FDI is a debt inflow or liability foreign exchange because the profits or returns it generates will have to be repatriated. Will FDI in retail, single brand, banking or insurance enhance our foreign exchange earning capacity? Do they bring technology to the economy?
There is so much of talk going around in all circles regarding FDI. Politicians, for obvious reasons, speak a language of their own, driven by ulterior motives. Most of the times, they are not even knowledgeable to understand the long term consequences of the populist measures and policies they adopt. It would be in the fitness of things if the whole thing is explained in simple and elementary terms.
FDI is Foreign Direct Investment. Direct Investment is of two types: Domestic Direct Investment (DDI) and Foreign Direct Investment. DDI is done in domestic currency (rupee in India) and FDI brings in foreign exchange.
Now, the question arises why FDI. The need for FDI is justified only in two situations – (1) when DDI is inadequate or (2) when foreign exchange is required. On the DDI front, the position as obtained in our country is fairly sound. Banks are flush with funds; the domestic savings rate is one of the highest in the world; market capitalisation, constantly on the rise, makes available investible funds; and DFIs have huge unutilised funds waiting to be deployed in feasible projects. It is gung-ho all around. Therefore, domestically speaking, there is no shortfall of funds for investment.
As for foreign exchange, it is either an asset or liability, depending upon its repatriability. If it is repatriable (i.e., to be returned or repaid in the form of foreign exchange itself), it is a liability. If not, it is an asset. This way, only three sources of foreign exchange – (1) exports of goods and services, (2) NRO accounts in banks and (3) Foreign Aid — qualify as assets. The rest are liabilities like FCNR & NRE deposits of NRIs; FDIs; FIIs and foreign exchange loans from foreign governments and agencies. For convenience, let’s call one asset foreign exchange and the other liability foreign exchange. Some people choose to call them non-debt and debt inflows respectively.
FDI is a debt inflow or liability foreign exchange. Why? Simple, because the profits or returns it generates will have to be repatriated in foreign exchange. Secondly, all the men, material and merchandise imported in the years to come will have to be paid in foreign exchange. Finally, at the time of winding up/selling off, the proceeds will flow out of the country in foreign exchange. And, it is noteworthy here, all this will end up in the outflow of foreign exchange, many times more than the initial inflow. So, every FDI is a clear-cut case of liability foreign exchange.
All the above is about the supply-side of foreign exchange. Now, let’s examine the demand side. The question is – why is foreign exchange needed at all? Based on long-term benefits to the economy, the demand for it can be classified into consumption and construction. Consumption demand is the demand for foreign exchange to import consumption items like gold, oil, tourism and FMCG — all those areas where funds are just blown. On the contrary, ‘construction’ stands for all those areas which promote exports, substitute imports, strengthen the infrastructure of the country and make it more competitive globally.
So, we have the demand for foreign exchange classified into two and its supply also into two. This can be neatly depicted graphically in a Foreign Exchange Desirability Matrix.
The table makes it amply clear that Asset Foreign Exchange casts no negative impact on the economy, regardless of whether it is used for construction or consumption purposes. However, liability foreign exchange needs to be restricted to ‘construction’ purposes, as the consequences of putting it to consumption needs are grave.
Now, why should we go in for liability foreign exchange, like FDI, at all, if it is not for any export promotion, import substitution or any capacity construction purpose? Well, if we indulge in the luxury of blowing liability foreign exchange on non-developmental consumption items, we’ll end up worsening our foreign exchange debt position (we are already in the doldrums with mounting pressure on our capital account of balance of payments, owing to increasing deficits in our balance of trade account year by year).
In fact, until we have any project/avenue in hand which will, in times to come, yield foreign exchange more than its repayment schedule warrants, the inflow of liability foreign exchange should be outrightly avoided.
The service sector is comprised of marketing (wholesale and retail), banking, insurance, civil aviation, education, tourism, medical & health, telecommunication and software, etc. All these fall either in the construction category like education, medical and health, telecommunication and Software or consumption like marketing, insurance, banking and tourism.
