FDI in retail, back again..

Sunday, December 2, 2012

FDI in retail industry refuses to die down, its back again in the parliament.
One could see mixed responses from about FDI in retail, I had read an article in The Hindu and read another article in Economic times few days back, with both providing a contradictory view point about FDI. Off course, I have written in my own blog about FDI in retail about a year back.

Having opened up almost all sectors including manufacturing, it really does not matter just to protect retail sector alone.

Going through the article in The Hindu, the following question came to my mind on which I do not have answers.

True, FDI should have been ideally allowed only for import substitute, promote export's. This has not been the case, FDI or imports were allowed in most of the sectors on which India could have managed by itself very well. For example FDI or imports were allowed in soft drinks, potato chips, real estate, fast food chain franchisees and many more consumer goods. Is repatriation of profit in form of foreign exchange not happening on these or have the economy not impacted?.

Let’s assume for argument sake, that export obligation is linked with FDI investment. A company setting up Indian arm and after couple of years of export , what if it set up an a subsidiary company in foreign soil, will not the foreign exchange flow as investment into the subsidiary company in foreign country from India?. If such interlinked subsidiary companies are set up in different country, how easy would it be track money flows into and out of India?.

As pointed out in the article in economic times the GDP growth was around 3.5% till about 1991, when the Indian economy was protected, however has GDP not grown much more after liberalization?. But then, Indian currency has also become weak since 1991 against most of the international currencies.

India has come a long way, after opening Indian door for investment in many sectors including manufacturing, in spite of many challenges faced and accepted the changes. There is no other option, but to accept change, take up competition and challenges where ever possible. End of the day, Darwin theory hold good in this global economy, which is ‘Survival of fittest’. A consumer, would feel OK to buy ‘Washington apple’ or ‘Nagpur Orange’ either in FDI hypermarket or mamji shop as long as they get quality product for the price one pay. Except for some changes and adjustment, both the retail shop is bound to survive in its segment.

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