Pros & Cons of 100% FDI in Multi-Brand Food Retail
Pros & Cons of 100% FDI in Multi-Brand Food Retail Post-1991 reformation in the economy vindicated several apprehensions. The market capitalization in the country was nothing, but a figment of imagination as a major bloc of the economy is based upon the agricultural sector. The government policy to liberalize the economy by abolishing License Raj had demystified the process of business and thereby freeing it from the Executive’s influence and red tapsim. The Foreign Direct Investment in the single-brand retail sector is allowed till 51%, but in the multi-brand retail, the question still looms whether to permit 100% FDI or not. There are several pros and cons to this decision, and many blocs are embracing this, which is desired to boost the economy by furthering more investment in the country.
Many critics condemned the idea of providing 100% FDI in multi-brand retail, as it is likely to subsume small-scale domestic vendors. Giants like Wall Mart, having abundance in market capitalization would create their hegemony. But, it can also be seen as a consumer-oriented policy. By allowing 100% FDI, the choices of products and services will broaden, ultimately serving the interest of the consumers. Foreign investment will pose challenges to domestic vendors that will lead to healthy competition regulated under the legal framework. Unfair trade practices will be reduced due to wider varieties of goods, and prices would likely to go down. But, before such policy framework could be implemented, there is a grave necessity to reform the competition laws which would be cordial to these future endeavours. The amendments are hugely required because the small and medium enterprises (SMEs) will become victims of predatory pricing by the global multinational businesses. The supply change will disintegrate due to global monopolistic attitude. Therefore, policy reformation is inevitable to safeguard the interest of domestic businesses. BRAND FOOD RETAIL
Competitions are seen healthy in a free market, as it widens consumer choices and results in a reduction of prices. The introduction of 100% FDI will also result in bringing down prices initially, but not inflation in a long-run as the multinational retailers set a stronghold in the market that would easily dominate the market of domestic vendors. Agriculture sector, one of the prime sources of employment in India, would boost due to the introduction of the policy accelerating the demand. The remuneration of the farmers would increase as the new policy would cut intermediaries between the farmers and retailers, and the farmers would directly reap the fruits of their production. But, it poses a challenge that it will also leave them at the mercy of global retailers, exposing them vulnerable to exploitation. On various junctures, voices are raised to safeguard the interest of the farmers and protect them from further destitution. It is an undeniable fact that foreign investment would generate employment, but the country’s huge reliance on the agricultural sector should not be undermined as well.
India had been under the colonial rule for more than 100 years. This led to the independent government reluctant to open their markets for foreign investors completely. The majority of the trade and commerce was kept under strict government control and vigilance. But, with the deteriorating economy in the early 1990s, the Government was compelled to open their markets for foreign businesses. Yet, many backward States with tribal population are reluctant in opening their markets, as there is a concern of exploitation by big industries. The decision to introduce a 100% FDI in multi-brand retail may likely to undergo several legal impediments. The implementation of this policy framework is up to the States. The constitutional question arises on whether the State can be compelled to introduce the policy. The Seventh Schedule of the Constitution of India does not clearly express retail, production, supply & distribution of goods and Entry 27 in the State List. Therefore, the introduction of the scheme would require a constitutional amendment that would make it amicable to its easy implementation without compromising the interest of the citizens.
The Government has envisioned India as an industrial hub by facilitating ease of doing business. But, such ambitious desires must not overshadow domestic concerns. India must proceed towards inclusive development, by considering the ramifications of new policy initiatives and overcoming the hurdles by sound deliberations.