Incidentally, in marketing, there is nothing like technology. It’s all about consumption, where the sole elements are Brand and Supply Chain Management; again nothing basic or infrastructural or technology enhancing. Further, the question arises — will FDI in sectors like retail, single brand, banking or insurance enhance our foreign exchange earning capacity? A big NO. Do they bring technology to the economy? Again, a big NO. Hence, FDI in ‘consumption’ sectors deserves to be outrightly rejected. If it is not, it would simply mean the government is not working in the interest of the economy, but is unscrupulously catering to vested interests.
Importing technology
They say, had FDI not come in, our automobile, telecommunication, aviation, banking and many other industries would not have reached global standards. I would say that instead of allowing foreign capital to set up shop here, the country should have used foreign exchange to just import technology, if needed; and set up the same industries with domestic capital. No liability foreign exchange; no profits going out of the country; domestic consumers getting the same products; and the fruits of exports being reaped by domestic firms and not foreign — all the way a win-win situation for us.
But, being blind to the undercurrents, we instead allowed foreign firms to set up bases here, milk the domestic market and carry back huge profits. The foreign exchange that flowed in by way of FDI was blown in consumption areas like gold and oil.
In the ensuing debate, lots of comparisons are being made with the U.S., the U.K., China and Japan. The question is: are we at the same level of development to indulge in the luxury of comparing ourselves with them?
With no apparent gain for the economy in the long-run on the table, there cannot be a more foolish act for any country than inviting foreigners to set up shop on its own territory. First, it is a clear signal of allowing them to reap profits here and take them back. Second, it is telling the world, loud and clear, that we, by ourselves, are incompetent and inefficient. If a foreign entity pushes for entry in the economy, it will still make sense. It wants to expand its market and reap profits. But what is the compulsion for a host country to insist that a foreign entity come and set up shop here?
Historically, no economy has ever developed on foreign capital. In the industrial revolutions of various nations, the crucial factors that have been instrumental are (1) indigenous mobilisation of resources, (2) domestic technological development and application (3) strategic management and (4) support from the governments, mostly to ward off external pressures. Cases of foreign investment are few and far between.
Let us keep in mind that foreign exchange is both a boon and bane, to determine which each of its inflow needs to be individually assessed for its costs and benefits, before allowing it.
(Professor Anupam Bhargava, a PhD in Management, is a former AGM of SBI. He is now Adviser and Research Guide at Rajasthan Vidyapeeth (Deemed University), Udaipur. Email: anupambhargava58@gmail.com)
Keywords: FDI issue
Dear friends/Reader,
I read some of comments of readers and thought of highlighting one fact about the articles. Author never said FDI as a whole bad but said when its needed. In case of Retail certainly NOT needed
Because:
1) Its does not bring any technology to country
2) Its give monopoly to some company..read the interview of "Duncan Green"
3) We don't have shortage of DDI...lots of bank and big business house are sitting of the huge cash, not investing because lots of hurdle, slow process from Govt and weird interest of political parties they need to full fill.
Some comments on this piece astound me. The propaganda of FDI in retail creating jobs, wealth and saving the farmer has to stop. Can we still not see that we do not have effective regulatory bodies in place, or an effective bureaucracy, or a government that wants the country to benefit.
The answer to effective food distribution and storage mechanisms is not FDI. It is good policy making, effective management and a willingness to implement. All three are lacking today and FDI will not make it better. There are far too many assumptions being made.
Also, access to the Indian market has to be earned and must be treated as a rare natural resource. Foreign companies must be willing to invest heavily in Indian products and display an inclination to depart from their operating norms outside of India. Unlike Ikea, who refuse to to employ indian craftsmen or sell handicrafts.
This is a flawed argument - just importing technology does not work - who is going to invest in rolling it out. And why is going to give you the technology - would Qualcomm give someone their technology to setup a telecom network for cheap?
The license fees paid to get the technology would be the same or more than the profits earned by these companies. Plus with FDI you will get a large amount of forex now.
This article shows a well focused analysis in simple way. Aurthur gives a economics point of view with reality. The characterization is very good. We are inward economy so can not be compare with China and USA as we are always doing.
