Though I have already written an “Essay on Foreign Direct Investment (FDI) in Retail Sector in India”, today I want to point out few important points which supports FDI India. You can find here the essay.
The following topic is one of the top group discussion topics which are trending nowadays. Recently India has witnessed several things which support FDI. I want to speak in favor of FDI. As far as I can understand FDI, it’s the way; an International company will invest money and technology to India. I want to keep few points in support of this.
- Technology and Innovation: Through FDI, competition will increase in the industry. Hence it will push the competitor to make some innovation. Apart from this, the company which will come to India will also bring technology. Take an example of Wall Mart. If Wall Mart comes in retail sector, though there are few stores of Wall Mart, but not for retail they do wholesale, the competition among Big Bazar, Vishal Mega Mart, Spencer’s will increase and customers will get the ultimate gain.
I want to give a live example. Flipkart.com is India’s biggest online shopping site. After Amazon’s formal entry to Indian online shopping market, Flipkart.com started to give discount. And one of my friends bought appeals from Allen Sally worth Rs 4400 in just 1100. So that kind of discount is giving away by Flipkart.com. I don’t know it may be just a confidence that Flipkart.com is doing sale for clearance, and I am taking in wrong way. But few days back, a survey has been filled by Flipkart.com and out of 4 questions, one was very interesting. The question was “Why do you not like to buy from Flipkart.com” and appropriate reason was there “High Price”. So now Flipkart.com has got competitor, they have reduced their prices.
Though Amazon has not been allowed for FDI, they are selling the products only.
- Employment: FDI will also provide employment. Yesterday Government has allowed 100% FDI for telecom and single brand products like IKEA and Apple. Now as these foreigner companies are going to open their stores or service centers across India, they will provide employment. People are saying that they will kill retail (Kirana) shops in India. Let me put a question to them, “Are not there Big Bazar, Vishal Mega mart already in the market?” Yes ! They are. Still people who are running kirana shop and who sell vegetables have not any problem from them. Then how would Wall Mart posse problem to them?
- Low price for high quality product: If competition increases it will certainly help the customers to get low price product. Products from IKEA are of very high quality. They make furniture and they keep low price also because they use steel instead of wood. Many such brands are there, who wants to enter India, and can offer low price products without compromising the quality.
- Opportunity for farmers: Supply chain management of Wall Mart is known to be best among the industry. They take agricultural products directly from farmers, so middle agent. Farmers will get the right price directly from Wall Mart. And in few cases Wall Mart also invests money and help farmers to do and learn farming with new techniques which help in better production. Pepsico (Lays) is doing the same.
I am supporting this point after watching this video.
- Economic Development: As we can see, petrol price is hiking weekly and the rupee is falling. It has reached to all time low. Government is expecting FDI to approve soon. So that we can get foreign currency and it would help to strength our economic. If the product surplus the market, we can export finished goods to overseas. Why China host manufacturing plant for every electronics company? The reason is their low cost labor and support government for FDI. In same way, India can do. Though we export branded clothes, cars, bikes etc but no electronics goods. So it will help our economy to get stronger.
The decision to allow FDI won’t be seen effective just after launching it. We need to wait at least 5 years to see its effects. We are witnessing the effects of Globalization (1992). I am not saying that FDI is completely good for India. Every decision has its pros and cons. There are few setbacks also.
Like small manufacturing plants, handmade material and small scale industry will suffer a lot. Their products may not stand in the competitive world. Our currency will go to foreigner. As we buy more and more, we will start to depend to foreigner technology and products, which later can harm our economy.
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