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Fdi Issues

In: Business and Management

Submitted By donacherian
Words 1334
Pages 6
FDI reforms – Challenge or Issue
Dona Cherian
C201276364

In the Indian economy, the contribution of retail and wholesale trade alone to the GDP growth is at a whopping 14 %. This figure in itself is indicative of the importance of this sector in the growth of India’s economy. It is double that of the next service sector contribution; construction at a7.3% growth rate. The retail sector is divided into organised (malls, hypermarkets etc.) and un-organised sectors (kiranas, convenience stores, pavement vendors) wherein the latter constitutes almost 98% of all retailing trade in the country. The coming of FDI would bring on a higher percentage of organised sector into the entire retailing industry which is where the question of good or bad arises.
The people who talk against the FDI policy have many reasons that they put forward to justify their cause. One of the main reasons here is the fact that the drastic increase in the organised retail market would almost wipe out the domestic unorganised sector and the advantageous situations that it has in our country. As the aforesaid figures show us, this sector accounts for 98% of India’s entire retail industry, which makes this argument quite scary.
The kirana stores in India are characterised by great neighbourhood locations and unbeatable access. With ever-increasing traffic congestion, this is a huge customer benefit. Our country lends itself to neighbourhood solutions better than countries that have wider open spaces and lower population densities (i.e., most of the rest of the world!).
Secondly, low - often notional - rents and 'flexible' wage costs often mean ability to have cost neutrality, if not competitiveness, versus larger players. Indeed, the biggest hurdles that large-format 'modern' retail faces are the high, inflexible rents and the need to constantly train a churning and less flexible staff.…...

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