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
