02 December 2011

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Detailed Analysis FDI Good or Bad for India Who will benefit in India if FDI is allowed in Multi Brand this is Kirana Business

Detailed Analysis FDI Good or Bad for India Who will benefit in India if FDI is allowed in Multi Brand this is Kirana Business

Few days back the Union Cabinet of India overcame years of indecision to allow up to 51% FDI in multi-brand retail.

Government also increased the FDI limit in single-brand retail to 100% from 51%.

Government says it will benefit India.
Traders fear the move.
Opposition parties oppose the move as they know they will benefit if they support the traders.

No one is touching the real issues and accepting the truth that today or tomorrow FDI, big global corporations will enter into India directly or indirectly.

Today world is becoming a global village.

Foreign Investment in India is governed by the FDI policy announced by the Government of India and the provision of the Foreign Exchange Management Act (FEMA) 1999.

The foreign investors are free to invest in India, except few sectors/activities, where prior approval from the RBI or Foreign Investment Promotion Board (‘FIPB’) is required.

In franchising and commission agents’ services, FDI (unless otherwise prohibited) is allowed with the approval of the Reserve Bank of India under the Foreign Exchange Management Act.
Examples of Such Business - Pizza Hut or Nike or Spencer

100% FDI is allowed in wholesale trading.
Wholesalers do the business with the Retailers.
Wholesalers never do business with Consumers.

Few days back central government of India, Congress Government announced the cabinet decision to allow 51 percent FDI in retail that is multi brand.

Is it good for the India to reject the FDI policy and direct investment in retail sector by the foreign brands?

Does India and Indian citizens are ready for big brands when 70% Indians do not earn daily more than Rs. 20 a day.

If you will see the history of foreign direct investment in India you will realize that India does not need any foreign funds.

In past history when companies invested Rs. 10 Lakh in one year they made profits of 50 Lakhs or 1 Crore.

India is a very big market
now Question is why Indian Government is opening the Retail sector for foreign brands?

Is it an idea to make people forget the Jan Lokpal Bill and in discussions of FDI never to pass the Jan Lokpal Bill and then put the blame on the opposition parties that they did not allow us to work in Parliament.

Who will benefit because of FDI policy of direct investment, Farmer or Consumer or builders and Indian Malls who are not in a competition to Indian Retailers?

Big owners of Indian Malls in future will sell their Malls to Foreign Brands and those rich owners will get the partnership as well as cash.
they will make lot of Money because of FDI policy.

After 50 Years what will happen in India because of Foreign Direct Policy in Retail?

Regarding this no body can predict one thing we should understand that Big Rich Multinational Companies and Indian Rich People will be seen controlling the Retail market of India and which will decrease the small business shops.

Big Malls and Big retail chains are good for any honest Country but in corrupt nations the benefits do not reach to the poor people.

The benefits of such faulty FDI policy are enjoyed by Politicians,big business houses, rich people and their friends who introduce the laws like Jokepal for their citizens.

India does not have good and excellent laws like USA.

One example –

In USA if any American citizen hides his money in other country the FBI and IRS of USA see that that rich American Citizen goes to Jail.

On the other hand Indian Government and laws do not even allow the Indian citizens [the slaves of India] to know the names of corrupt India who has kept the money in other countries.

The Government knows the names but we Indians do not have right to know the names of Corrupt Rich Indians.

Those corrupt Indians do not go to jail but they pay minimal fine and their money becomes legal.

No one goes to Jail for cheating India.

Like this in every law American law beats the Indian law.

So we should not consider and compare the benefits of Big Corporations and Companies which are enjoyed by the America or China.

Example of China –

China – Do the corruption if you are found doing corruption in China, Chinese government gives the corrupt person a death punishment immediately.

Like this laws are very strict.

What happens in India we know it
nothing happens they get the bail and never go to Jail again in their prime youth.

Indians who visit to Singapore do not spit on the road and they follow the laws.
But same Indians do not hesitate to spit on the road.

Before we talk about FDI one has to understand the complete structure and working of Indian Government and Indian system.

2G was happening and No Government agency tried to stop the 2G.

Aadarsh Society scam was happening no Government Agency stopped that.

All decided to unite and planed to enjoy the fruits of evil.

Major scams and crimes come out in public domain or knowledge in India because of Supreme Court of India and few people or NGO who dare to file Public Interest Litigation writs in High Courts or Supreme Court of India.

Otherwise we fear the machinery and system.

Short History and Current FDI Retail Policy –

FDI has been permitted in wholesale trade on cash and carry basis.

