The pros and cons of FDI in multibrand retail

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The pros and cons of FDI in multibrand retail
Even as a debate rages in parliament over foreign direct investment, or FDI in muti-brand retail, here are a few things that the common man should know about FDI in multi-brand retail.

The debate in parliament is whether to give 51% or a controlling stake to foreign companies in multi-brand retail. This means that foreign retail giants like Carrefour, Tesco and Walmart can set up hypermarket chains and can retail many products. Presently, India allows FDI in single brand retail, which means foreign companies cannot sell multiple brands under one roof.

The fears

* Fear of killing the local khiranas

Many fear that the advent of 51% FDI in multibrand retail will kill the mom and pop stores, more popularly known as khiranas. This is because people would start patronizing the large foreign retail chains, which are sure to offer better prices, due to their huge financial muscle.

* Fear of unemployment

There are fears that FDI in multi-brand retail could lead to unemployment. While this may be true, one would have to really examine whether it has created unemployment given the fact that we already have major corporates like Reliance, Aditya Birla Group and the Goenka's engaged in multi-brand retailing.

* Fear of predatory pricing

There are fears that these major foreign retailers wield huge financial muscle and this could lead to predatory pricing and exploitation of farmers.


* Wastage and rotting of food would be eliminated

One of the biggest advantages for FDI in multibrand retail is that there would be less wastage and rotting of food items. This is because foreign chains are likely to invest and bring in chilled freezer technologies, which would help reduce wastage. One estimate puts the losses due to food wastage at Rs 55,000 crores annually.

* Elimination of the middleman

Those in favour of FDI in multibrand retail argue that it would benefit the farmer given that the foreign chains would deal directly with the farmer and hence the middleman would be eliminated.

* Create more jobs

There is also an argument that it would generate lakhs of jobs every year.

* Better pricing for consumers

There are those who argue that FDI in multibrand retail would ultimately lead to lower prices, which would benefit consumers.

Read more about: fdi
Story first published: Wednesday, December 5, 2012, 9:38 [IST]
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