Since the passing of the bill for Foreign Direct Investment in retail sector recently, a lot of discussions and hullabaloo has been going on in every circle. Starting from economists to the political parties in the Indian Parliament, everyone is discussing the effectiveness of such a proposal. Talks of FDI in India wouldn’t be a new concept, as it had been tried by the government to be introduced in the Indian market, most recently in the beginning of 2012. However, in the month of September in 2012, the bill was passed to allow FDI in retail sector to the extent of 51% in their enterprises in the Indian market.
Indian scenario before FDI:
Indian retailing market has looked bright in the last few years, probably almost a decade of their business with bustling shopping centres, huge complex buildings, multi storey malls and low cost products, for the highly aware consumers. Retail stores are offering products along with food and entertainment under the same roof. Customers, on their part, are increasingly going for products with a better buying capacity in recent years. Indian giants in retailing business like Godrej, Biyani, Raheja, Reliance, Tata, Goenka, etc. are operational in various segments like Health & Beauty Products, Construction Materials, Books, Low Discount Stores, Electronics, Groceries, Fast Foods, and few others.
Local government veto:
As per the new act, the government has given the veto in the hands of individual states to decide if they want to let foreign retail chains to open their stores or not. Therefore, partly, the ball remains in the court of the state governments. And hence, keeping up this veto power of theirs, some states like Uttar Pradesh, West Bengal, Punjab, etc. have pointed out loud that they are not interested for FDI. They have their own reasons, primarily of which is the assumed loss of business for the small sector of unorganised stores in the country.
Benefits accruing from FDI:
On its part, the government is relentlessly trying out different arguments to support its new act favouring Foreign Direct Investments. It favours the large-scale investments because the retail industry will let consumers into various global options regarding buying of products and also will allow them to avail daily use items at lower and competitive costs.
Also favoured is the fact that employment opportunities will increase significantly. According to the Indian Staffing Federation, which is the apex body on flexi staffing industry in India, there would be about 4 million direct new jobs due to the foreign retail investments while an extra 5-6 million jobs would be indirect, in the coming 10 years. This is a momentous step for solving India’s unemployment scenario, which will influence the unskilled and less educated people more than anyone else.
Furthermore, benefited would be the logistic and supply chain companies, as they would get the opportunity to grow because of their link between the producers, farmers and small manufacturers and the retail companies. Closer integration of the small time producers with the organised retail chains will help the former to access latest technologies, processes and systems, which would add to their overall profits.
Its time better for wait and watch:
It has been with lots of ifs and buts, that the Government of India finally was able to get the bill for FDI passed in parliament. Surely, it has been well researched. Moreover, broader perspective of the country and its people has been kept in mind, before allowing such a proposal. There might be some downsides to it while some sections of society are raising their voices against it. But on the whole, it will take some time to settle down the wave of assumptions and predictions, while the way the foreign investment driven retail industry takes, would be seen.
- FDI In India – Say YES or NO