In 1997, FDI in cash and carry (wholesale) with 100 percent ownership was allowed after getting permission from the Government.
License Raj = Corruption Raj

In 2006 51 percent investment in a single brand retail outlet was permitted.
This time

As per the current regulatory regime or say Policy
Foreign Direct Investment (FDI) up to 51% is allowed with prior Government approval, in retail trade of ‘Single Brand’ products. Guidelines notified, vide Press Note 3 (2006 Series), require:

i. Products to be sold should be of a ‘Single Brand’ only.

ii. Products should be sold under the same brand internationally.

iii. ‘Single Brand’ product-retailing would cover only products which are branded during manufacturing.

Meaning of Single Brand in connection with FDI?

Single Brand means a retail store with foreign investment which can sell only one brand.

The government has not defined the meaning of single brand and Multi Brand.

As Government of India will open the Multi Brand for Foreign Investments then
Big companies like wall mart or Carrefour and Tesco will open their big luxuries Kirana stores in India.

Currently in Indian Metro cities one can see the Indian rich people opening such luxuries and very big Kirana shops.

Do you know what definition of Retail as per law is?

In 2004, The High Court of Delhi defined the term ‘retail’ as a sale for final consumption.

Retailing is the interface between the producer and the individual consumer
Buying for personal consumption.

This excludes direct interface between the manufacturer and institutional buyers such as the government and other bulk customers.

A retailer is one who stocks the producer’s goods and is involved in the act of selling it to the individual consumer, at a margin of profit.

As such, retailing is the last link that connects the individual consumer with the
manufacturing and distribution chain.

The retail industry is divided into

1. organized sectors – The sector which pays income taxes, sales tax etc or licensed retailers or hypermarkets and retail chains

2. unorganized sectors – this sector includes local Kirana Shops or pan bidi shops or hand cart vendors or pavement vendors

Currently in India Presence of Organized sector is very limited.

Unorganized sector needs the help of Government of India but problem is in last 64 Years India failed to give them facitlies.

Indian government does not have storage facilities to keep the extra food produced by
farmers. on television we see that how the food is kept in open 24 months.
Even i read in a newspaper that government storage house was rented and farmers produce was kept openly in a rainy season.

When Government failed on government front then forget about government helping farmers and others so they can build their own facilities and save the food produce by them.

Currently in India majority Kirana shop business is family oriented and if you ever watch it closely you will find Child labor working in Kirana shops.

Traditional retail sector exploits labor. Did you ever ask the boy what is your salary when he brings your monthly kirana shopping to your home.

If you never asked him now ask him what is his monthly salary and his age.

Do you know any Indian company or business house helping farmers or consumers?

Currently in India situation is farmers do all the hard work and they enjoy the minimum or lowest share of the profits.

Middle men that is Dalals or agents earn more than farmers.

Farmers commits suicide as they can not give education or food to their kids.

Ever heard any agent committed suicide for the above reasons.

Business people purchase from the farmer 2 or 1 Rs KG. and that same produce we consumers have to pay 50 or 100 Rs. KG.

Foreign direct investment is good for the India but reality is that Indian laws are not ready for the FDI investment.

Currently if the FDI comes into India only and only rich people of India and politicians will benefit.

No Indian Consumer will benefit.

No Farmer will benefit.

In If you will try to read the studies made by the different people in different nations you will find that farmers always get less money, consumers always pay more

With or without FDI farmers and consumers both suffer.

When FDI will come into India it will be a start of monopoly and we know that Our Indian laws do not punish any criminal.

Here corruption has become a religion for many people.

In India laws are made for the benefit of Rich and not for the benefit of poor.

If farmer commits suicide no one pays attention but when rich air line say we are suffering losses immediately top politicians say that do not worry we will help you or we will arrange loans for you, using those loans you can pay your debt like this in India we work.

American farmers are not rich they are surviving on the subsidies given by the American government.

America government gave a subsidy of US $ 307 billion under the US Farm Bill 2008 to farmers it’s for 5 years.

As per studies in Europe also the subsidies given by Government to farm sectors are increasing.

President Barack Obama in his speeches he said to American citizens that start to purchase from the local stores.

When FDI comes to India it may or may not eliminate middlemen but the profits of middle men will not go towards the farmers or consumers that profit goes to politicians and company owners.

India has signed the GATT agreement thus Indian government has no right to tell the big retail companies from where to purchase.

By saying 30% will be purchased from Indian farmers is a white lie.
Thus demand 60% produce should be purchased only from Indian farmers.

