Foreign direct investment in retail (FDI) in retail sector good for India?

“FDI can be defined as a cross border investment, where foreign assets are invested into the organizations of the domestic market excluding the investment in stock. It brings private funds from overseas into products or services. The domestic company in which foreign currency is invested is usually being controlled by the investing foreign company”

FDI in the Retail sector:
Retailing is one of the world‟s largest private industries. Liberalizations in FDI have caused a massive restructuring in retail industry. The benefit of FDI in retail industry superimposes its cost factors. Opening the retail industry to FDI will bring forth benefits in terms of advance employment, organized retail stores, availability of quality products at a better and cheaper price. It enables a countries product or service to enter into the global market.

On Dec 5, 2012, FDI in multi-brand retail got the approval of the Lok Sabha through voting, 218 voted in favors of the opposition motion, while 253 voted against it in the House where 471 members participated in the voting. The total strength of the House is 545. UPA government has hung the „Open‟ sign for foreign retailers. The cabinet said OK for 51% FDI in multi -brand retail sector & 100% FDI in single brand. "FDI in retail is the need of the nation. It will help the nation progress," as you know that 96% of India's retail sector is occupied by small traders and only 4% is organized. Even if we open retail sector 100% for FDI it will take another 20 to 30 years to get 50% organized level.  FDI will bring new technological advancements which not only help in better management of our firms but also reduce the wastage that's happening.  Because of FDI our government can create around 10 million jobs in our country within a span of 10 years which is a report prepared by Indian staffing Federation (ISF).  FDI in retail will create better infrastructure in terms of warehouses and retail shops. Also small traders can get benefits in terms of purchasing in bulk from these stores cheaply and can get economy of scale.

 Also small traders have to innovate in their style of working if they want to compete with bigger retail giants. This will give a better choice to customers and they can get benefit from it.  Customers will get more variety and will get shopping experience that is equivalent to western standards.  For farmers it will help in getting more price for their produce as they can directly shipped to retail stores bypassing middleman. This will in turn result in price reduction of products.

SATYA PAL PGDM 3rd Sem

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