Presentation on FDI Challenges In India

Presented By;C.P Praveen Kumar

Potential dangers associated with FDI.

Majority of FDI has come in the form of speculative investments in India's stock market, where few have seen phenomenal jumps in their stock prices, while stocks of some major Indian manufacturing companies have languished at very low valuations.

Greater instability in India's financial markets.

• History of foreign direct investment in India indicates that India does not need any foreign funds.

• In past history when companies invested Rs. 10 Lakh in one year they made profits of 50 Lakhs or 1 Crore.

• Now Question is why Indian Government is opening the Retail sector for foreign brands?

• After 50 Years what will happen in India because of Foreign Direct Policy in Retail?

• Big Malls and Big retail chains are good for any honest Country but in corrupt nations the benefits do not reach to the poor people.

• The benefits of such faulty FDI policy are enjoyed by Politicians, big business houses, rich people and their friends who introduce the laws for their citizens.

• India does not have good and excellent laws like USA and China.

• Foreign direct investment is good for the India but reality is that Indian laws are not ready for the FDI investment

One example –

• In USA if any American citizen hides his money in other country the FBI and IRS of USA see that that rich American Citizen goes to Jail.

• On the other hand Indian Government and laws do not even allow the Indian citizens to know the names of corrupt India who has kept the money in other countries.

• The Government knows the names but we Indians do not have right to know the names of Corrupt Rich Indians.

• Those corrupt Indians do not go to jail but they pay minimal fine and their money becomes legal.

Example of China –China – If you are involved in corruption. If you are found doing corruption in China, Chinese government gives the corrupt person a death punishment immediately.Like this laws are very strict.

What happens in India? we know it…

nothing happens they get the bail and never go to Jail again in their prime youth.

Before we talk about FDI one has to understand the complete structure and working of Indian Government and Indian system:

2G was happening and No Government agency tried to stop the 2G.

Major scams and crimes come out in public domain or knowledge in India because of Supreme Court of India and few people or NGO who dare to file Public Interest Litigation writs in High Courts or Supreme Court of India

Current Policy

• As per the current regulatory regime or say PolicyForeign Direct Investment (FDI) up to 51% is allowed with prior Government approval, in retail trade of ‘Single Brand’ products. Guidelines notified, vide Press Note 3 (2006 Series), require:

i. Products to be sold should be of a ‘Single Brand’ only.

ii. Products should be sold under the same brand internationally.

iii. ‘Single Brand’ product-retailing would cover only products which are branded during manufacturing.

• Meaning of Single Brand in connection with FDI?

Single Brand means a retail store with foreign investment which can sell only one brand.

The retail industry is divided into:

1. organized sectors – The sector which pays income taxes, sales tax etc or licensed retailers or hypermarkets and retail chains

2. unorganized sectors – this sector includes local Kirana Shops or hand cart vendors or pavement vendors

Unorganized sector needs the help of Government of India but problem is in last 64 Years India failed to give them facitlies.

Indian government does not have storage facilities to keep the extra food produced by farmers.

Current Indian Scenario• Currently in India majority Kirana shop business is family oriented.

• Current situation is, farmers do all the hard work and they enjoy the minimum or lowest share of the profits.

• Middle men that is Dalals or agents earn more than farmers.

• Farmers commits suicide as they can not give education or food to their kids.

• Ever heard any agent committed suicide for the above reasons.

• If farmer commits suicide no one pays attention but when rich air line say we are suffering losses immediately top politicians say that we will bailout.

• Currently if the FDI comes into India only and only rich people of India and politicians will benefit.

• No Indian Consumer will benefit.

• No Farmer will benefit.

• In India laws are made for the benefit of Rich and not for the benefit of poor.

• Here corruption has become a religion for many people.

• American farmers are not rich they are surviving on the subsidies given by the American government.

America government gave a subsidy of US $ 307 billion under the US Farm Bill 2008 to farmers it’s for 5 years.

As per studies in Europe also the subsidies given by Government to farm sectors are increasing.

President Barack Obama in his speeches he said to American citizens that start to purchase from the local stores.

• When FDI comes to India it may or may not eliminate middlemen but the profits of middle men will not go towards the farmers or consumers that profit goes to politicians and company owners.

• India has signed the GATT agreement thus Indian government has no right to tell the big retail companies from where to purchase.

• In study entitled “Wal-Mart and Poverty”, Pennsylvania State University in the United States has clearly brought out that those American states that had more Wal-Mart stores in 1987, had higher poverty rates by 1999 than the states where fewer stores were set up.

Wal – Mart USA turn over = US $ 400 Billion = Jobs created = employs 2.1 million people.

Now in India Indian retail sector too has a turnover of US $ 400 billion, but has 12 million shops and employs 44 million people.

So who is creating more Jobs ?• FDI will not create jobs FDI will fill the bank accounts of Politicians and

Rich Indians.

• Wal-Mart Stores, the world’s biggest multi-brand retail chain, had told the US Senate that it had lobbied for “discussions related to India’s Foreign Direct Investment (FDI).”Wal-Mart spent Rs. 52 Crore between 2007-2009 towards FDI in India or say getting entry into the India.

The company had also incurred Rs 6-crore in the first 3 months of 2010 for the same purpose.

It has disclosed “discussion related to India FDI (Foreign Direct Investment)” as one of the issues in its lobbying with the US lawmakers in the first two quarters of 2011, during which it spent nearly USD 4 million.

Hourly Salary of the Wal – Mart CEO Michael Duke's is $16,826.92.

Conclusion• We like it or not thus in our hands we got only one thing to see that

FDI does not come into India and if it comes into India, It comes with the good laws which will protect the Indian

Consumers and Farmers.

Good Law - Any Company can invest 100% in retail but it will be mandatory for that company to purchase 60% farm produce from Indian farmers or producers or manufactures.

Before allowing FDI Indian government needs to study in transparent manner not behind close doors the benefits of FDI.

• Big corporations will not be allowed to import any food items from other nations.

• Big Kirana shops must and compulsorily buy everything in India and sell in India or they can export it.But they should be banned to import from other nations.

Thank You….