Wednesday, December 07, 2011

FDI in Retail

I cannot understand the issue with Foreign Direct Investment (FDI) in retail. I don't know whether the protesters are clear on what they are protesting.

Is it issue with Foreign Money?

If it is the issue with foreign money, then won't the same problems be there, if the money is invested by the Indians? How does it matter whether the profits are earned by Indians or foreigners? Indians are already buying enough foreign goods to give profits to the foreigners. Are you going to stop buying foreign goods to save Indian industry?

Is it the issue with Super Markets, because of which Retail business would be effected?

Any kind of development would have impact in many people. Many people may have to move to different kind of jobs as part of the evolution. If everyone wants to do the same kind of work everyday for whole life, then obviously there won't be any development.

Those who are worried about employment, instead of fighting to ban FDI, if they fight to ban ATMs in India, that would create lot of employment.

Why Indians are not investing in Super Markets significantly

I don't think any domain where free market is allowed, one can earn lot of profits. If there are many opportunities to earn profits, then many people would be there in the field already and would make the entire domain saturated. Best examples are Telecommunications, Airlines and TV Channels. Many of them are not in profits or having marginal profits. I don't think super markets is a best option to get lot of profits.

If there are no profits, then Why foreign companies are coming?

If there is minimum guarantee to the investment, there are many Indians who are ready to invest. But, if there are losses, or one has to wait for a long time to get profits, then not that many Indians are ready to invest. Whereas, the US companies are ready to take lot of risk. They are ready to wait for a long time to get the returns and they don't mind investing a lot in research, where the returns are not guaranteed. They may invest in India for the returns they may get in the future.

If the foreign companies are coming and going to make losses in India, then we should invite them with red carpet and should allow 100% investment, because, if they are making losses, it means Indians are making profits.

Right now, is there any cost advantage in Retail?

I don't see any cost advantage in super markets. Most of the regular commodities are sold at MRP. Vegetables and fruits etc., are more expensive in super markets than the road side shops. But, in road side shops, one may have to bargain to reduce the price. Even for expensive items like Mobile phones also, if you go to small shops, you may get it little cheaper than the shops in the big malls.

Many people (including myself) prefer malls/super markets, because, one can buy everything at one place, browse through the items and can check new products, pay by credit card/food coupons without extra charge, and there is no need to bargain. There may be indirect price advantage, because while browsing, one can see less expensive alternate products, and buy them.

Is it a way to convert to Black money to White?

India would be at advantage, if the black money is invested in India rather than saving in foreign banks.


Irrespective of what all happens, if the government does not encourage open competition (i.e., if it puts restrictions to the new players), then it would lead to monopoly and everyone would suffer. If government ensures that, any person/organization can enter into this business without much hassle, then everyone would be benefited.

The foreign investment should not be allowed in cases of security, agriculture lands, or any other thing which is limited in India. In all other fields, we should allow foreign investment.

If the FDI bill is not passed in the parliament for whatever reasons, I would consider that as the failure of BJP and nobody else.

1 comment:

  1. Your points are right.
    1. The issue is may be due to there would be less demand for domestic goods/items. Some or the other-way the local people will lose their bread.
    2. At the same time, unnecessary increase of demand for new goods (from the global market) even though domestic alternatives are available. of course it depends on the customer taste.
    3. Also, as you said, super markets are not making losses.
    4. Road side items are way costly compared to the super markets.
    5. But the ridiculous point is creating jobs. Already India is lacking behind technology and research. By creating jobs and exploiting people will be very much dangerous in future.