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FDI in Retail Sector in India and its Possible Implications

UPA government has been successful in bringing 51% FDI in multi brand retail through voting in Parliament amid extensive heated debate and discussions in Parliament as well as in print and electronic media. Whether, it will be good or bad for Indian economy and its people , it is a big question? Normally, FDI is good for economic development of a country if it is brought in field of infrastructural development such as power, energy, road, port and rail etc which is pre-requisite for economic development or in those areas of manufacturing and service sector where capacity does not exist and country is dependent on import to meet its requirements as it brings capital, technology, technical knowhow and managerial skills etc. However, FDI in retail does not fall in any of these two categories, rather it is in field of  consumer market and role of big multinational stores through will be limited to  outsourcing of material from indegenous as well as imported sources, its storage and retail sales through various outlets.

A fair market exists when there are large number of buyers as well as sellers so that no one could influence the the market to their undue advantage. However, experiences of many of those countries who have have gone for FDI in retail shows that a large share of retail market has been taken over by big global players in this field like Walmart and TESCO etc. Under such a scenario many of the small retailer will either have to close their operation or will have to relocate themselves to a new and less favourable locations. In this process total number of retailers will reduce and market will be dominated by a few big global operators and market would not remain a fair market. Under these conditions, staus of producer-retailer relations will be that of a buyer's market where few big retailers as buyers would dictate the terms in merket unfavorably to producers and specially to farmers and putting farmers to great disadvantage.  Similarly the retailer-consumer market will be seller's market and market prices would be determined by a few big players especially in essential comodities and fair share of efficient operation of retail will not be passed on to customers in terms of reduced price. As big retail shops will function in relatively more efficient way, total number of people employed in retail sector will be less as the market share of big houses increases in retail.  Therefore, it will definitely have adverse impact on employment of less skilled persons already employed in retail sector though it will also provide opportunity of employment to few skilled persons with better  salary and income. 

on one hand Goverment is supporting and promoting micro, small and medium industries against large one as it creates large employment opportunities even though many of these industries are not very efficient, but on other hand this aspect has not been considered in case of retail market. Small retailers are like small industries and their growth will provide more equity in employment compared to big retail houses. As far as small manufacturers are concerned, they will have stiff competition from some of the countries in Esat Asia and China who have comparative advantage in manufacturing sector. The big global retailer have capacity to access and outsource these products from China and other East Asian countries nad it may again be detrimental to small industries. If the same happens many of the small industries would die creating further unemployment.

One of the top priority of Government is to create more employment. However, FDI in retails clearly indicates creating a situation for unemployment and widening the gap between rich and poor that may lead to deep social division and tension and  many other social problem. Since decisision on FDI in retail has already been taken and it has to come in a big way, now it is upto farmers, small manufacturers and retailers how they take this challenge. If they could face this challenge by making their operation more innovative and efficient and protecting their interest collectively seeking favorable support from government, then FDI may even turn to a boon and the same big multinational firms would help in exporting our product.  


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