Impact of Fdi in Multi-Brand Retailing Essay

3572 Words Mar 7th, 2012 15 Pages
Introduction
The 1991 reforms marked a paradigm shift in India's policy vis-à-vis foreign capital. The 19 years of reforms era has seen progressive liberalization of the policy particularly with respect to Foreign Direct Investment (FDI) whose role in economic development is acknowledged by policy makers. India cautiously opened up to FDI with the hope that it could act as a catalyst for growth as it is believed to fill up the critical gaps of capital and technology and also be a facilitator for transfer of managerial and technical skills, for employment generation and export promotion. Keeping with the policy of progressive liberalization the Government of India has now initiated a debate of allowing FDI in multi- brand retail.

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The government run agricultural ‘mandis’ have become ‘monopolistic and non-transparent’ in nature over the years and have failed to protect the interests of farmers and consumers. The large chain of intermediaries means farm-to-fork supply chain is nonexistent in India and consumers pay a huge premium which goes into the pocket of the intermediaries and not the farmers. FDI in retail will ensure creation of a supply chain which will have a sobering effect on prices, and also guarantee a fair price to both the farmers and consumers. The opening up of retail sector would also address the infrastructural shortages in agriculture. India loses around Rs. 1 lakh crore of food products, including fruits and vegetables owing to bad farming practices and lack of structured farm-to-retail cold chain infrastructure. FDI in retail could bring along huge investments in cold storage chains, agro-processing and other back-end infrastructure which could reduce the post-harvest losses. Organised retailing could also encourage direct marketing, access to modern technologies and even contract farming. This would give farmers a better price, steady income and better access to changing consumer preferences through private investors. FDI in retailing could revolutionize the agricultural sector as it opens the sector to well functioning markets and enhances its access to

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