In study entitled “Wal-Mart and Poverty”, Pennsylvania State University in the United States has clearly brought out that those American states that had more Wal-Mart stores in 1987, had higher poverty rates by 1999 than the states where fewer stores were set up.

Wal – Mart USA turn over = US $ 400 Billion = Jobs created = employs 2.1 million people.

Now in India Indian retail sector too has a turnover of US $ 400 billion, but has 12 million shops and employs 44 million people.

So who is creating more Jobs FDI will not create jobs FDI will fill the bank accounts of Politicians and Rich Indians.

So who will benefit because of FDI in India.

Only Rich Indians and Politicians will benefit because of FDI in India.

Wal-Mart Stores, the world’s biggest multi-brand retail chain, had told the US Senate that it had lobbied for “discussions related to India’s Foreign Direct Investment (FDI).”
Wal-Mart spent Rs. 52 Crore between 2007-2009 towards FDI in India or say getting entry into the India.
the company had also incurred Rs 6-crore in the first 3 months of 2010 for the same purpose.
It has disclosed “discussion related to India FDI (Foreign Direct Investment)” as one of the issues in its lobbying with the US lawmakers in the first two quarters of 2011, during which it spent nearly USD 4 million.

Hourly Salary of the Wal – Mart CEO Michael Duke's is $16,826.92.

Now question is where Wal- Mart Spent Rs. 52 Crore.
To come into India they will keep spending money on lobbying , I hope wikileaks or someone tell us where the lobby is spent by company and who got that money.

This is just start I am sure one day FDI will come into India
We like it or not
thus in our hands we got only one thing to see that FDI does not come into India and if it comes into India
It comes with the good laws which will protect the Indian Consumers and Farmers.

Good Law - Any Company can invest 100% in retail but it will be mandatory for that company to purchase 60% farm produce from Indian farmers or producers or manufactures.

Before allowing FDI Indian government needs to study in transparent manner not behind close doors the benefits of FDI.

After that government should make such strict and good laws that the benefits will be enjoyed by poor people of India and mainly farmers and consumers.

Another law government should pass is that big corporations will not be allowed to import any food items from other nations.

Big Kirana shops must and compulsorily buy everything in India and sell in India or they can export it.

But they should be banned to import from other nations.

Government should not become the permit giver.

Government should give the clear cut policy and allow them to do business in India.

If Government becomes the permit giver then Corruption will happen.
Then these big companies will do the corruption and then wrong laws and policies will be framed and no one in India will enjoy the real benefits of Big Companies.

In this that is once the good laws and good FDI policy is introduced then the competition will rise and farmers will get the good money for their produce.

Big companies will build the storage houses so Indian food will be stored and it wont be wasted.

Currently Indian Produce is wasted because we do not have storage facilities.

Because of Big companies the supply chain will improve, child labor will be reduced; government will get more taxes and many other facilities we Indian citizens will get

But Currently India is not ready for doing business honestly.

Our laws and system encourages corruption.

Thus currently I do not support FDI in India.

I hope BJP and other opposition parties will see that Congress fails in bringing the FDI in India.

I do not oppose FDI.

FDI is good, Competition is good in business.

FDI can benefit India but reality is India is not ready for FDI.

Indian system will never allow the Indian citizens to enjoy the benefits of FDI.
FDI will help Rich Indian Business houses and politicians and not to the farmer or Indian consumers today or tomorrow also.

Thus do or die but oppose the FDI in India.

Suggested Reading –

FDI in Multi Brand Good or Bad for India Answers to Doubts regarding FDI in Kirana Business Part 2


Reality views by sm –

Friday, December 02, 2011

Tags – FDI Multi Brand Single Brand Good Bad Oppose


Destination Infinity December 02, 2011  

Is this being done on pressure from some countries? If you see the protectionism policy followed by certain countries who are considered to be the symbol of capitalism, I wonder how they do something at home and pressure other countries to do something totally different. What high standards!

Destination Infinity

rama December 02, 2011  

Thanks for the detailed explanation, it really helps to know the facts.

Rakesh Kumar December 02, 2011  

Oh! an excellent informative post with detailed
analysis of the issue.

Thanks SM for this nice presentation.

Pl. find time to visit my new post.

Kirtivasan December 03, 2011  

Being in government, I cannot think in the way that FDI is bound to happen directly or indirectly. As a government servant I would develop urban market for rural products.

