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. Eg. An American company taking major stake in a company in India. Their ROI is based on the performance of the project. In the past decades, FDI was concerned only with highly industrialized countries. US was the worlds largest recipient of FDI during 2006 with an investment of 184 million from OECD (Organization for Economic Co-operation and Development) countries. France, Greece, Iceland, Poland, Slovak Republic, Switzerland and Turkey also have a positive record in FDI investments. Now, during the course of time, FDI has become a vital part in every country more particularly with the developing countries. This is because of the following reasons: Availability of cheap labor. Uninterrupted availability of raw material. Less production cost compared with other developed countries. Quick and easy market penetration.

FDI in the Retail sector:

Retailing is one of the worlds largest private industry. 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 countrys product or service to enter into the global market.
Cheaper production facilities:

FDI will ensure better operations in production cycle and distribution. Due to economies of operation, production facilities will be available at a cheaper rate thereby resulting in availability of variety products to the ultimate consumers at a reasonable and lesser price.
Availability of new technology:

Higher wages will be paid by the international companies. FDI has created an encouraging effect in both traditional as well as modern formats of retail business in China. China . Metro from Germany. the Government increased the FDI cap to 49 percent. the physical capital invested in the domestic company is not easily liquidated. China allowed FDI only in a few selected cities and also restricted the ownership by 26 percent. Tesco from England. There would be an increase in the market growth and expansion. Greater managerial talent inflow from other countries is made possible. and reached $300 billion in 1999. It is a long term investment because unlike equity capital. leads them towards acquiring the market entry through franchises. and has used it deftly to increase its exports. Retail giants who are at their wings. Domestic consumers will benefit getting great variety and quality products at all price points. Initially during 1992. These restrictions on the global retailers regarding the inflow of Foreign Direct Investment. 40 retailers now have a secured approval in the Chinese market. which would ultimately ensure better and lower prices thus benefiting people in all sections of the society. Carrefour from France. Urban consumers will be exposed to international lifestyles.FDI enables transfer of skills and technology from overseas and develops the infrastructure of the domestic country. It started off with an FDI investment of $19 billion in 1990. Later on as the exports of the country progressively increased. countries which offer promising market potentialities for retail growth offers substantial growth in the franchising sector as well. Thus. It will increase retail employment and suppress untrained manpower and lack of experience. Lead driver for the countrys economic growth: FDI would create a competition among the global investors. by 2002. seeking entry into foreign market look for other available alternatives. FDI Success story China: China is the worlds largest FDI recipient. and Wal-Mart from US have entered the Chinese retail sector and has uplifted the countrys economy. FDI opens new doors for Franchising: Restrictions on FDI are considered as trade barriers as they deny direct market access to foreign firms. Long term cash liquidity: FDI will provide necessary capital for setting up organized retail chain stores. It will ensure better managerial techniques and success.

142. More than 28 million people and approximately 10 percent of Chinas total population are working in companies funded with FDI. retail sector is likely to make massive strides. the number had moved up to 40 million kirana stores and by the 3rd of December. these 3.5% of all employable Indians) are employed by kirana shops? Does any politician actually expect any educated Indian voter to believe this nonesense? Since West Bengal's Chief Minister and Trinamool Congress party chief Mamta Bannerjee.81 million kirana shops.2 crore (12 million) kirana shops. and catalyze the growth of the ountrys economy. This is not hard to believe.348 million) should have 3.011 million per year or Rs. then both the Left parties. If there is a kirana shop for every 24 Indians.595 registered dealers as per the 2010-11 Administrative Report of the West Bengal Directorate of Commercial Taxes. If there are as many as 3. as well as Trinamool Congress.595 registered dealers in the state.81 million kirana shops. are the most vocal critics of FDI. Obviously. of which Rs. Since the state has an estimated consumption of Rs. West Bengal (population 91. It is much more likely that there are only 180.257 per year or just Rs.continues to hit new records. need to answer why there are only 217.81 million kirana shops should be doing an average business of only Rs.542 billion (98%) is sold by the unorganized sector .3. FDI in Retail: Why all the political opposition and rhetoric? Most of the politicians who appeared on various TV channels on 24th November the day that the union cabinet took a decision to allow 51% FDI in mulibrand retail and 100% in single brand retail . does it mean that there is one kirana shop for every 24 Indians? And if an average kirana shop employs four people. as well as the lest parties who ruled the state for the last 34 years.8250 per day. grocery & FMCG products (products sold at kirana stores). this does not make any sense. considering that West Bengal had 217. If one was to believe this incredible claim that there are 50 million kirana stores.390 per day.said that India had 1. let me take the state of West Bengal as an example.553 billion in food. it had shot up to 50 million kiranas. and the average business per kirana shop is Rs. . With the advent of FDI. it is the life blood of economy.000 kirana stores in West Bengal (1 shop for every 507 persons ). By the next week. As far as developing nations are concerned. does it mean that 200 million of the 635 million Indians of employable age (31.

fertilizer. iron & steel and other items not sold through retail trade).So how many kirana shop owners will get out of business if Walmart. Does the kirana provide them all of this? Long Term Stock Picks So is Mamta Bannerjee opposing FDI only for the purpose of saving the livelihoood of 1400 small traders (many of them non-Bengali ). If the VAT collection should have been Rs. The state's sales tax (VAT) revenues in 2010-11 were only about Rs. they will contribute Rs.18. cement. This proves that there is tremendous tax revenue leakage in the state.800 Bengalis? Is this what the hoo haa is all about? Is this why the Indian parliament has got disrupted for nine days? West Bengal's retail sector is estimated to have annual sales of Rs. no one will lose jobs. At an average 11% VAT rate.1. who is answerable for the balance Rs. Durgapur. zero VAT is being collected from the 1400 kirana shops that they might displace .000 and above (as opposed to one million and above). chemicals. aluminium . Gopalpur.5% increase in West Bengal's VAT collections . By any measure. There will be absolutely no change in employment as about 7800 people will get employed by the "foreign " hypermarkets.4% of the preVAT retail sales of Rs. That's a 2. thus making them far more marketable. or only 4. "foreign " hypermarkets can only be set up in Kolkata.5%).1680 billion.831 billion in VAT. the 7800 employees of the "foreign " hypermarkets will have benefits such as PF.100 billion ? This is not a small amount of money! The 20 "foreign" hypermarkets in Kolkata are expected to do sales of Rs. Another 10 hypermarkets can be opened in these cities and West Bengal's VAT collections will go up by almost 4% . On the contrary. These 20 hypermarkets cannot displace more than 1400 kirana stores (@ 70 kirana stores per hypermarket ). They will have far better training in personality development and selling skills.1754 billion (at an average per capita retail expenditure of Rs. the 1400 kirana shops are not employing more than 7800 people.74 billion (excluding fuel & LPG. Siliguri. period. Panihati and Bardhaman also. Greater Kolkata can only have a maximum of 20 more hypermarkets. Carrefour.5%. In all probability . Certainly. Tesco and other foreign retailers are allowed to set up hypermarkets in West Bengal? Since Kolkata is the only city in West Bengal with a population of more than one million. at the cost of a better life for 7. So.1600 per month). whereas the most common VAT rate was 12.174 billion (at an assumed average VAT rate of 11%. ESI and insurance.48 billion per year. since some items will have different rates than 12. engineering goods. If Mamta Bannerjee realizes the benefits of this and actually supports the UPA government in allowing 51% FDI in cities with a population of 300. then foreign retailers can open hypermarkets in Asansol.