**************SAMPLE ESSAY FOR SBI PO ASSOCIATE*********** Foreign Direct Investment in Retail Industry – Its Advantages and Disadvantages Government has encouraged by the economic policy 1991, has adopted retail reforms mainly as 100% FDI in the retail sector in India. It may benefit by bringing investment in complete backend infrastructure and helps rural and agricultural sectors with a better go to market scenario. They also safeguard the health of the Indian retail sector against competition from the player of global economy. India is ranked as the third most attractive nation for retail investment among 30 emerging markets with domestic companies like the Future Group, Tata’s Westside, Reliance Fresh, Raheja Group and Bharti Retail competing for market share. Market liberalization sowing the seeds for a retail transformation that will bring more MNCs players and big Indian retail players which are looking to expand their operations which include Pantaloon, Reliance, Lifestyle, Food world, Raymond, Titan, Bata etc. Global player’s access India market through the licensee/franchisee route includes McDonald’s, Pizza Hut, Dominos, Levis Lee, Nike, Adidas etc. There are so many advantages of FDI in retail sector 1. Boost Economic Life - This is one of the major sectors, which is enormously benefited from foreign direct investment. A remarkable inflow of FDI in various industrial units in India has boosted the economic life of country. 2. Increase level of competition - FDI increase level of competition in market. They have to improve quality of products and service in order to stay in market. They enter into Indian market through Joint venture and collaboration. 3. Maximum Opportunity – FDI norms will open up strategic investment opportunity for global retailers, who have been waiting to invest in India. This may have a significant impact on the current arrangement of foreign players. Employees are well-versed with globally valued skills. FDI also ensured a number of employment opportunities to people by establishing industrial units in India. 4. Advance Technology Improved technology in the area of processing, grading, handling and packaging of goods and further developments in areas like electronic weighing, billing, barcode scanning etc. Further, transportation facilities can get a improved in the form of increased number of refrigerated vans and pre cooling chambers which can help bring down wastage of food. DISADVANTAGES OF FDI FDI feels that liberalization would endanger retail sector and mainly affect the small retailers, farmers and consumer and give rise to monopolies adversely affect the pricing and availability of goods. The entry of large global retailers such as Wal-Mart wipes out local shops and millions of jobs. The global retailers would collude and exercise monopolistic power to raise prices and monopolistic (big buying) power to reduce the prices received by the suppliers. Hence, both the consumers and the suppliers would lose, while the profit margins of such retail chains would go up. It would lead to lopsided growth in cities, causing discontent and social tension elsewhere. Despite country wide speculation on the plight of various Stakeholders, trading associations, politicians, etc. have given various arguments for and against FDI in retailing. However, such arguments are largely based on perception and there has not been serious academic research in this area. Further, India’s local enterprises will potentially receive an up gradation with the import of advanced technological and logistics management expertise from the foreign entities. In our view, the government has an opportunity to utilize the liberalization for achieving certain of its own targets- improve its infrastructure, access sophisticated technologies, generate employment for those keen to work in this sector.FDI would lead to a more comprehensive integration of India into the worldwide market and, as such, it is imperative for the government to promote this sector for the overall economic development and social welfare of the country. If done in the right manner, it can prove to be a boon and not a curse.
Posted on: Sat, 08 Nov 2014 10:11:30 +0000
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