India Opposes Foreign Direct Investment (FDI) in Retail Trade

Indian Organized retail Industry is one of the sunshine sectors with huge growth potential. Its organized retail industry accounts for only 5.5% of total retail industry and expected to reach 10% by 2012. The key factors that drive the growth in retail industry are young demographic profile, increasing consumer aspirations, growing middle class income and improving demand from rural markets. The United States of America and European Union have been seeking that India permit Foreign Direct Investment (FDI) in retail trade. FDI objective is that large international chain must control the food supply chain and the distribution of other items of daily utility in one of the worlds largest markets, which accounts for over one-sixth of worlds population. However, at this stage, if international retail majors are permitted the consequences will be adverse. The first consequence will be an adverse impact on domestic manufacturing. International retailers operate on the principle of buying internationally at the cheapest cost from the economies like China. The fall in manufacturing sector jobs is likely. India needs manufacturing sector reforms in the first instance, so as to enable it to develop into low cost manufacturing economy. For this, India needs to improve infrastructure, low cost utilities, competitive interest rates and trade facilitation. Once these reforms bring down the cost of our manufacturing goods, one can expect international retailers to source domestically and FDI can be sought after. Indian business sector is not opposed either to the concept of FDI or giving an additional thrust to the reform program. Changes which hurt the Indian economy can hardly be termed as reforms.

CITATION: Editorial (2011, November 25). BJP, Left oppose FDI in retail. The Times of India. Retrieved from http://timesofindia.indiatimes.com