FDI: A game changer
FDI is ultimately going to benefit common man
WHATISUP BY SAJJAD BAZAZ
A wave of opposition to the decision to open retail sector to foreign companies is currently sweeping the country and our state too has come on the forefront to register protest against the foreign direct investment (FDI) in retail sector in India. The protestors, parliamentarians, and various commentators, political or economic, have joined the chorus, pressurising the government to roll back the decision. The common plea is that the decision will destroy the livelihood of crores of small retailers countrywide. The protestors who have joined the chorus from our side say that Jammu and Kashmir will also bear the brunt in view of its vast chain of retailers operating across our towns and villages.
It’s true that our state has the highest shopping density with lot many youngsters deriving sustenance out of the retail trade. But will adding FDI in the retail sector snatch their livelihood means? The unusual protests organised by a marginal section of political workers which has also lured the local business community clusters to join the chorus failed to generate the heat, though at national level, the debate is gaining momentum day by day.
So far, these anti FDI policy protests failed to lure a common man here. It is visible that those mostly associated with retail trade here were hardly moved by the development. But attempt is being made to create a threat perception in the local markets that FDI in retail sector will take away jobs here in our state.
To debate on the issue, let us first understand the concept of foreign direct investment? We have been talking of globalisation a lot, where economic boundaries have become irrelevant. In this scenario, foreign direct investment plays a pivotal role. It creates an environment where businesses across various countries get an easy access to new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and of course financing. The country or the state where a foreign business house directly makes investment, can lead to a source of new technologies, capital, products, management skills etc. Ultimately all this will translate into strong impetus to economic development of the country or state where foreign direct investment is encouraged. However, the home country –from which the investment originates too get benefited through the exchange of investment flows.
I don’t think that the FDI mode will lead to multinational conglomerates wielding great power over smaller and weaker economies and can drive out local competition. In fact, FDI represents an opportunity for small and medium sized businesses to become more actively involved in international business activities and garner more and more business opportunities.
But at the same time we have to be cautious that growth of retail sector doesn’t lead actually to creation of jobs somewhere else. Here let me quote an example of a situation in the US, where increased consumption does take place, but actually creates jobs in China. Here the example of China is worth mentioning. China is the country which witnessed successful execution of foreign direct investment in retail. After FDI in retail, Chinese retailers still hold a majority of retail share. The number of small retailers has doubled. Also, exports and GDP growth has continued unabated in that country. Today China continues to dominate global trade through large-scale Foreign investment in the country.
So, the FDI in retail sector should be taken on positive lives, though some negatives are attached to it. But managing this FDI mode in a calibrated manner can lead to efficient development of our retail sector. This will ensure that its benefits—through development of infrastructure, provision of employment, and support for local sourcing—balance potential risks to the retail trade debated currently.
In other words, what I feel is that the move of FDI in retail sector will in the first instance make our retail sector organized. Finally, it will be the consumer who will get benefited. The people associated with the sector have to readjust their operations on modern lines. Otherwise, the current mess in the sector will impact the employment opportunities.
In nutshell, FDI benefits customers, economy and infrastructure. We have seen FDI success stories in telecom, automobile and insurance sectors. The FDI policy in each of these sectors has led to improved customer services and a sleeve of tailor-made products. And see the level of competition after allowing FDI in these sectors, as the resultant competition is spurring the players to improve their operations vis-a-vis customer convenience. With proper checks and balances, FDI mode will give a boost to our economy. Consumers will get a wide variety of quality goods at reasonable prices as they will be able to shop best global brands.
Those who oppose it need to understand that ultimate benefit of the FDI intervention into our retail sector is going to benefit common masses.
The views are of the author & not the institution he works for.
Lastupdate on : Sat, 3 Dec 2011 21:30:00 Makkah time
Lastupdate on : Sat, 3 Dec 2011 18:30:00 GMT
Lastupdate on : Sun, 4 Dec 2011 00:00:00 IST
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