Renu December 03, 2011  

I was waiting and thinking when will you write about it...our system is so bad that we cant support any good idea even:(.isnt it a big tragedy?

veerubhai December 03, 2011  

Wonderful commentary through this post .Good to read this extraordinary analysis.

Kirtivasan December 03, 2011  

The government is doing exactly this only. Sardar Manmohan Singh is a master planner and is inviting all the NRI money in the service of the country.

sm,  December 03, 2011  

Destination Infinity, ,thanks.
Rakesh Kumar,,thanks.

kalaiselvisblog December 03, 2011  

very nice & informative post buddy...

Anonymous,  December 05, 2011  

Really well written !!

Anonymous,  December 06, 2011  

good article..all pros n cons explained in a clear manner..but still NOT agree with u...u said FDI is good, only reason u r opposing it is b'cs of CURRUPTION..it means,as per u,we should wait until corruption get over?? tell me one thing should we stop all the schemes, policies, projects n every others welfare activity just b'cs there is so much corruption??????? How will u measure that the level of corruption has gone down..so that we can implement FDI ??..some of ur points are undijestable like..what u want- a DEATH penalty for a corrupt act like in china, acc. to you,??think about it....dont say american citizens go to jail for putting black money in tax heavens by FBI/IRS...no such actions have been taken in past, although in last one year US govt has obtained the name list of those person ..but that was not a regular act of FBI/IRS...agree with u that indian govt should explain the name of those indian citinzen...... u said if we implent FDI, benefits will go in the hand of rich people but you did not explain how? b'cs apparently it doesn't seem to be..i dont know what new type of corruption u r wondering in this...

Kirtivasan December 08, 2011  

SM has written very passionately and at times taken a very risky stance. It is difficult to explain a lot of things. We need to fill in the blanks and weave our own explanation of things.

pyanka December 21, 2011  

very very nice explanation given by you,,,,,,,,, realy amazing on both side of FDI. thnx for such a nice facts that u shared ,,,,,,, :)

Anonymous,  January 06, 2012  

hey dnt u think if we implement FDI then only we il start probressng. Surely it will compress our rural markets.. Bt isn't it better to have those rural workers working for urban markets. Nd it will surely rise the demand, production n standards of indian market..!
We cnt wait till that so called satyug cums back to india whrn ther is no corruption n all. Lyk if we implement it we will be forced to rise above average.. To the next level.. Plz clarify my doubts SM

SM January 06, 2012  


thanks I Updated the FDI good or bad article tried to answer your question.

SM January 08, 2012  

A 2007 report by the state-run National Commission for Enterprises in the Unorganized Sector (NCEUS) found that 77% of Indians, or 836 million people, lived on less than 20 rupees (approximately US$0.50 nominal; US$2 PPP) per day.

Pradeep January 27, 2012  

You have explained well but in my view you are partially correct. It is not that if FDI is allowed then only rich and and big politicians will enjoy. A simple qns to u.... Do we see only rich and big politicians going to Big Bazaar and other Shopping malls. Don' the middle class family go to shopping. You have explained well but in isolation. I disagree with you that FDI will be bad in India. WE need FDI and foreign investment in many sector because of our open economy.
1- What is the quality of groceries and price in a normal Kirana Shop. I purchase my groceries from the kirana shop and complain him regularly about the quality but of no use.
2- Kirana Price is more higher and benifit does not reach the farmers. Kirana Shop owners do not pay taxes. Shall we not make them organised.
3- Food wastages from in logistic and procurement. who will address that ?
4- Being a consumer, should not i have the choice to choose which shop to buy from ?
5- How many Kirana shops have closed after the opening of Big Bazaar and Reliance Fresh. Customer will always prefer the shops which is near by and good. So it is not that if big malls come then other kirana shops will lose their business.
6- As regards ur logic ar the kirana shops destroying the street vendors business because both are in the same business.

Now look at the other side of FDI

When foreign companies will bring investment, India will have money to build infrastructure in retail. cold storgaes, good logistics, reduced wastages.

Farmers will have choice to sell their produce whoever they find good. If Big investors pay them they will do business with them.

In the last 65 years govt of India has not been able to build infrastructure because most of our budget money goes in Subsidy and poverty alleviation schemes which are very poorly implemented and never reach the poor and targeted.

At present FDI will be allowed in a city of more than 1 million population. For that to qualify only 53 Indian cities comes under the criteria.

Lets open the retail sector and do it on an experimenting basis, if we need changes and laws we could certainly bring it. we have to address the farmers and consumer issue and protesting FDI is no way going to give us any valuable solution.

