FDI in Retail - The Good and Bad of it..

September 26, 2012

The UPA government’s move to open Foreign Direct Investment (FDI) in Retail has invoked strong reactions from political parties to businessmen to industrialists to the man on the street. While some have welcome the move many are opposing for various reasons. Trinamool Congress has already exited the UPA while BJP, left and other parties are strongly opposing the decision.

Why does FDI mean bad for a country like India ? Or, is it good for us ? Does opening up the economy for FDI in retail means end of jobs for millions of Indians ? Will it curtail competition and monopolize procurement of goods including commodities ? Will it lead to predatory pricing as has been alleged in western countries? Will it make way for cartelization of pricing mechanism ? Who ultimately will benefit from the opening of the floodgate for FDI in retail ?

Prime Minister Manmohan Singh termed these reform policies are essential to boost investor confidence domestically and globally. He says FDI will reverse the slowdown in India's economic growth. Singh rejected the argument that FDI in retail would hurt small traders; rather he said this will benefit our farmers and will create millions of good quality new jobs. Do you agree with him, or does he play the tune for a different audience ? What is in store for millions of small and medium traders and farmers in India?

You must be having an opinion on this vital issue… share with others what you think about the matter and suggest if we can have a better mechanism to infuse confidence in foreign investors..

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Readers' Comments (13)

Shashank Himmatramka18-10-2012:

FDI in India will be very very useful for company as it will increase the employment opportunity, our slow economy rate will be fastened not only this it will be extremely beneficial for the development of our country.
It will not hurt the small retailers from my point of view if FDI enters. People would not go for purchasing small items to big bazzar, food bazzar etc.
so from my point of view FDI is really very beneficial.

ajay14-10-2012:

This reform might have come late but it certainly would be able to push are economy which at current seems stationary. In order to boost are economy we need investment which would come via FDI. Fdi is not going to kill small shop owners or hawkers as it would be implemented in cities where population would be more than 10 lakh. It would not make farmers kill themselves as one-third import of goods and raw material is to be done from local market. Opposition is trying to mislead people only to bear down the government. No prime minister wants to harm his own country. Since today we all make hue and cry about inflation;it is beneficial for us to welcome this step.

Avinash Shetty03-10-2012:

Sonia's return from a US visit and PM's FDI announcement have a strange co-incidence.. The much acclaimed economic genius of Manmohan Singh does not seem to work. Is he working against his will or being dictated by someone ? What havoc FDI has created in western countries does not need any economic expert to explain - just google..

Ramyashri28-09-2012:

The last sentence is very touching and how true!... I think we will lose a lot and not gain by FDI in retail..

Sarika ,Nagavara30-09-2012:

To argue that the big malls will not drive away the small-time grocer any day soon is very petty and not worthy to put in to writing.

Shankaran, Hosur30-09-2012:

It is aping middle class mentality to believe that demarcation between the rich creamy layer and the middle class seems to have been erased with respect to acquiring more, even if it is not necessary. Trying to define the rich describe as one who goes on acquiring more even if it is not necessary?

Rajeev Sundaran01-10-2012:

Being rich is not a crime, But we are becoming greedy is the problem, isn't it ? Aping the US without thinking what is good for the country and our future generation is the worrying factor.

Vinod, Kalkere01-10-2012:

To welcome,defend and propogate the cause of FDI-In-Retail, even in the desguise of a debate itself, is a self-defeating aping unpatriotic state-of- mind of unworthy sons of our soil. Yes / No ?

Rati Hegde28-09-2012:

While everybody is busy debating the effect of Foreign Direct Investment (FDI) in our country, one point seems to have been lost in the quagmire of political squabbling. In my opinion, the most important effect that the FDI in retail marketing will have is in the import of the culture of Consumerism.

According to one report, the luxury market is growing at a rapid pace in India with a compounded annual growth of 25 per cent and is set to touch three times its current size at US$14.72 billion by 2015. The size of India's retail sector is currently estimated at around $450billion. It is estimated that the retail sector would continue to grow at 10-12 % per annum, while the country's economy is only projected to grow at 6%.

