Foreign Direct Investment (FDI) plays a major role in economic growth of India. FDI in India has let India to get somewhat financial stability, growth and development in several ways. From among 30 emergent markets, India is recognized as the 2nd most attractive retail destination throughout the world by A.T. Kearney. FDI in retail in India has been strongly opposed by BJP, Left parties, DMK and TMC but supported by Confederation of Indian Industry and the Federation of Indian Chambers of Commerce & Industry. Indian government decided to allow 51% FDI in multi-brand retail stores so giants like Carrefour, Walmart and Tesco can open their outlets in India. Now 100% (earlier 51%) FDI in single-brand retail stores are allowed so owners of brands such as Gucci, Adidas, LVMH, Hermes and Costa Coffee will have full possession of business in India. This decision has separated the social, political and trading classes of the country. These giants cannot sell anything directly to customers. As per government, Foreign Direct Investment in retail will benefit small retailers, farmers and the country. Here is provided the benefits of FDI in retail in India.
Benefits of FDI in Retail in India:
Increase Organized retail sector
51% FDI in multi-brand retail stores will enhance the organized retail market size. In the next 10 years, the market size will increase up to $260 billion. This will optimistically impact the employees, workers, producers, consumers and Government thus increases the overall economy of the nation. FDI in multi-brand retail stores also boosts the income of producers to $35 - $45 billion annually, provides 3 to 4 million direct jobs & 4 to 6 million indirect jobs opportunities.
Growth in units, output and employment
FDI will also increase the number of units, output and employment opportunities. Quality standards, technology and marketing will be brought by FDI so Indian retail chains will integrate with global supply chains and thereby increase employment and economic opportunities. For example, liberalization growth from 1993-1994 to 1998-1999 was 16%; from 1998-1999 to 2004-2005 was 12% while from 2004-2005 to 2008-2009 was 19% as well as registered SSIs generated employment increased 6% from 1979-1980 to 1989-1990; 4% from 1993-1994 to 2003-2004 and 19% from 2003-2004 to 2008-2009.
Help small and medium enterprises (SMEs)
Indian SMEs will get extra orders of USD 60 billion every year from huge retailers. Currently, 35% products are supplied from SMEs and after 10 years (by 2020) over $298 billion worth products will be supplied. FDI will also help SMEs to increase quality as well as to stay connected to the international markets. SMEs will also turn out to be cost-competitive. Through transparent & accountable monitoring of goods and supply chain management systems, government will be benefited by FDI. The government will get extra income of $25 to $30 billion through different types of taxes.
Customers will get more option in buying, with better competition. Customers will get all the things that they want to buy because more brands will be available. They will also get guarantee of quality with better transparency and simpler monitoring of adulteration, fake products & traceability. Consumers will get things at cheaper rates which will help to control inflation.
Farmers will be benefited
In India, farmers are getting only 30% of the consumer price. The entry of big retailers will raise the price realization for farmers by 10% to 30% as a result of direct sourcing. So the farmers can increase their yield and produce. Along with that the economies of scale will let them to provide goods at more reasonable price to customers. They will also get advantage of investment in supply chains and logistics through retailers and logistics companies.
Low income family
Organized retail will decrease 5% to 10% cost of the monthly consumption basket for a low income family. FDI integrates farmers and enterprises (small & medium) by bringing growth of a healthy supply chain. Fixed percent of foreign retailer’s investments will be spent on setting the back-end infrastructure.
Reduce handling and wastage
FDI in retail in India also helps to reduce 25% to 50% handling and wastage by consolidation and investments in technology (directly / via aggregators). Direct procurement at the farm let the farmers to get market feedback, technical knowledge and appropriate agricultural extension services. Thus there will be less wastage and rise farm income.
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