SM January 27, 2012  


thanks for comment.
Regarding your questions i wrote again one article Below is the link please read it.

FDI in Multi Brand Good or Bad for India Answers to Doubts regarding
FDI in Kirana Business Part 2


MAD HAV April 23, 2012  

I am so much worried , we THE PEOPLE have become so weak that even after knowing that there no good in it we cant stop it. Its waste to be educated and thinkable in such a self killing system . . .

Durga Ranjan June 29, 2012  

very nice...keep writin such excellent articles...

Custom Market Research August 07, 2012  

India's retailing market is essentially owner operated small shops. In 2010, better arrange convenience stores & supermarkets accounted for about 4 percent of the market, and these were present only in large locations. India's retail and logistics industry employs about 40 million Indians.

Anonymous,  August 17, 2012  

its very good...now i understood the concept of FDI...thank u for giving it in detail...

Urvish Acharya,  September 07, 2012  

@ SM , really a helpful article in understanding our policy paralysis, and because of this general people facing issues & challenges

Arun September 15, 2012  

Thanks for the info.. really fetched me with lot of insights

Dr. Munish Raizada September 18, 2012  

Hello SM:

I tend to differ. FDI in retail market will be good for India too.
This link provides further perspective: http://sabhlokcity.com/2011/12/please-ask-your-questions-on-fdi-here/

SM September 18, 2012  

@Dr. Munish Raizada

FDI is good but India and Indian Politicians and laws are not ready for FDI.
So say No to FDI.

dr_che,  September 20, 2012  

Very nice article...I totally agree with you,fdi is good for india but india isn't ready for it as the corrupt politicians and selfish rich people of india will never let the poor farmers and innocent consumers to benefit from fdi....we need more stricter laws (like china) against corruption....weed out the corruption first and then any kind of reform will work in india but till the time we have rampant corruption,corrupt politicians,capitallistic rich snobs in india then we citizens of india will never benefit from any reforms....sad to see my country like this

Anonymous,  September 20, 2012  

thanks for information about f.d.i.

Gurudatt September 22, 2012  

FDI is not good for India..I will tell this 1000 times!! Just to attract few crores of investments , we are selling ourself to MNC's. What is the need to allow FDI in retail? You are killing local farmers.Like you said correctly, there is no rider for making Purchases.They will dump goods from China and and make huge profits. Where the money(profits) will go? Is there clarity? Tomorrow once they are established, they will start dictating terms to our people(both consumers and farmers)
Control our economy. In the name of attracting FDI's please do not sell our country to foriegners..Respected PM, please call for debate before you take such big decision..Do not yield to Mr.Chidambaram's views..He is the most arrogent finance mininster India has ever seen..May GOd save India..

Anonymous,  September 24, 2012  

Come to UK where I live ...... TESCO/ASDA(Walmart) first provided goods at very low prices and now that all the local shops are closed, they are controlling the prices !!
I don't think wearing NIKE shoes is important ..... as long as the shoes are made in India and the workers have been paid enough salary, Indians should be happy to wear even unbranded items.
Most of the Indians are uneducated and hence they do not see the evil side of FDI ...... I live in UK and hate TESCO / ASDA !!

Praveen Kumar October 03, 2012  

its very intersting and informative
i agree with mr gurudatt as later our economy ll be controlled by foriegn contries who enter india in the form of fdi
how can we controll fdi later wen we are not able to controll it now

Anonymous,  October 10, 2012  

it is very interting after knowing the fact of the about fdi .now a current position of our is bad .so first we growth our economy.then allow for fdi.

satish,  December 07, 2012  

Today to making Money its very difficult and showing employment for our citizens of India also same.

Due FDI Money will go in the pockets of USA so because they are being investors and fdi products are from china parallelly their citizens will empowered.
so finally india will lose floating of money and increases unemployment.

places where the malls are going to place near to that land-rate will be increases.

when such decision are happening they should involve peoples of india not the opposition parties.

Rajat,  December 23, 2012  

Dear SM,
I liked the article very much. Though I support FDI strongly, I am impressed by this article.

But I think you have written this article in biased way. You should consider both sides and then write about this. There are much advantages of FDI.

You should not blame govt. or governmental policies directly, else you should suggest what ordinary Indian should do, because ordinary man, not govt. shapes the country's future.

SM December 26, 2012  


Read Part 2 will clear your other doubts.

Himanshu Soni February 01, 2014  

AS FDI definately came into india..But only if it will be helpfull for poor farmers..not 2 the poltician 9d rich persons.........