FDI in retail

In order to improve our countries economy government tries to introduce foreign investment in India. Let we see in what way This foreign investment will help  to improve our economy or not. First of all our country is based on agricultural economy. That is why the government mainly says fdi in retail will give benefit to farmers. It will eliminate intermediaries. Give more employment opportunities, etc etc. Why we need foreign investments? We are not having sufficient fund to manage our country. Let us see how our country earning money. In economy balance of payment is divided into two 1.   Current account 2.   Capital account This current account gives us short term term earnings whereas capital account gives long term. Again we can classify this current account into 1.   Visible (goods and commodities we produced, exported, imported) 2.   Invisible (services, transfer, income) This visible current account can be divided into 1.   Exports 2.   Imports The sum of export and import is called as our countries balance of trade. Just like our family income and expenditureJJJ. under invisible current account category transfer is important source of income. Remittance sent by our citizens who are working in abroad generate a considerable income to our country. Here let we talk about second part of balance of payment  that is capital account. This capital account is long term investment. Under this we have 1.   Foreign direct investment 2.   Port folio investment 3.   NRI deposits 4.   Short term capitals 5.   ECBS For the year 2012 we set target $360bn, but as per recent announcement we are not achieving that target in this fiscal year. When we need foreign investment only when we affected with trade deficit. Ok let we see what is trade deficit When import>export it is called trade deficit Whereas Export>import is called trade surplus. We are consuming more that is we are importing more than exporting. That is why we are having $175bn trade deficit. In the year 1991-1992 we had balance of payment crisis. That is why borrowed loan from international monetary fund. Now we come to foreign direct investment This FDI is divided into two 1.   Greenfield FDI 2.   Brown field FDI If we see these types greenfield FDI is for construction purpose whereas brownfield FDI is for consumption purpose. The present proposal of FDI is only for brownfield FDI it is not good for us. Because greenfield fdi gives opportunities from the bottom level whereas the brownfield fdi gives development on the well established existing institutions which means it borrows the shares of the established companies and it will do some jimicsJ The investment also divided into two 1.   Domestic direct investment 2.   Foreign direct investment Domestic direct investments means the assets we have it may be liquid assets. All our citizens having gold as a saving this can be used us.when we have this surplus domestic investment no need for foreign investents. Even if we receive foreign investments only direct investments alone will give some sort of benefits that institutional investments, because this institutional investments, nri deposits etc will investment only when our country gives them more interest rate otherwise they won’t invest on those shares. Under present situation the foreign directinvestments are used in consumption purpose. Do you know when the foreign directt investments will give us benefit only when they were used in construction purpose then only we can get benefit. Present FDI is not used in construction purpose. Secondly we are using it in oil imports, and Gold imports, we have imported 1000 tons of goldJ Ofcourse oil import is import because using oil only we are generating powers. If we use it in this two matters  alone will we get any benefit ? Now let we see about FOREX Forex is divided into two 1.   Asset 2.   Liabilities Assets and liabilities together called as repatriability Under asset forex we have 1. Export earnings, 2. Foreign aid(oc la vara dubbu)  JJ. This foreign aid neet not be repaid by us. Under liability forex we have 1. FDI consumption 2. FIIs 3. NRI external accounts 4. Foreign Currency Non Resident Accounts POSITIVE ASPECTS OF FDI ACCORDING TO OUR COUNTRY 1.   Infrastructure development 2.   Warehouse 3.   Power 4.   Roads 5.   Elimination of middleman 6.   Jobs 7.   Technology 8.   Remunerative price 9.   Managerial capability and operatioinal probability 10.                     Inflation will be controlled As per FDI retail policy what will we get? 1.   $100mn minimum we will get 2.   50% invested in infrastructure 3.   30% outsourcing to be outsourced from the local markets i.e through SMEs COUNTER TO THE POSITIVE ASPECTS OF GOVERNMENT VIEW ON FDI 1.   Elimination of intermediaries According to the present market situation we have 1 or more intermediaries. When FDI is coming to our country they will be eliminated. Indirectly they say lobbying giants of US will act as intermediaries which will hidden from our eyes. They are walmart, tesco, sainsbury, carrefloor 2.   Cold chain and Warehouse Why our government waiting for someone to come and to it. He also will buy everything from india or where it is cheaply available.(i.e from china more cheap than our market) so benefit will go to the giants and other countries not for us. As per Rao manmohan model FDI should be banned in india but the government did not considered the recommendations of this panel 3.   