Tuesday, November 29, 2011

Is FDI in retailing in India a right thing?

If a foreign retailer like Walmart sets up their operations in the major cities of our nation, what can happen? Have you ever imagined it? These stores which sell everything from 'Salt' to 'Robots' at a very cheap price can compete with the local shop owners in price and defeat them most of the times! They can provide better environment and shopping experience too! They will buy everything from the sources and sell it here in the cheapest possible way. Thus a foreigner will buy in bulk from India and sell in bulk in India itself, thus disrupting the way the Indian retailers operate. If a monopoly situation arises out of this, a dangerous phase may occur where buying low and selling high will be the key. Thus this kind of a re orientation can destroy the supply chain mechanisms which are already set up.Hence the foreign retailer will rule both ends of the supply chain. This is how the entry of even one big retailer can destroy the whole Indian economy.

It is definitely true that the consumer has every right to obtain goods at the lowest possible price. But it cannot override the responsibility of any country or society to provide economic balance and security to their people in the long run! So better stop the plan of inducing FDI in retailing in India. Foreign direct Investments can boost the global competitiveness, but it should be introduced after a very strong preparation. Shall we not wait for a while?

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