I say thanks to writer for writing this article as well as The Hindu team.
The author presents a text book style of analysis. Unfortunately text
book he read is pretty old. Wake up sir.I am not saying the FDI is
good but if you want to write a critique at least do a reality check
and consult a modern economics text book. Analysis is full of so many
loop holes that it does not even merit comments. Sample this. All men
material and merchandise are paid in foreign exchange. are you
kidding? All men will be paid in dollars ? All machinery will be
imported ? Hopeless analysis Sir. At least I expect The Hindu to
select its authors carefully.
a good analysis.
our thought process never changes.the age old thought that anything coming from abroad is better is fool hardy.cannot the billions find a creative way to market the products needed for the same billions.
there was a time when we imported wheat,maida and milk powder to name a few. thanks to the green and white revolutions we are self sufficient.cannot our masses think of creative ways.why invest on IITIANs and IIMIANs. let us use our brains in the right way instead of flouting rules or siphoning money through scams.
I was dithering in my judgement and decision as to rights and wrongs.
All in spite of being student of economics. Knowing the type of guys
GOM, It looks we suffer from desh-dhrohis. They may have long pockets.
They must be out to help them selves.
Do you have any proof that it will benefit farmers? Do you know that in US there no such thing called small farmers? Do you know, in US, people are preferring to buy food items from non-Wal-Mart stores to avoid health issues? Do you know that US financial capital, Newyork, does not allow walmart to open its outlet? do you know reliance fresh and other outlets did not help farmers but actually closed lots of small shops nearby? On top everything, do you know reliance fresh removes one truck load of perished vegetables EVERYDAY? where is the argument that big retailers will reduce wastage? Do you know why China is richer than US? Do you know China will become supper rich after Indian FDI is implemented?
A highly logical article. Article has 2 assumption- a man will not
keep working at the same high quality and rate, without proper
competition. Secondly, greed of the nation increases at a higher rate
than its productive output.
Import substitution practices and the license raj era show the failure
of domestication.
Importing of technology - many a times it is not possible without
making the owner/proponent of technology, a partner in profit as well.
A parallel can be drawn to IPR - in the end profit will flow out, its
not a one time payment.
FDI advantages - competition, technology, forex, new products in the
market, experience in world market, similar opportunity for local
companies in the foreign land (better foreign relations)
With globalisation, internet access, mixing of cultures; the wants,
desires and needs of a nation are becoming global, it is better to
allow someone with expertise to function in our country, learn their
tricks and reduce dependence on them than stay away.
After reading the article I am convinced that the author has little or
no knowledge about FDI or FII or investment procedures for that matter
of fact.. You say that FDI is a liabilty in certain sense.. please
Enlighten me on the fact that when Foreign companies set base in India
through FDI (they invest in infrastructure development; which can be
used by other industries also such as roads or telecommunications etc)
; They create jobs; train labour for specialized tasks; help upgrade
the lives of people involved); make industries more competent by
getting more professionalism; we have better quality of products in
the market for the consumers..Maybe you have some kind of Prejudice
against FDI in retail but for that you are painting the entire model
of FDI/FII as an evil Monolith..Please remember..just like these
Foreigners that you are talking about (the TATAS, BIRLAS, MAHINDRAS,
BHARTI AIRTEL etc) are also foreigners outside and nobody raises any
voice on their takeovers outside..
I am not convinced to treat FDI as a liability so as to prohibit FDI. If there is a liability it is to be paid back and nothing wrong with it. We require funds both domestically and internationally.
Technology can be a USP and not necessary off the shelf product. So, if an entrapreneur has a better technology there is no doubt we should welcome him/ her.
There some pre-conditions due to which I think FDI in retail should not be done now:
1. Dismantle APMC, let agri produce be saleable to retailers by farmers. This will encourage domestic players to put their cold storage infrastructure as they can be sure of purchase at a certain price and so will be the farmer.
2. No quotas or restriction on import or export e.g. Sugar, Cotton and onion etc.
3. Implement GST. Government needs funds and needs law abiding businesses which MNCs are. They are more careful about legal liabilities.
