Nitika
FDI in Retail in India
By; Dr. Neelam Tandon
PGDM II A, B and IB
The matter of FDI (foreign direct investment) in retail is best understood in terms of economics, although the FDI policy is a matter of politics. When one is talking about anything that has to do with economics, it is helpful to use a bit of common sense and to stick to the basics, as we will now proceed to do.
FDI in multi-brand retail is being opposed by some, including the BJP. The question of whether FDI in retail is good or not is being hotly debated. To the extent that the debate is related to the economics of organised retail and foreign investment in it, the debate is pointless because it takes only a few minutes to get to the heart of the matter.
Consider these fun facts. * Retailing is an essential service in any large modern economy (or any economy that has hopes of being modern). Organised retail is a necessity only for developed economies because it is the bridge between the production of a large number of goods and a large number of people with specific preferences and varied choices. For poor underdeveloped economies, informal retail suffices given that very few goods are produced and people have little choice. * Organised retail is a good thing in any sufficiently large economy. It increases distribution efficiency, and increases production through increased efficiency in resource allocation. In the absence of organised retail, a good deal of labour is involved in low productivity retailing of small amounts of goods. * Organised retail requires investment, in terms of capital and human resources. This is an obvious fact but is often overlooked. Even if desired, organised retail will not happen if required human resources are missing. * Foreign investment augments domestic investments and is good for the economy. If domestic investable resources fall short of what’s necessary, it is a good idea to attract foreign investment. One large poor economy (which we need
By; Dr. Neelam Tandon
PGDM II A, B and IB
The matter of FDI (foreign direct investment) in retail is best understood in terms of economics, although the FDI policy is a matter of politics. When one is talking about anything that has to do with economics, it is helpful to use a bit of common sense and to stick to the basics, as we will now proceed to do.
FDI in multi-brand retail is being opposed by some, including the BJP. The question of whether FDI in retail is good or not is being hotly debated. To the extent that the debate is related to the economics of organised retail and foreign investment in it, the debate is pointless because it takes only a few minutes to get to the heart of the matter.
Consider these fun facts. * Retailing is an essential service in any large modern economy (or any economy that has hopes of being modern). Organised retail is a necessity only for developed economies because it is the bridge between the production of a large number of goods and a large number of people with specific preferences and varied choices. For poor underdeveloped economies, informal retail suffices given that very few goods are produced and people have little choice. * Organised retail is a good thing in any sufficiently large economy. It increases distribution efficiency, and increases production through increased efficiency in resource allocation. In the absence of organised retail, a good deal of labour is involved in low productivity retailing of small amounts of goods. * Organised retail requires investment, in terms of capital and human resources. This is an obvious fact but is often overlooked. Even if desired, organised retail will not happen if required human resources are missing. * Foreign investment augments domestic investments and is good for the economy. If domestic investable resources fall short of what’s necessary, it is a good idea to attract foreign investment. One large poor economy (which we need