FDI in Retail

FDI in Retail

The UPA Government’s decision to throw open the huge Indian market to multinational companies, which had been lobbying for years for entry into multi-brand retail has evoked mixed reactions. The government claims that this move will culminate in creating about 10 million jobs. The protagonists of this policy claim that apart from helping calm inflation, it will spur improvement of supply chains because half of the investment will go for that. The opening of Mega Stores will be limited to cities with population of over one million and retailers are required to source 30 per cent material from small and medium enterprises. Those who are opposed to FDI in retail in India have argued that livelihood of about 40 million shopkeepers and vendors will be at stake. Besides, the farmers will be left at the mercy of foreign multinational companies. It is also argued that predatory pricing is likely to affect small vendors and it will ultimately culminate in encouraging monopoly.

Mainstream media has hailed it as a politically bold decision by the UPA government. The Left’s opposition of the decision on ideological grounds is understandable. The BJP’s public posturing can be understood in terms of small traders being affected because this segment is the urban constituency of the BJP. The native big Corporate Sector’s entry into retail was also opposed on similar grounds a decade ago. The FDI in retail is likely to stay. However, Producers’ organisations and Civil Society need to monitor and negotiate more equitable contracts with supermarkets. The government should play an enabling role through legal provisions and institutional mechanisms like helping farmer co-operatives, producer companies and producer groups to facilitate the smooth functioning of supermarket linkages and avoid ill-effects

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