is improving day in day out among the countries that is strong bone of this business. Because a spread relationship many ways open easily to do multiple things at a time.

Finally, Foreign Direct Investment (FDI) in retail sector in India is magic stick through many problems are going to solve from the nation.

Thanks.

Before starting, first we need to understand what do we mean by the term FDI. FDI i.e., foreign direct investment is the investment by any foreign country in home country here India. This FDI can be fully owned by foreign player who wants to start business in India. Also, it can come under joint partnership with any private player of that country.

Now coming to the pros that why FDI in retail sector is good for country India. Firstly it enhances competition in the market which lessens the price of the goods, that is the consumer starts getting best quality at cheaper rate. Secondly, consumer gets lots of option to choose from that suits his/her budget. Thirdly, by bringing in foreign entity, it leads to the regional development of the country, thus leading to more employment opportunity for the people and also improving quality of life of the people.

Now, looking at cons, that why FDI is not good. As we can see our markets are already filled with Chinese products which are far cheaper than the Indian goods, and thus the price point at which these Chinese products are made has no match with the Indian goods. Thus, this has resulted in the shutting down of lots and lots of Indian companies due to failure. So, in my opinion, there should be FDI, but also there should be check in the products so that our own companies do not collapse due to foreign goods at cheaper rates.