foriegn direct investment

Topics: Retailing, Investment, Shopping mall Pages: 4 (936 words) Published: October 19, 2013
Prepare for GD: FDI in retail - a boon or a bane

What is FDI in retail?????????????????????????

Foreign direct investment (FDI) refers to capital inflows from abroad that are invested to enhance the production capacity of the economy. However, FDI in retail is different from the investment in corporate, manufacturing, or infrastructure sectors. Retail can be single or multi brand and may be described as a sale to the ultimate consumer at a margin of profit. While the FDI in single-brand retailing was allowed earlier, FDI in multi-brand retailing is being allowed now; meaning a retail store with a foreign direct investment can sell multiple brands under one roof. So it is the link between the producer/manufacturer and the individual consumer. India had to open up the retail trade sector to foreign investment as she is a signatory to the World Trade Organization’s General Agreement on Trade & Services, which include wholesale and retail services.

Whether it is beneficial (boon) or harmful (bane) for India: The aspirant has to remember and be very cautious that he/she has to follow one path – either pros (boon) or cons (bane) of FDI in multi-brand retail. It will put the aspirant in a piquant situation if he/she speaks in an ambiguous tone and ideas. If one idea, fact, etc overrides the earlier one, the credit earned may be lost.

Pros (benefits)

a) Indian retail sector is highly fragmented with around 97 percent of its business being run by the unorganized retailers. The organized retail is in its infancy. With the entry of FDI the retail sector will become organized.

b) Foreign investment in food-based retailing would ensure adequate flow of capital into the country and its productive use, multiplying the same. It will promote the welfare of farmers by agriculture growth, and thereby increasing their income level.

c) Intermediaries, known with different names in different parts of the country, flout the business ethics. Prices...
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