Why FDI in Retail Faces Opposition in India?

FDI in Retail?

FDI in Retail has generated controversy in India
FDI in Retail has generated controversy in India | Source

FDI in Retail


FDI (Foreign Direct Investment) in retail

The Congress government recently allowed FDI (Foreign Direct Investment) in retail trade. The move encountered lot of opposition from the general public, farmers, traders, media, opposition parties, allies of the ruling party and even from sections of Congress Party itself. After sensing opposition, the government has dropped the move.

Indian traders are looting the public

Is the move to allow FDI (Foreign Direct Investment) in retail good? Undoubtedly it will bring in lot of benefits to the consumers and farmers. When foreign companies like Wal-Mart come and open their shops in India, they will sell articles to the Indian public at reasonable prices and maintain the quality of the articles sold. Expired products and counterfeit products will not be sold as is happening now. The existing traders feel threatened by the move. Existing traders in India are looting the public by selling substandard goods at exorbitant profits. Public are helpless as government also takes no action against the traders as it needs the financial support of the traders. If foreign companies enter India and start selling goods at reasonable prices, then the Indian traders cannot fleece the public and make killing profits. This is the reason for opposition from the traders.

Middlemen are pocketing huge profits by cheating the farmers

Another reason for the opposition is that the middlemen feel threatened. Now the middlemen procure goods from the producers and farmers at low rates and sell these items at high rates to the traders to make huge profits. The traders in turn sell the goods at still higher prices to fleece the buyers. The farmers and producers get low payment and sometimes even have to sell their produce at losses or at no profits. The farmers do not have the power to sell their produce directly to the traders. But big foreign companies like Wal-Mart will directly procure goods from the producers and farmers by paying a good price to them. The financial condition of the farmers will improve because of this. At the same time the foreign companies will be able to sell the goods at a reasonable price to the consumers. Consumers will also be benefitted by this. The middlemen will be eliminated.

Unwarranted fears

Some people suspect that once foreign companies enter into the retail trade, the local Indian companies will have to close down. This is a baseless fear. Foreign hotels have entered India and are doing good business. But no Indian hotels have closed down because of the competition. Foreign airlines are operating in India. But no Indian airline company has closed down because of competition. Even in USA, the giant retail companies like Wal-Mart are doing only 5% of the business. Small retailers do the remaining 95% of the business. China allowed FDI (Foreign Direct Investment) in retail long back. But the big foreign companies are not even able to capture 10% of the business.

People’s decision to buy from a shop are based on many reasons

The reason for this is that people simply do not go to a foreign retail shop for purchasing goods they need. People’s decision to go to a particular shop depends on so many factors like price of the goods, distance of the ship from their house, service offered, familiarity with the sales personnel, ambience of the shop, likes of the family members, credit assistance offered and a host of other factors. Therefore foreign companies will not be able to corner even 10% of the business in India even after a decade of operation.

Congress government is corrupt

But there is another valid fear in the minds of the general public and the media. The Congress government has been caught in several scams. All these scams involve huge money siphoned off. For example the 2G spectrum scam involved siphoning off a huge Rs.176000 crore (more than $40 billion) of people’s money. Even now no court has asked the government to recover this money and pay it back to the government treasury. No court has punished any Indian politician for taking bribe. The Courts, government, officers and business people always collude to loot the public. Commonwealth Games were staged by India which witnessed looting of public funds. Huge contracts were doled out at inflated rates. Who pocketed this money is not clear. Either the government head or the Congress Party head should have been the beneficiary. But the government head Prime Minister Manmohan Singh is not known to be corrupt. Therefore it is reasonable to conclude that somebody at the highest level in the Congress Party should have swallowed this money.

Change of government will help push FDI in retail

Therefore people and the media suspect that the government’s move to introduce FDI (Foreign Direct Investment) in retail is also with an intention to loot the people’s money. People are viewing the government with suspicion on each and every move it makes. Even good moves are viewed with suspicion. This is the reason for the opposition from the general public and the media. If this good move of introducing FDI (Foreign Direct Investment) in retail is made by the next BJP government, it will most probably be welcomed by the people and the media.

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