The proposal to permit foreign direct investment (FDI) in multi-brand retail could spell doom for consumers and traders as foreign investors will dry up existing supply chains and then jack up prices to exploit the situation to their benefit, according to a top official of a traders' body.
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"Consumers and traders will be at the receiving end if the UPA decides to introduce FDI in the retail sector. The international traders never face genuine competition in the market, but follow a policy of concentration of goods and dominance in the market," said B C Bhartia, the National President of the Confederation of All India Traders (CAIT).
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"These FDI investors will put in a lot of money and also spend huge money. Obviously their expectations will be high. They jack up prices of commodities instead of selling goods at comparative rates and virtually compel consumers to take more quantity of goods and also compromise on quality," he told PTI.
With full control over the supply chain, FDI investors will dry up the existing sources on which traders are fully dependent and exploit the situation to their benefit to earn profits. Since FDI investors have a huge financial loss-bearing capacity, they will virtually make the local traders run for money, Bhartia - a professional Chartered Accountant with a background of family business in trading - said.
To a query on states exercising options not to accept FDI, Bhartia said FDI investors are known for acquisitions and mergers.
"They will in due course take over companies having operations or a market presence in multi-states. By this route, they will automatically reach the 'no entry zones' or states not interested in FDI in the retail sector," he said.