What is Foreign direct investment?
Why Foreign direct investment?
Drawbacks of FDI
Impact of FDI on host economy
FDI policy in India
Top Investors in India
Retail Sector in India
Major arguments against adoption of FDI in
Retail in India
Suggestive measures to eliminate the
negative effects of FDI in Retail
Investment made to acquire lasting interests in enterprises
operating outside of the economy of the investor.
Consists of a parent enterprise and foreign affiliate which
together form a MNC.
Eg: Hero Honda
No debt creation on the part of the government.
Triggers technology transfer.
Assists Human capital formation.
Contributes to international integration by promoting
Increases productivity and competitiveness.
Improves efficiency of resources.
Local firms may loose business because of the
oligopolistic power of foreign firms.
The repatriation of profit may drain out the
capital of the host country.
Local population may be displaced out of their
jobs if they are unable to cope with the
technologically advanced foreign firms.
FDI may have a negative impact on the growth of the
developing countries (Singer,1950; Griffin, 1970).
Hanson (2001) argues that evidence that FDI
generates positive spillovers for host countries is
FDI could have a favorable short-term effect on
growth as it expands the economic activity. However,
in the long run it reduces the growth rate due to
dependency, particularly due to “decapitalization”
Banga (2005) demonstrates that FDI, trade and
technological progress have differential impact on
wages and employment.
Higher extent of FDI in an industry leads to higher
wage rate, it has no impact on its employment.
Higher export intensity of an industry increases
employment in the industry but has no effect on its
Import of technology has unfavorably affected
employment in India. The study by Sharma (2000)
concluded that FDI does not have a statistically
significant role in the export promotion in Indian
Currently FDI is permitted:
a) Through financial collaborations.
b) Through Joint Ventures and technical
c) Through capital markets via Euro issues.
d) Through preferential allotments.
India had opened up its economy and allowed MNCs
in the core sectors such as Power and Fuels, Electrical
Equipments, Transport, Chemicals, Food Processing,
Metallurgical, Drugs and Pharmaceuticals, Textiles,
and Industrial Machinery.
Telecommunications, Banking, Insurance, Hotel
& Tourism, IT.
Mining of titanium keeping India's civilian
nuclear ambitions in mind upto100%,a mineral
which is abundant in India.
single Brand product retailing where Foreign
Investment up to 51% is permitted with prior
Government approval. Major debate going on
about approving FDI in India’s Retail sector.
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Large number of private operators started operating
in the basic/mobile telephony and Internet domains
after several series of reforms in the telecom sector.
FDI is permitted up to 74% with FDI, beyond 49%
requiring Government approval.
As a result of the New Telecom Policy 1999 (NTP99)
Total FDI in telecom is currently over US $ 15 billion.
Tremendous improvement in infrastructure, lowest
tariff rates in the world and over 250 million users.
In 2007-2008 Vodafone took over Hutch for about US
$ 11 billion.
Retail industry in India is one of the fastest growing.
Contributes 14% to the national GDP and employs 7%
of the total workforce.
The retail industry is divided into organised and
Organised trade employs roughly 5 lakh people
whereas the unorganized retail trade employs nearly
Growth in Retail as a result of economic expansion as
well as jobless growth.
FDI driven modern retailing is labour displacing.
It can only expand by destroying the traditional retail
Foreign retail firms have deep pockets and can cause
even the organized retail sector to go out of business.
Will buy big from India and abroad and be able to sell
low. When monopoly situation is created will will buy
low and sell high.
It is true that it is in the consumer’s best interest
to obtain his goods and services at the lowest
possible price. But collective well being should
FDI should be aggressively promoted in R&D,
Manufacturing, Entertainment to accommodate the
people who have lost their jobs.
Import duty should be imposed to protect domestic
Labour laws should be imposed to ensure that no
management jobs are outsourced.
Jobs should be reserved for the poor people.
Hindi and local languages as a mode of operation
should be encouraged.
Cooperative societies should be formed for the
farmers and other agricultural suppliers to take care
of their rights.
The foreign retail units should be made to divest a
certain percentage of their equity in the Indian
Social infrastructure like schools, colleges and
hospitals should be developed to promote human