A highly flawed argument. We are no longer living in the 80s where Indian
consumers should bear the brunt of 'import substitution'. If Indian firms cannot
provide world class products, they must fail. Consumers shouldn't be suffering
because of firms' lack of innovation.
It seems that a certain class of people are hell-bent on taking us to
the "glorious" days of a pre-liberalized india, as argued by the
'learned' professor.
I am quite tickled by the phrase we should 'just import technology' &
'set up same industries with domestic capital'. Well we did just that
in the 50s. And what happened? Those domestic players who were offered
this 'technology' due to crony capitalism had no incentive to
evolve/refine/develop the technology further, & thus for more then 40
years we were stuck with the same Fiat, the same Ambassador, the same
Bajaj scooter, the same road, bridge, rail building technologies -
even while the world overtook us. Technology is not a snapshot, frozen in time. it has to evolve & develop. Only world-wide copetition in a 'flat' world can ensure that.
The arguments propounded in the article are equally applicable to the
FDI in other sectors involving investment from abroad. Therefore shall
we ask Foreign companies like Ford, Hyundai, Samsung,Vodaphone,HP
etc., which made significant contribution to the Indian economy and
created numerous jobs also to wind up their business and get out? Most
of the indigenous business houses are only crony capitalists who
thrive on bribing the politicians and bureaucracy. It is these foreign
companies which have brought a sense competition in India. Please for
God sake, don not bring / encourage socialism / communism in disguised
forms. We have suffered enough under these socialistic policies and
paid a steep price. We want real development not anachronistic theories, which the rest of the world has discarded long back.
Brilliant and a highly thought provoking article. Prof Anupam Bhargava
has has argued most effectively the issue,"FDI in ‘consumption’ sectors deserves to be outrightly rejected. If it is not, it would simply mean the government is not working in the interest of the economy, but is unscrupulously catering to vested interests" and has raised two very pertinent questions:-
1. will FDI in sectors like retail, single brand, bankig or insurance enhance our foreign exchange earning capacity?
2. what is the compulsion for a host country to insist that a foreign entity come and set up shop here?
I am sure our learned PM will have convincing answers.
FDI in retail will eventually lead to most national resources being
owned by foreign entities and the locals getting relegated to a
permanent status as low wage employees, a situation that obtains in many
South American countries and elsewhere. Costa Rica is a classic example
where all banana plantations are now owned by American multinationals
and the Costa Rican slaves as a day laborer. The Indian politicians
should stop selling the country for personal profit and for the profit
of the few at the top.
A very well written article, simple and easily understood by the man on the street. Thanks. In a country like India, there is no need for FDIs in retail market - no doubt about it.
The author has exposed his lack of knowledge and experience in dealing
with a subject like FDI. He talks about buying technology with foreign
exchange without any idea about practicality of such a suggestion. Worse
still he says in marketing there is nothing like technology but only
consumption.
A very disappointing, myopic and one sided article. The writer ignores
the fact that Growth happens with investment. He speaks about the
outflow of foreign currency but what about the initial inflow ?
India's growth is mostly consumption driven and thus hyperinflation.
If the costs from farm to fork needs to be reduced, we need to
encourage the efficiency of our distribution system. Once FDI in
retail is allowed there will be huge investments in the storage and
transportation areas of food related articles. Remember the wonders
done by Green revolution four decades ago. It is surprising that the
writer is totally ignorant of inflation which is a burning problem. In
the present system of distribution only chosen few brokers and traders
make money from the commodities. The farmer still remained poor. When
the profits are properly distributed, agriculture will become more
viable. Writer represents the outdated socialist psyche. I wish the
article a more balanced in approach.
The penultimate paragraph says it all succinctly. FDI in retail will
eventually lead to a situation similar to that obtains in many South
American countries and elsewhere, where most of the resources
eventually get owned by foreign entities and the locals get into a
permanent state of being economic slaves at low wages. Costa Rica is
a classic example wehre most banana plantations are owned by American
companies and the local will for ever be a day laborer. The Indian
politicians need to stop selling the country for personal profit and
profit of the few at the top.
