The pros and cons of FDI in retailing

BT Online Bureau   New Delhi     Last Updated: November 25, 2011  | 15:29 IST

The Cabinet has approved 51 per cent FDI in multi-brand retail, a decision that will allow global mega chains like Wal-Mart, Tesco and Carrefour to open outlets in India.

The Cabinet also increased the foreign investment (FDI) ceiling to 100 per cent from the present 51 per cent in single-brand retail.

The following are the main issues raised by those in favour of foreign equity in multi-brand retailing and those opposed to it:

Those against:
- It will lead to closure of tens of thousands of mom-and-pop shops across the country and endanger livelihood of 40 million people
- It may bring down prices initially, but fuel inflation once multinational companies get a stronghold in the retail market
- Farmers may be given remunerative prices initially, but eventually they will be at the mercy of big retailers
- Small and medium enterprises will become victims of predatory pricing policies of multinational retailers
- It will disintegrate established supply chains by encouraging monopolies of global retailers

Those in favour:
- It will cut intermediaries between farmers and the retailers, thereby helping them get more money for their produce
- It will help in bringing down prices at retail level and calm inflation
- Big retail chains will invest in supply chains which will reduce wastage, estimated at 40 percent in the case of fruits and vegetables
- Small and medium enterprises will have a bigger market, along with better technology and branding
- It will bring much-needed foreign investment into the country, along with technology and global best-practices
- It will actually create employment than displace people engaged in small stores
- It will induce better competition in the market, thus benefiting both producers and consumers (With IANS inputs)

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