Published by MBA Skool Team, Last Updated: February 19, 2016
6 people are having a discussion on the topic (Rohan, Manoj, Sweta, Sonia, Rohit, Puja)
Group Discussion Starts
Rohan: Hello, everyone. So today our topic of discussion is “FDI in retail Sector is a boon or Curse”. As per my view point, India being a developing country, FDI in retail sector must be permitted only under some conditions and control. If percentage of FDI in retail Sector is increased it would not be good for the economy of our country. We need to control and manage the economy of our country very carefully. The control of foreign investors in our country will increase if FDI in retail sector is allowed without any restrictions.
Sweta: Yes, I agree with Rohan. We need to have control over our economy to develop it properly. The FDI in retail sector in multi-brand is restricted to 51% and if this is increased to 100%, the government will lose control over this sector and the sector then would become privatized and dominant.
Puja: FDI in retail sector will help in technology transfer which will help small and large enterprises of or country to produce goods effectively and efficiently. It will also help in infrastructure development of rural and sub-urban areas of our country. FDI in retail sector will lead to increase in job opportunities at a faster pace. Hence to make our Country to develop quickly FDI in retail sector must be allowed freely to help the country to develop.
Rohan: However FDI will also lead to job losses. All small retailers’ shops and other ‘Kirana Store owners’ will suffer huge losses on coming of a big retailers market like Walmart, carefree, etc. These will displace small retailer’s shops and big retailers would establish monopolistic power in the market. It will lead to lose of livelihood of millions of people who are dependent on their own local shop and jobs. All profits earned by such retail shops will be taken up by foreign investors. Hence I believe FDI in retail sector will have negative impact on our economy.
Manoj: FDI in retail sector is not good for our country if there is no proper rules and regulation framed by our government. Yes, to some extent it is good and must for our country. Excess of FDI must not be permitted as it will reflect weakening and falling Indian trading.
Sonia: As per my view point unrestricted FDI in retail sector is a curse for our Country. As to invite foreign retailers like Walmart the government will need to invest thousands of crore Rupees and if the foreign company fails, all of the government money would go to ashes. So as per my opinion instead of this investment should be made in private branded firms if they really consider it a business as private firms can handle business in a better way and government always fails.
Rohit: Looking at the advantages of the FDI in retail sector, I believe to some extent it good for the economy of our Country. The FDI is an important contributor towards higher GDP growth, it has also contributed towards economic growth of our country by way of technology transfer, generating employment opportunities, growth of international trade. Hence help of FDI to some extent is necessary for our country to develop properly.
Rohan: Yes, I agree with Rohit that to some extent it is good and must for our country. However on considering the disadvantages of FDI, it should be under control and restrained to some extent. FDI in retail sector will lead to shut down of the traditional kirana stores, economically backward class of people will suffer from price rise as it may cause increase in inflation, and also our country will become slave on entry of foreign players.
Sweta: On considering all pros and cons of FDI in India, I believe FDI should be allowed only partially not 100%. Government should have complete control over foreign companies and it should have the power to immediately cancel the license whenever it feels that foreign company is causing harm or useless for our economy.
Puja: Yes I agree with you all but FDI should not be ignored completely considering the major advantages it offer or provides. I would like to prove my point by giving some practical data from country and across the world. In 90’s FDI was not considered good for our country but later on in after 91 when FDI was allowed in India , our GDP grew from 1.7 % to around 5% in 95. The inflation had also come down from 17% to 7% in 95. And in context of world, Malaysia and Singapore are the examples of two country which accepted FDI policy heartedly and we all are aware of development in this two countries. However considering the demerits of FDI like risk of creation of monopoly in market if a particular investor becomes major player. Hence to conclude I want to say that FDI is necessary for our country and to overcome its demerits Government need to apply some strict rules.
Manoj: The other advantages of FDI in retail sector I would like to add is the benefits that the farmers of our country will get by supplying its products directly to big retailers. This would enable them to get better prices for their crop as the supply will reduce and also reduce wastage of agricultural produce. This would improve the productivity and income of the farmers. This will also benefit government in terms of increase tax revenue. Therefore FDI in retail sector would help to reduce the price of food and the investment in cold storage infrastructure would reduce wastage of agricultural produce.
Sonia: FDI in retail sector will increase competition in retail industry which in turn will lead to increase productivity. At present many Indians spend money to purchase goods abroad this policy would make them to spend same money on the same goods in India. The increase in productivity will lead to reduction in cost. This policy would improve the quality standards and cost-competiveness of the Indian producers.
Puja: The government should frame the policy in such a manner that FDI in retail sector leads to economic and overall development of our economy. The outcome of this policy should be positive. The policy should be tailored to recover the losses it made in terms of labour dislocation. The rules can be framed to with regard to percentage of investment that should be made towards infrastructure development, the minimum percentage of produce and raw materials that should be procured from small farms, small and medium enterprises, etc. The provision for reservation of certain percentage of job for youth population can be made. Hence the policy should be framed very careful to utilize its benefits to full possible extent and also contain provisions to benefit the affected section.
Hence in the light of above discussion, we all conclude that FDI in retail sector is good for our economy if it gets implemented in a healthy way.This policy would help in the integration of Indian retail market to that of global market besides increasing employment opportunities and providing better pay jobs which small and unorganized retail sector failed to the people. Looking at the advantages of FDI in retail sector, we must not only permit it but also encourage it. FDI in retail sector ha fruitful outcomes which are as follows supply chain improvement, Investment in technology, Manpower and skill development, greater sourcing from India, etc. The benefits of healthy FDI policy outweigh its shortcomings.
Facts Related to The Topic
1 100% FDI is allowed in Wholesale Trading (Cash and Carry) which deal with small retailers and not directly with consumers. For example : Metro AG which is the First foreign player to enter India through this route
2 FDI in multi-brands is permitted subject to certain conditions like 30% of sourcing has to be done from small enterprises, entry must be approved by state, and others with regard to population, infrastructure, and investment amount.
3 Prime Narendra Modi now is in support of FDI in multi-brand to take of budget deficit and maintain positive relationship with foreign countries.
4 FDI in multi brand retail Trading (MBRT) has been approved by state government in their states which are Andhra Pradesh , Jammu & Kashmir , Rajasthan , others.
5 The state government has been given right to approve or disapprove as Trade and commerce within state is a state subject.
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