Predatory pricing will be controled by our competition commission of india but in reality the CCI can’t do anything in this matter because it can impose only penalty. That penal amount is very meagre compare to what they earned. For example essar company earned more in 2G when we questioned it russia threatening us we will go to ICJ ADR etc,same thing will happen. 4.   Infrastructure If we talk about power and roads it is completely under our government control.if anything done in this respect it should be done by our country not by those giants. Government hide this truth from us. 5.   Technology, mangerial and operational process Already we saw this FDI going to be invested in consumption purpose only meagre amount will be invested in infrasture. Even if they invest in infrasture the benefit will be enjoyed by the reality sector not by our agricultural sector. Already the reality sector earning much more if they earn through FDI they become much more wealthier people of our country not our agricultural community. 6.   Jobs:- if we talk about employment we have two sectors 1.   Agricultural 2.   Manufacturing Present GDP contribution in agricultural sector is only 16-17%. Our country is suffering from under employment, at this juncture this proposal will not work. Second thing our government introduced krishi vikash yojana but its target of 4% was not yet achiveed so far. Manufacturing contributes 14-15% to the GDP Target=25% This target was mentioned in National manufacturing policy Our country shows China as role model for introducing FDI in retail. Just think their economy is manufacturing sector based but our’s is service sector based economy. Service sector’s contribution in GDP is 50-60%. Will this fdi help us? India has the highest density population=11/1000 95% belongs to BPL families. These BPL people running small shops and earning for their life. If the FDI is introduced these shops will be entirely abolished. This FDI will give opportunities only to the younger generation the older generation will be left unemployed. AS PER US STUDY Walmart’s turn over is $450bn 2bn employment opportunity Our tirana’s turnover is$460bn 44mn employment opportunity REMUNERATIVE PRICING US STUDY Every 20 minutes one farmer quitting agriculture. If this walmart provide good opportunities why they are doing so? Not only that US provides more subsidy to  their farmers. Walmart has no role in their benefits. If this walmart introduced in india our country people should beg before the another country for their daily bread. INFLATION This fdi will not control our inflation in any manner. It will introduce dictatory pricing and predatory pricing MIDDLE MAN This walmart will introduce standardisation, quality control and certification. INDIAN STUDY Our country introduced cooperatives. We are the largest producer of milk in the world.70% were given to the farmers as remunerative pricing in india at present and 30% to the retailer. If FDI introduced this ratio will change 30 to farmers,70 to retailers/ OUTSOURCING Our country introduced dereservation policy in SMEs earlier 374 items produced by our SMEs now  only  24 items produced by SMEs. They were not in a position to fulfil the requirements of those giant companies. WTO agreement:- As per Trade related investment measures(TRIMs) we introduced national treatment policy i.e. foreign players and national players must be treated equally. Finally our state government said we will not introduce this FDI in tamilnadu. Can they stop introduction of FDI in tamilnadu? As per 7th schedule of our constitution, foreign investment , foreign policy are under the control of union list but retail is under state list. State government can’t do anything in union decision. We have signed bilateral investment protection agreement(BIPA) with 84 countries using that russian president vladimir putin threatening us. This BIPA has two draw backs 1.   National treatment(according to this we should treat foreign players equally with our players. Our people already in bad condition can they compete with them?) 2.   Most favoured nation status(this is to establish normal trade relations between two nations. But it will benefit the hidden middlemans walmart, testco, carrefloor) INDIAN STUDY Parliamentary standing committee chaired by Mr. Murlimanohar Joshi analysed four aspects 1.   Jobs 2.   Predatory pricing 3.   Dictatory pricing 4.   Environmental issues. Then they recommended complete blanket ban on FDI in india. ICRIER STUDY  In this study only 300 people from high class and middle class people were surveyed but main target people below poverty level families didn’t surveyed. LOBBYING:- In us lobbying is not an offence infact they have to produce a report once in 3months under the lobbying disclosure act. Implicit lobbies of india are 1. ASSOCHAM 2.CII 3. FICCI FEMA:- Our RBI recommended to introduce amendment in FEMA when a person filed a writ against FDI. But our supreme court said it is executive policy we can’t intervene in this matter. ENVIRONMENTAL ISSUE:- There is a threat that these companies many compel our farmers to produce same crops for number of time and use of pesticides in our soil. This will affect soil fertility. The farmers can’t produce as per their wish.