Truly disappointed at this right wing analysis coming from an academic. The world is flat and
continues to be so more than ever. More so in commerce and trade. India can not live in
isolation with currency, energy, military , terrorism, immigration and even infrastructure now
on the heat map of global interactions. The writer is only representing a small idealogue
stuck in old times.
The FDI in retail should not be viewed as loss in terms of more outflow of Foreign Exchange.It should be viewed with the comforts that people will be getting. About a decade back Indians had only few branded cars , TVs ,handsets,and Textiles. Now, due to FDI in these sectors one can see a lot of options available to people.It should be noted that the Business ventures of foreign aim at a minimum return of 50% from their third year of operation. They bring technology along with them and also the business skills which make the locals more competitive.People should also note that Indian entrepreneurs have also made lot of money and repatriated to Swiss by supplying junk items to local.In FDI more jobs are created and Govt gets Tax revenue from the capital which generates retail business.There will be more business for the local Logistics packaging industry.To put in short it is not a scare
The foreign retail chains will also impose their food culture and life style on us through advertising.Cola,burgers,preserved foods,baby foods will all adorn the supermarket shelves and we will start consuming them more and more.Cancer,kidney-heart ailments will all increase when we move away from our natural food habits to these preserved and formulated foods!And of course the beneficery will be again the multinational drug industry!The retail chain's slogan would be spend more, when actualy it should be spend less and conserve more!Can our dear planet host 7 billon people (or more) with highly energy intensive life style for long?
Your article is really an eye opening to many people. It is a very rational analysis. I have two doubts.
1) Our Govt. is saying “with the introduction of FDIs in retail they are going to reduce the gap between and farmers and retailers. If it happens the prices will come down to some extent and also farmers will earn high profits, foreign companies will construct cold storages, they will teach new methods in forming, new systems in Agriculture”. This is what they are claiming. How far it would be possible to occur?
2) And could the *Technology Transfer* instead of FDIs have been brought this much of development in India?
Very sound assessment Professor Bhargava! And I must add, as someone who is living overseas, that the business model that these retail companies use does not help host country's economy in anyway. Look at the small retail businesses in countries like US and UK, they are almost nonexistent now. And also the goods that these retail businesses purchase are from around the globe to get competitive prices. Hence the local businesses die very quickly. Ask the US people about WalMart and they will agree that WalMart makes more profit for itself and the Chinese economy because most of its goods are imported from China. Or ask the farmers of UK, where the retail stores import even ginger and garlic from China or bananas from South America or Africa.
FDI has according to reliable reports, helped our neighbor china considerably. China opted
For this since 1992, and retail net work, has not vanished in that country. On the other
hand, the retail network has increased., the export trade has grown there considerably, the
Business of Walmart and Carefor has increased, and the economic growth of the nation is
Also on the upward trend. Blind opposition will destroy our country. An expert study team
should analyze the situation in china in depth, and there is nothing wrong if we follow
Successful experiments there, to our advantage. The economic growth in our country is
Below six percent , and this should enable us to take corrective decisions to enable growth
To help the nation, and not destroy the national interests.
The UPI II may be waxing eloquent on Walmart super market chains in China. But, China manufactures all its military hardware indigenously. Why Can't India follow the same example and save precious foreign exchange?
The article is very informative.It proves that allowing FDI is not in the interests of The Nation.Its true our Commercial Banks have plenty of Deposit monies which can be utlised instead of permitting Foriegn monies into the Country.Why are Congreemen so eager to allow FDIs into India ? India was once a British colony,does UPA want to sell India and convert it into US Colony ?It seems UPA Partners particularly Congress leaders are real beneficiaries of FDIs entering India.This foreign Invasion must be stopped tooth and nail.The Honourale Supreme Court of India must take up this issue of FDI and see that interest of India are not sacrificied.What has happened to the slogan"BE INDIAN BUY INDIAN".Will The Indian Prime Minister Manmohan Singh and his Council of Minister agree to be made accountable for any loss to India by this Foreign Currency Invasion ?I strongly feel India should stick to its slogan"BE INDIAN BUY INDIAN"
An interesting article. One can form his opinion about this burning
topic.
