November 29, 2011

FDI in Retail Sector: Good or Bad?

Foreign Direct Investment (FDI) in retail sector can be a good concept in Indian context. It is true that the same has got both good and bad effects, but a compromise with the bad points can result good.

India is the second fastest growing major economy in the world, with a GDP growth rate of 8.9% at the end of the first quarter of 2006-2007. But, India's huge population results in a per capita income of $3,300 at PPP and $714 at nominal. It means we need to do something big for the overcrowding population first. FDI is providing a large opportunity of employment to a huge mass of India. Accordingly, this is why we can go for FDI.

Presence of FDI for multiple retail products will generate competition. And as per economic principles competition in the market benefits the customer.  And customer enjoys sovereignty. The competition not only provides a better nominal price to the customer, rather it also brings enhancement in quality and other factors added to a product. Hence, FDI can be a good concept as the customers can reap better.

The concept of investment by foreign investors will bring an international harmony among the countries. The interdependency between the countries will also develop diplomatic relationship among the countries which is a good symbol towards establishment of peace and international brotherhood.

The said concept will bring a change in the lifestyle and way of trading. So, what is wrong with adopting a perfect way of trading instead of indulging in the traditional processes?

The next benefit is regarding the ‘chain system’.  In the traditional business policy, a consumer receives goods in an highly increased price as compared to its cost of production, because the middle men in the chain of bringing that product up to him demand a high rate of share merely for carrying and forwarding, which is absolutely useless, if you have an opportunity to bring it directly to the customer. FDI is the answer to this question, hence it can be welcome.

A hard truth for our country is that any innovative comes to the country the first thing the political leaders do is – they protest. So there is nothing new or wrong in that. Again, there are also loopholes in the traditional business policies. The ‘dalals’ in the suburbs of the country in many occasion literally harass the original producer, the farmers.

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