FDI AConvinient Solution

7/31/2019 FDI AConvinient Solution

1/14

FDI IN RETAIL:Real Stimulus or Convenient Solution


2/14

INTRODUCTION Foreign Direct Investment is the most preferred

form of investment since it is considered to be the

most beneficial form of foreign investment for the

economy as a whole.

It is targeted at a specific enterprise, with the aim

of increasing its productivity or changing its

management control.


3/14

FDI in multi-brand retail can

Attract huge investments in the retail sector

Create employment opportunities in agro-

processing, logistics management and front-end

retail.

Help farmers secure remunerative prices by

eliminating exploitative middlemen.

Bring in investments in back-end , considerably

reduce post-harvest losses


4/14

FDI would also

Lead to large-scale job losses.

Invariably displace small retailers.

Global retail giants would resort to predatory pricing.


5/14

Issues Plaguing the Economy

Euro Crisis fears

Current account deficit of 4%

Impending fears of a double digit High Inflation

Corruption in governance

Lack of political will

Globally-acclaimed India growth story seems to beheading for an unhappy ending .


6/14

1991 Reforms

Balance-of-payments crisis

Main objective then of reforms was to eliminate the

administrative shackles of the license raj

The main sectors where reforms took place after 1991 were

the external sector, industry and the financial sector.

The major sector left out was the agriculture sector

Agriculture sector categorized as a state subject


7/14

Agriculture being a state subject ,overlooked by majority

states.

In case of FDI in retail, new storage facilities would be

developed thus reducing wastages.

However, it is not clear why the domestic players in multi-

brand retail have not developed these facilities - if profitable -

over the last decade or so, and why foreign investors would

suddenly jump into this high-cost activity.

.

BARRIERS IN REFORMS


8/14

The ability to buy food grain for stocking would also be stymied

by state APMC Acts - still applicable in most states.

There is the additional problem of a ban on inter-state

movement of food grain.

Bottom line:

It is necessary to remove administrative controls on the

agriculture sector

As in the other sectors, this will create the economic conditionswhereby issues like FDI will find less political resistance.


9/14

ARGUMENTSArgument 1: FDI in multi-brand retail will reduce inflation.

FDI in multi-brand retail will eliminate the 40% wastage

of food grain that currently occurs

After almost a decade of domestic organized retail and

huge tax breaks for investment in warehouse facilities,

such facilities have failed to materialize.

Lack of this investment is more due to the controlled

nature of agricultural production than lack of foreign

investors


10/14

Argument 2: FDI in multi-brand retail will give more

remunerative prices to farmers

the APMC Acts require the sale and purchase of

farm produce in government-designated market

In this rather unfair non-competitive market, there is

nothing to ensure that farmers will get market-

determined prices.

The monopoly power of wholesale buyers having

strong political support.


11/14

Argument 3: FDI in multi-brand retail will lead to loss of jobs in

kirana stores

Firstly, organized retail accounts for only 5% of total retail

sales

the shift to organized retail normally occurs in response to

increase in labour costs.

Today, even in large metros, the kirana stores provide

personalized services which no organized retail can match.

It is an insult to the intelligence of consumers to assume

that they will suddenly undertake costly and time-consumingretail purchases simply because foreign investors are here.


12/14

REALITY CHECK

Excessive focus on FDI in multi-brand retail would seem to

indicate that it is the principal instrument of reform, which it

certainly isn't.

Income levels in India cannot support a wide spread of

organised retail

The political opposition that would follow (which it has!)

would then give greater ammunition to opponents of the

reform process.


13/14

Arguments in favor of FDI lie in the field of

technology and competition.

In other words, FDI allows access to technology

not easily available.

Much of this technology spread comes viaspillover benefits to local firms.

Even more important, FDI provides strong

competition to local companies.


14/14

THANK YOU

Presented By

-Ashish

-Devina

-K Soumya

-Prerana

-Swetha

-Shravan

Documents

FDI AConvinient Solution