The liability foreign exchange argument is a outmoded concept in a
globalized economy. Does the author believe that it is alright for
Indian corporates to go abroad and earn foreign exchange, but the
reverse should be stopped. If all the countries in the world adopt this
protectionist concept we will go back to the pre-industrialization days.
Is this what the author wants?
Simple explanation of complicate issue of FDI in Retail. General puplic should realise the issue and resist up to the end. Otherwise the future of India's economy will be in question?
Very thoughtful article with things stated in a clear and simple manner. Most of the times the jargon around FDI discussions simply makes it seem like a capitalism vs. socialism/ communism debate. What needs to be clearer is that it's mostly a debate between domestic and foreign capitalism and who's gaining out of the resulting consumerism. It's plain stupid to buy groceries from a foreign player with no distinct advantage in quality or variety of goods (and most of the goods even being produced locally) and then end up paying for them in foreign currency at the economy level.
Sectors where we need technology/ expertise and countries are not willing to sell us technology without getting a share of the pie might still be cases of necessary evil for FDI. However, why do we need need foreign players to buy groceries and have coffee? If it's about brand and variety, let them continue with the franchisee model where at least the spent money is retained in the local economy.
A must read article for every eduacted Indian to know Why FDI in Retail will not help Inida. The article is very lucid and upto the point.
Sorry to see such biased and one sided arguments by a professor, and Ph.D in management.
What will be the value of assets ten years from today of FDI of foreign company - may be ten times the initial investment or A BIG FAT ZERO. Theoretically after ten years a foreign company may not even get one Dollar of its investment back.
If the banks were so flush with cash, we would not have had drop in investment in new industries / services. The government with its high fiscal deficit is depriving the private sector of liquidity.
The learned professor is ignorant of the fact, that many times FDI is required for technology also.Off course the aspect of Current Account Deficit due to massive import
of Gold and Oil is also ignored.
As with the nuclear deals, this government has been allowing 100% export of top
quality solar panels to Germany etc for foreign countries to have CHEAP ELECTRICITY
with FREE FUELS and importing costly and dangerous nuclear power projects at
billions of dollars of our money not only to poison and contaminate our country but
also put us in an never ending economic mess. Add to this the recent disclosure,
how defense deals have holes in them proving money that was to return to India was
quietly siphoned off to foreign lands leaving India poorer by billions of dollars. Now
again this government wants to help the scamsters by providing them with a way to
bring back these ill gotten gains through FDI so this black money can be laundered
white and repatriated abroad as legal money. Worse still is the danger of the foreign
affiliates interfering with our internal politics as is evident already with the 3 media
english channels who are constantly telling us what to do and how to think.
Great analysis every ordinary reader can understand fully.
This article should get reproduced in other news papers too
Also visual media like HT, TIMES NOW cnn ibn, ndtv should take up in
their prime time debates os that message reaches larger sections and
help to nullify false propaganda of U P A governament
THANK YOU
I disagree with this author. All firms, domestic or foreign, operate with a profit motive. CTS is now investing in Phillippines to build software parks there. Infosys is listed in NYSE and their dividends are paid out to US shareholders. Tata has recently purchased UK based Jaguar. All these are examples of capital outflows from Indian firms.
There is no reason to believe that domestic firms will act with an inherent patriotic bias. The world is moving towards an economy where all corporations become MNCs and operate without borders. Globalization, overall, is a good thing. Poorer countries (like India) benefit from wage increases and richer countries benefit from lower prices.
More capital inflow into an economy (from domestic or foreign sources) increases competition, improves technology, drives up quality and drives down costs. Nitpicking over whether capital inflow is from India or a foreign country is illogical and xenophobic.
Finally someone writing sense on FDI in Retail business. FDI in retail is like inviting the East India Company back to India. If Indians want to go back to the Raj days, thats fine. Go back to slavery, rather than using Indian labor and Indian money to build India.If this FDI is implemented, then everyone can shout "long live the Multinationals" and have a celebration on morgagiing India again after the hard won independence.
