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Welcome FDI retail, in Maharashtra State
Recent development in the economic policy of Government of India introduced a new chapter in Indian retail market. Foreign direct investment in retail market we have accepted because the US government wants to encourage their MNCs to take a chunk of profit from our local consumer market. If the government interferes in the market practices by introducing compulsive measure to give added advantage by making rules by which local traders will be pushed on side and the MNCs benefit; we have the HC to go to, and protect the basic rights of the traders. Any regulation if government imposes to help the foreign traders above the local traders that will be challenged in the Court and government will have to relent. That means our traders are not really in any danger of becoming marginalized by the foreign traders in the retail market. The fear they show of that is not well founded but only imaginary.
With this new challenge these traders will have to compete with something very tough and in the end we expect that the consumers will probably benefit. Competition in the market always helps the consumers and that will be a good thing for all we customers. Government suggests while spelling out many benefits to the farmers and other suppliers that they will get better prices and the payment mode will be more reliable. Any cheating that they experience at the hands of the local traders will not be experienced with these foreign traders. These MNCs will teach the suppliers better ways to present the merchandise and eventually that shall help them while handling export commitments. Many of our export orders are cancelled due to bad or wrong packings, that will stop and our exports will pick up. At local level we may expect some employment created for local youths in the malls manned by these foreign retailer companies. At present only 51 % participation is permitted that means, a sizable control of the working of these stores will be in the hands of local people. If my readers remember, when Mall culture government introduced, all small time shoppers were complaining about their safety. Eventually, the resistance vanished as their leaders at Dhanabazar realized, that they can open their Malls, they did that and the resistance stopped. Similarly, here again local investors shall come to partake in these FDI retail markets and their resistance will wither out.
To be on the safe side I suggest that we should take note of news that one big Retailer Co. is not paying salaries of their workers! If this is true then our belief that we shall get employment created by these retailers may prove to be false.
How consumers may benefit we shall see, as with local dealers faulty products are pushed on to helpless customers and warranties and guarantees are not honored; this will not be possible with these foreign retail dealers. That means, our manufacturers will have to be careful while selling their faulty products as they will not sell; that shall save the customers from being fooled the way they do today.
There are rumors about the import policy that shall make imports of foreign goods by these companies easy and fear shown that these imported merchandises shall pose threat to indigenous products. After careful study of this aspect I came to know that this FDI is not a new concept as it is made to appear. Foreign companies have been coming to invest their funds in India since British times. What is new is not that foreign companies are coming to invest but specially American companies are going to be encouraged to get into the market. Therefore, the real term should be USDI (US Direct Investment) and not FDI, and that bothers the concerned people. In earlier times, foreign companies were allowed to put their funds but they were not allowed to take the profits out; this protection UPA government of MMS has removed. That is the concern for all because if these monster corporations are allowed to take away the chunk of profit to their country our foreign reserves are surely going to suffer; even though, temporarily Stock Market may benefit.
Our shares market looks up because they feel with this incentive more foreign funds will come and with this anticipation the market has become bullish however, that has nothing to do with the true development of our economy. With funds going out of India, how our economy will improve, I do not understand. All these attempt look to be with intention to encourage speculative spirit so that more gambling will continue and the speculators will make some profit. One European finance expert told me some time back that Indian Stock Market cannot attract sizable funds because, India does not have many blue chip companies. To attract more funds our government should see that more and varied groups of entrepreneurs are encouraged to open up and develop blue chip companies. At present number of truly blue chip companies our market boasts are anything around not more than 45! This is too low a number for foreign players to play with. This number should be as high as 1000 at the least to attract sizable funds in the speculative market. We have a limited number of industrial groups such as Tata, Birla, Reliance, Modi, Wipro etc. that is too little for these investors as he pointed out. What new companies come up are all belonging to one of these groups and so their working is identical that discourages these players. They want variety of management to offer different outlooks for developments; that is not happening and so long as this situation persists our Stock Market will not be able to attract foreign funds in quantity we want to boost the economy of our country. To achieve this, our government should encourage new and industrious groups to come up to from new companies, those to develop into blue chip eventually. Our present policy does not have this aspect.
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