FDI Change on Multi Brand Retail Outlet

FDI on Multi-Brand Outlet in Delhi

FDIs or Foreign Direct Investments are the direct investments made in the host country by an organization or an individual of a foreign national. There was a decision made by the Shila Dixit party sometime back, allowing FDI on Multi Brand Retail, but as the Kejariwal party stepped up, they had it all cancelled. What could be the reasons for it?

Kejariwal reverting the FDI decision of the FDI in Multi Brand Segment, if I am asked, could be because they just want to do the opposite to what the previous party did, to get a recognition, could be that he was against taking bribe and caught them bribing or could also be that he was not bribed or the party did give a serious thoughts on the pros and cons of the FDI which could be as follows:

Pros:

1.       Cheaper products for the general public due to massive compaction.

Due to the fact that there are large domestic multi brand outlets in Delhi, the addition of MNC in the market would make the competition fierce and this affects the selling prices of the products, which are bound to decrease which is a plus point as a consumer.

2.       More choices for the common public.

Having multiple outlets will give the consumers choice of what they want to purchase. All the multi brand outlets do want to sell something different, which also gives the domestic consumer goods manufacturers’ choice on where they want to sell their products.

3.       More tax options for the government.

Once a large multinational company enters a market, they are not going to sell the products without having to pay tax, there will be an additional tax that is added to the government revenues, property tax if the company decides to get a place of their own, income tax from the people they hire and fall under the payable category.

4.       More job opportunities for the common people.

There is a need of a lot of work force on a multi brand outlet, from sales reps to managers and security to customer care reps. The highly populated city will be able to employ a lot of their capable work force to the opening of the new intake.

5.       Improvement in general life style of the public.

Due to the products being cheaper, more employment and betterment in technologies that usually are due to the competition in the market, the improvement in lifestyle of the people will be at most visible.

Cons:

1.       Exploitation of resources.

The human resources might not be getting the facilities that they deserve for the hours and effort they put in.

2.       Large amount of earnings will be taken back to the home country.

The investors do want their returns and the profit margin will be taken back to the home country in the form of foreign currency, which will reduce the reserve bank’s hold on foreign currencies.

3.        Dumping.

Yes there are anti-dumping policies in India but some products could be dumped in the market which might not even come to light till it’s too late.

4.       The threat of local businesses getting shut down.

There are small multi-brand outlets in Delhi, which do not have much bargaining power which are easy to be crushed in the battle of giants.

5.       Risk of domestic manufacturers not getting a place.

The Foreign companies might not be fond of what the local manufacturers produce or the manufacturer could not be price competitive for the market where the pricing is very sensitive. The factor of standards and finishing will also arise in a highly competitive market which is a problem, providing quality at a cheaper rate.

Like the two sides of a coin, even letting in the FDI in the Multi Brand Retails has pros and cons. This does not mean that they are to be stopped. FDIs are important at a country and mainly for the developing countries like India. The population is a gift for business; they have their own market to work with and are a magnet for other foreign companies. The FDI will help improve the technology and the standard of living of the citizens of the state. You might say that stopping FDI has created a union in the state but Maharastra opening up to it has not faced any negative consequences, and instead are earning higher rate of tax revenue.

Himosh Sharma