Awesome article, Worth reading & sharing.
Sir, even though I agree to most of the comments, with several months of working in India I believe that we are indeed largely incompetent. It's not that we need the Western countries. It's that we need discipline in our planning and execution. Sadly, this is largely lacking. Discipline of the right sort needs to be inculcated from the grass roots.
ur quiet right.when will our politicians change? you quote that they
surrender to vested interests of the multinationals.
Thank you for the informative article. The Table mentioned should be part of the article.
Intellectuals and professors, must clear the air, as the politicians are creating confusion and most of the Mumbai based media is sold to corporate interest.
I request everyone to share this article on social media.
It's unfortunate that in India it's the educational elite with left wing mentality that hold this
great country back.
Sir, The major points raised in the article are Banks are flush with
funds, FDI in ‘consumption’ sectors deserves to be out-rightly
rejected, Just import technology, (They will)Carry back huge profits,
Historically, no economy has ever developed on foreign capital and
Inflow needs to be individually assessed for its costs and benefits.
Globalization is a stage in development of human civilization. It is
fulled by accumulation of Capital and Modern Technology in developed
countries & need for them in developing countries. Major population is
in developing countries. The under developed countries are out of
globalization. No country gives technology just like that. Their is
contribution of FDI & foreign technology in India's development
(Bhilai, Bofors, Atomic Power, Highways etc). You even need technology
for bio-farming. The author has no idea about the investment needs in
the retail sector. One can suggest more safeguards but you can not opt
out of globalization or adopt it piecemeal.
You said only to import the technology, but why do the foreign companies share their technology(in retail, its their efficient supply chain model) to us, if we do not share the profits with them. In this globalized world, every country is dependent on the other. This does not mean that a particular country is weak or incompetent. The main purpose of FDI is to let the countries share their technologies and services in which they are good at, to others. We are currently facing a lot of problems in infrastructure, energy, education sectors. The world has many solutions for these problems we can adopt. The govt. simply cannot solve every problem, it should be left to the private sector which can form alliances with foreign firms to overcome our problems and this is the whole point of FDI. Certainly you are way over qualified for me, but these are just my opinions.
First one being rational in this matter is important, FDI in retail is a need of time, sluggish current account deficit and so and so macro economic reasons. And it neither sweep out all the current economic problems nor it brings dramatic change the ordinary people life.But it might help a bit for current socio-economic scenario.
The root cause of this issue is the inability of government functionaries. Poor execution of policies, which
are not able to reach at the lower level of people. A faulty PDS(Public Distribution System) and poor logistic management are also supports it. So some of the intellectual people believe the entry of FDI in to retail is a remedy for this ailing PDS, and rein the soaring prices of commodities in the open market.
Why do not give a chance for them?It is need of this time, for macro economic concerns and domestic problems as well. Is it possible to bring out a plan, which sort out the soaring prices of commodities with the support of the huge domestic s
i think prof. bhargava has lost the whole point of allowing fdi in retail, aviation etc.
has he thought about the unused surplus resources such as food grains, vegetables etc. there would be better mobilisation of resources, more employment opportunities for rural as well as urban youth, more profit to farmers instead of middle men etc etc
sir, why there so fuss against FDI? if it is not profitable or loss to the small business
ones,simple solution is not to purchase from these markets and encourage local
commodities.shun fDIs.there is no need for so much hue and cry. will power of the public to discourage foreign stock and encouraging native produce is enough.this will work.
A very good article. I would like to raise another problem with FDI and multinationals in India. The question of OWNERSHIP. The problem is that companies like carefour, wal-mart etc. will OWN the real estate, the warehouses, the cold storage, the supply vehicles, even the employees. Employees, including store managers, will be simply working at the places without having any OWNERSHIP of anything. They will have salaries just sufficient to make them happy.
Currently our system is excellent because the Kirana store is OWNED by the manager, the vehicles are OWNED by either driver or a delivery services company, the food is OWNED and sold at competitive local prices by the farmer, etc.
We dont want a system where everything is OWNED by the multinational and everyone else is a employee.
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