Will FDI in multi-brand retail benefit consumers and the nation?

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Will FDI in multi-brand benefit consumers and the nation?
FDI in multi-brand retail has created a furore with the Trinamool Congress threatening to withdraw support and a Bharat Bandh being called by opposition parties on September 20, 2102. What is this FDI that has created a cacophony within the opposition?

FDI or foreign direct investment in multi-brand retail is the ability of foreign companies to invest in multi-brand stores. This would enable foreign companies like Carrefour and Walmart to sell everything from vegetables to branded products all under one roof.

Presently, FDI in whole sale is allowed, which has seen the likes of foreign companies like Metro setting up outlets. However, these companies cannot sell to retailers and have to sell their products to wholesalers, who are given membership after scrutiny of certain documents.

Here are few of things the common man needs to know about FDI in multi-brand retail:

Create joblessness

Critics of FDI in multi-brand retail argue, that by permitting FDI in multi-brand retail will affect the local "mom and pop stores" also called "khiranas" run on a small scale. This is because the small shops would not be able to compete with the large multi-nationals and would eventually have to shut shop.

Reduce prices to consumers

Those for FDI in multi-brand retail argue that it is likely to reduce prices for consumers, as the large multinational chains are able to negotiate better prices with suppliers and might pass on the prices to consumers.

Create monopolistic situation

Critics of FDI in multi-brand retail argue that large MNC chains might create a monopolistic situation and could even intimidate suppliers, which could create unethical business practices.

Reduce large scale rotting and wastage of perishable goods

Foreign companies through their superior technologies could build robust infrastructure and usher in solid storage, warehousing and transportation facilities, including chilling trucks, which would go a long way in reducing wastage. According to one estimate around Rs 40,000 crores is lost due to rotting of perishable food items, due to woeful storage and warehousing facilities.

Benefits to farmers

Those in favour of FDI in multi-brand retail argue that farmers would get a better price for their products and hence FDI in multi-brand could benefit the farmers.

Generate more employment opportunities

The UPA government claims that FDI in multi-brand would generate more employment opportunities.

Bring in vital foreign exchange

The country will benefit through foreign multinationals bringing in vital foreign exchange for investment in multi-brand retail, thus boosting forex inflow into the country.

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Read more about: fdi multibrand retail
Story first published: Monday, September 17, 2012, 8:59 [IST]
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