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Dec 14, 2011

FDI in Retail in India... & Corporate Social Responsibility

In India FDI or Foreign Direct Investment in retail sector is very essential… *Conditions Apply

Foreign Direct Investment can be complimented with FRIForeign Redirected Investment in bringing up the social status of this country. The Multinationals(MNCs) stepping into the retail sector can use their exposure, extent and skills in realising their Corporate Social Responsibility. This can be an important step in reducing the gap between the Haves and the ones Having less.

Essentials of Foreign Redirected Investment or the *Conditions Apply

1. MNCs in retail sector should adopt and develop 3-5 villages near the city of their major operations.

2. 50 % of the produce of the adopted villages should be consumed my these MNCs.

3. Not just the big cities but FDI should also make its way in tier 3 and tier 4 cities. They can also open small sub stores to cater to the ‘bottom of the pyramid’ in these tier 3 & 4 cities like Mangalore, Jalandhar, Kanpur, Varanasi, Allahabad, Jabalpur, Raipur, Bhilai, Baroda, Nasik, Rajkot, Jammu, Dehradoon, Kasauli, Rishikesh and many more.

4. These MNCs should only hire Indians, after training from their respective foreign staff for about two months (this time is enough for training the Indian employees, will also add to the exposure of the foreign staff).

5. Existing retail outlets around the areas of the expected Foreign retail outlets, should be moved to other scattered areas of the cities. The state government should assist their relocation. This will help the local retail stores expecting losses due to the bigger chain of foreign retail establishments. It will also assist in reducing the economic disparity of the areas.

6. These small Indian retailer can be given tax benefit in direct or indirect taxes, to match the competition created due economies of large scale selling by foreign retailers.

7. A mandatory condition can be laid on foreign retailers to use the products made in India for 80% of their selling.

8. Also the services of these foreign retailers can be used in Public Service Departments like, Railway stations& Trains, Army canteens, stores in big public sector organizations. This will not only improve quality but also a healthy competition will be created to supply the best.

India and Indians need to protect their interest and that can only be done, by being selfish in the interest of the Nation. In the era of fierce Globalization, once again we can not be looted by a new form of East India Company (MNC). These Foreign companies are knocking India's door because they see an opportunity, we have failed to capitalize on. Invitation card to these companies should be an invitation for equal growth of the country and not the individual growth of the Multi National Company.


Dr Shuchita Vatsal said...

Nice write up..I'm not much in finance but still some of the conditions that you suggested, can keep our motherland away from drawbacks of FDI . Also the chances of exploitation of our markets can be reduced.We need to really work hard n findout certain measures to stop the recurrence of a trade that East India Company did years bck in India.. We can't sit back in times of globalization.. Need to be part of this race but more sensibily.. Keep writing..-Regards.

guptaaman said...

I agree with you, Nishant!!! The points you made are really appreciated. I'm just normally presenting my ideas, may be they needs correction. But there are various factors other than you mentioned like:-
1. whether it is Reliance, Best Price ( bharti + walmart ), or any other type of FDI in retail sector; they are just doing business on contract bases by purchasing all the produces (specially fresh fruits and vegetables) leaving nothing left behind for the local small towns & tier III cities. That means they are controlling the food prices indirectly and the same farmer has to come in these stores to buy his own produce. Sometimes, even on much higher prices. Moreover, due to their stores limited to Tier I or II cities which means they are interested in serving capitalized society only as there are more customers.

2. Now, why we need FDI or say Walmart in India? I don't think that an Indian can't start a SME business but Because we don't have infrastructure to keep food items safe and fresh. It means government should look up on providing subsidized loans & even establishing temperature controlled food markets. Here, we are generating direct employment rather than any FDI will do that.

3. Now, why there is need of Walmart type supermarkets? I am experiencing it , right here in united states.
Firstly, Areas are very less densely populated and supply is more than demand. Therefore, to preserve the products we need some supermarket to preserve them. Secondly, Temperatures are as high as 45°C to as low as -15°C. So, need of temperature controlled units.
Thirdly, here people eat much more processed, frozen and meat which means again you need a store like Walmart, Costco, Kroger, Sams Club, Giant Eagle and many more. .

What I believe personally is that the root cause of present situation in India is "Improper Education System". There is need of bigger Education Reforms if we want to develop a strong nation. Moreover, I can say that FDI, Globalization or Westernization is not the solution to develop a prosperous India. If we keep looking on MNC's to develop India or let them to do business like the way they want, it is not feasible in current situation. Moreover, as you said "another East India company".

P.S: I want to mention also that why US is still dominated over other countries.
firstly, even if they are outsourcing all the manufacturing from countries like China & Oil from Middle East. They are still on strong edge because they are preserving their own natural resources, to feed their people in the future. On the other side, In India we are exporting our natural resources like Iron ore to china and many more products; leaving behind our people hungry and future in nowhere.
It's really thinkable situation that needs to be controlled by a strong and optimistic statesman who works for his countrymen rather than private interests.


dinesh singh said...

sir, i have been reading about this too. this policy is becoming confusing day by day due to disputes and different political views which comes on news.

yes there are some defects too, but this will help investment sentiments in country. no money will come to govt, will help GDP and employment with good numbers. If we make strict norms then it will be difficult to attract investors.

there are many mix and match policy needed by our govt to take country to higher growth but this opposition will not let anything happen....

2004 - 2008 has been the most favorable and golden period in Indian economy.

its a debatable topic - but iam in favour of fdi.... lets continue...

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