FDI in retail: Positive and Negative arguments and my opinion.

FDI in retail: Positive and Negative arguments and my opinion

The Indian government is thinking to open their door for foreign companies to invest in India. Here I have prepared some arguments for analysing this whole FDI issue.
v Positive arguments:

• Because of the investment of foreign companies, job opportunities in areas like marketing, agro-processing, packaging, transportation, etc. will be created. According to the Government, 10 million new jobs will be created.
• Because of FDI, the post of middlemen in India will be removed. Because of that, farmers will get a good price for their crops and their exploitation will stop (which is going on for the last 150 years).
• Foreign companies will invest around $100 million in India. Because of that, infrastructure facilities, refrigeration technology, transportation, etc. will be renovated. That will lead to low-inflation rate.
• According to the Indian Government’s conditions, foreign companies have to source a minimum of 30% of their goods from Indian micro and small industries. This will provide the scales to encourage domestic manufacturing, by creating a big effect for employment and to upgrade the technology.
• Countries like China, Indonesia, and Thailand already have 100% FDI in retail. After allowing FDI in retail, these countries have experienced tremendous growth in the agro processing industry, refrigeration technology and infrastructure.
• Foreign companies will also create a supply-chain in the India market. Because of that, food which perishes due to bad infrastructure facilities and refrigeration, will not be wasted.

v Negative arguments :

• FDI will lead to job losses. Small retailers and other small ‘Kirana store owners’ will suffer a large loss. Giant retailers and Supermarkets like Walmart, Carrefour, etc. will displace small retailers.
• Supermarkets will establish their monopoly in the Indian market. Because of supermarket’s fine tuning, they will get goods on low price and they will sell it on low price than small retailers, it will decrease the sell of small retailers.
• Jobs in the manufacturing sector will be lost because foreign giants will purchase their goods from the international market and not from domestic sources. This has been the experience of most countries which have allowed FDI in retail. Although, our country had made a condition that they must source a minimum of 30% of their goods from Indian micro and small industries, we can’t stop them from purchasing goods from international markets as per WTO law. So after coming to India, they can reduce this 30% by litigating at the WTO.

• My analysis :

At the first sight, we can see that benefits are more in numbers, but I think detriments are more serious.

• In India, we have 11 shops per 1000 people.
• India has 1.2 crore shops, which gives employment to about 4 crore people.

What about the problems which these 4 crore people will suffer?

As Indian government’s condition, companies will buy 30% from small industries of India, but what about the other 70%? Walmart and all these big giants import their majority goods from China. If we consider Walmart as a country then Walmart will be the one of the top-10 countries which is importing goods from china. These giants will dump goods from China. We can’t stop them for doing this.

Our PM is saying that allowing this major FDI will bring new technology to India and it will bring proper refrigeration technology so that wastage of food/grains can be stopped. But don’t you think India itself is capable for that? Why can’t our government build storages for refrigeration of food? Is it ok to open our country’s gates for foreign giants just because of this reason? Why we are not passing ‘Food Security Bill’, which is still in the parliament? If government is not capable of building a supply chain and infrastructure, we can open this field for Indian entrepreneurs.

Government is saying the cities which have a population of more than 1 million are open for these foreign companies. This is totally illogical. I bet, in the next 10 years they will open their stores in small cities, after opening their stores in metros first and so on.

Today, when the American President is requesting their citizens to buy goods from small retailers, we are inviting them to our country. These companies have ruined their own country and we are expecting that they will save our farmers and food. We are expecting that they will give new technology and will invest in India to help our poor fellas. This is bull. Argument that only foreign companies can create the supply chain for farm produce is totally illogical. International retail players have no role in building roads or generating power. They are only required to create storage facilities and cold chains. This could be done by government of India also. I think there is no need to allow 51% FDI in India at this point. No need to go so fast. We should discuss this point in parliament (peacefully!).

Words for Government:- Please don’t waste 21 days of precious time on adjourning the parliament on the FDI issue. There are many bills which need to be passed immediatelylike the Jan Lokpal Bill and the Food Security Bill.