Translated into simple words this means that we, as a population, are embracing the culture of consumerism and materialism with no holds barred. What was earlier a ‘luxury’ has now become a ‘necessity’. The common man who used to just sigh at the neighbour’s new car, now goes
ahead and buys the latest model himself. The demarcation between the rich creamy layer and the middle class seems to have been erased slowly but surely, with respect to acquiring more, even if it is not necessary, thanks to the advent of these super stores. This is totally against our earlier culture of ‘use and reuse till it is really of no use’.

Is it any surprise then that the country has become the prime destination for top-notch global brands, while many high-end luxury brands have quickly set up their shops here?

But this culture of consumerism is not without its pitfalls. It is a well-known fact that more and more craving for material wealth brings about a loss in spiritual wealth. Our country has since time immemorial been following the path of spiritual well-being where material pleasures had no place of importance. The purpose of this was to ensure the mental and psychological well-being of the individual. When desires are sublimed, an individual experiences peace and happiness. Craving for material pleasures leads to work being done only with the purpose of earning more money. When any job is done without the love for that job, disappointment and disenchantment with the job sets in sooner or later. An inability to earn enough to sustain never-ending purchases also leads to suppression of desires. All this leads to a decline in our mental health and a perceived sense of inferiority. Unfulfilled desires are the most important cause of crime.

Another very important outcome of consumerism is the increased misuse of natural resources. It is not a secret that Americans, while making up only four percent of the world’s population, operate one third of its automobiles and U.S. citizens consume one quarter of the worlds global energy supply. 16 percent of the world’s population is consuming some 80 percent of its natural resources. Now visualize a situation where the world’s 2nd most populated country turns materialistic and indulges in insatiable consumerism. A point to be noted is that the government is hoping to increase employment by way of industrialization to produce these very goods that will be sold.

FDI in the retail sector seems to be a very catchy phrase for the politicians who are fighting for or against it. But the common man who thinks that big malls and shops will help him lead a better lifestyle or help him to get products at a cheaper rate, is chasing a rainbow that is ephemeral.

On another note, people who cry hoarse that the big malls will drive away the small-time grocer are just not realising that it will not happen any day soon. Because you see, the big shops do not sell any items on credit! Nor do they give things in the hands of a child, just because she came and said: “Uncle, uncle please give me 250gms of tea powder immediately. There are guests at home!”.

AJAY14-10-2012:

I take exception to your last remark. At present we have retail stores in metro cities i.e. big bazaar, vishal, reliance etc,but still in the morning if we run out of sugar or tea. We still go to the local street shop not big bazaar or any other retail chain.Albeit we may visit these Retail stores once in a week or once in a month but every time shopping is not possible for everyone from these shops.Moreover it would provide things at cheaper prices. If you really oppose foreign interfere in our country; stop using foreign brands. It is we who want multinational brands in our life to ascent our status.

Ram28-09-2012:

The hysteria about Walmart is beyond my comprehension. What difference it would make - if it is looting, we have Reliance, More etc are looting us royally. FDI would benefit us a lot and at the same time, it would harm some. The pricing policies of these multinationals are to be worried. Since the middleman is removed, the farmers will have to sell products to them for whatever prices they quote. The question is how far the government will be able to restrict the big retailers in terms of pricing, how well the govt can ensure that local sourcing of products is strictly followed, ensure the low quality products of foreign countries are not dumped in India, ensure local facilities such as logistics, supply chain, manufacturing units are set up, ensure jobs are created, ensure end-consumer benefits, - ALL IN A GIVEN TIME FRAME.

Vivek27-09-2012:

FDI in retail will not be good for a country like India where more than 70% of the population live in poverty. Mega retails chains like Wall-Mart have destroyed millions of jobs in US and other countries while creating relatively less jobs. People in Us itself are protesting against Wall-Mart and think of India, for a few Million Dollars of FDI can we sell the country's interest to such companies ? Take examples of Coke and Pepsi on how they killed Desi cola companies and monopolised the cola business, using all raw materials and labour of India and taking back money back to their country. I think the UPA government is dancing to the tune of USA.

Latha27-09-2012:

I welcome the move. It would make a lot of goods cheaper for us. Few clause in FDI ensures that locally available or locally made raw materials be used and this would generate employment. The small petty shops will not be affected.