FDI multi brand retail in India what will it bring

The government of India has come out with sharp thought out economic initiatives, and in fact, it has all the makings of a jolt, at least to the opposition. The opposition seems to have not taken very well of the new government plans to allow 51% FDI multi brand Retail in India. There is a huge hue and cry over the decision, and even those who don’t know anything about it has joined the bandwagon of those opposing it. 

Some say that the Indian Prime Minister, Dr. Manmohan Singh has taken a brave decision, and had similarities of the financial decision he took in the year 1991, when India surged ahead and stamped its arrival in the world economic scene. 1991 paved India through to the liberalization road. But will the increase of FDI in Retail and other sectors bring the same results for the battered Indian economy. 

Key features of new FDI norm in India

• The government of India has allowed 51% FDI in multi brand retail.

•   It has also allowed 49% FDI in the Aviation sector.

• Finally, broadcasting sector also stands to gain 74% through foreign direct investment. However, news channels and FM Radio has been exempted from foreign direct investment increase, and the cap stays at 26%.

What has made the government come out with such a brave step?

Politically, there could be any reason to guess, but India definitely had its back to the wall, in serious economic terms. Look at the fiscal deficit which has cramped the Indian economy ride, and with foreign investors not ready to plunge in the existing environment, there was needed a decision that will help – and the government has done exactly that with the announcing of 51% FDI Multi Brand Retail in India. Some say that the government should have gone with this decision much earlier. John Chalmer, Bureau Chief, Reuters, has welcomed the big move, saying that India needed this move; the inflow from the foreign investors will definitely help Indian economy growth. 

What are the benefits expected out of FDI Multi Brand Retail in India 

•  Consumers will definitely stand to gain. You can expect to buy everything under the same roof, and that means apart from the convenience, the consumer will get quality stuff, and the shopping experience will even be more organised. Large retail outlets such as Wal-Mart have the capability to surprise everyone with the price they offer.  

Best Price, the collaboration of Wal-Mart with Airtel, has 5 retail outlets in the state of Punjab, the quality and the price that you get in such stores will attract you to pay more visits. 

• The one major benefit here is the price, not just on the premises of big retail outlets, but even the smaller business retail outlets will be forced to keep the prices competitive in order to retain customers.

• The other big advantage that everyone is talking about is the benefits it will offer to the farmers. The farmers in India definitely face loss due to wastage of their produce, but with foreign direct investment of 51% cap, the farmers can expect multi nationals to take charge of the produce and offer more protection.

• In the economic front, foreign reserves opening up, can be a big boost for the Indian economy, the fiscal deficit will decrease, the debts accumulated over the years will definitely clear up. Foreign investors who are sitting with billions and trillions of cash has no where to invest, the American or the European market seems to be at dead ends, and therefore, with the cap at 51% foreign direct investment in multi brand retail, foreign investors will be jumping with all they have in their kitty to make the most of the opportunity.

Conclusion 

However, the major downside in the whole debate is the small traders. Will they suffer or will they not? Some traders point out that with stiff pricing of the products in the big malls, they stand to lose, because they will have to keep up with the prices, which is never easy while some say, they don’t think things will change much. Only time will tell how the decision will reflect in the future.