(IGP) Special Current Affairs Material for IAS (Pre) 2013 – PIB “Topic:FDI In Multi Brand Retail”

(IGP) Special Current Affairs Material for IAS (Pre) 2013

Chapter: Gist of Press Information
Bureau Articles

Topic: FDI In Multi Brand Retail

Q. How much FDI has been allowed in multi brand in India?

The Government has decided to allow Foreign Direct Investment (FDI) upto 51% in
multi brand retail. This means that global retailers can come to India with a
local partner and set up stores in the country. Till now FDI was not allowed in
multi brand retail.

However, there were big multi brand retail outlets owned by Indian entities.
This decision is an enabling policy that will open up new windows of opportunity
to modernize the retail sector particularly for agricultural products and the
small-scale sector.Q. What the actions are being taken by government to bring down its fiscal
deficit?

Q. What are the benefits being considered from multi brand FDI?

The benefits would be for all:

  • The farmer will get a better price for their produce as middlemen will
    be removed and retailers will buy directly from farmers.
  • Farmers’ losses from wastages especially in vegetables and fruits will
    come down.
  • The small scale sector will find new buyers and cheap and better quality
    source for their products.
  • Consumers will get better prices and greater variety from these stores.
  • The entry of global players will encourage existing traders and retail
    outlets to upgrade and become more efficient, thereby providing better
    services to the consumers as also better remuneration to the producers from
    whom they source their products.
  • This is also one of the most effective ways to tackle rise in food
    prices and inflation due to availability of food items on lower prices.
  • Today India is one of the largest producers of fruits and vegetables in
    the world. However 30-40% of food and vegetable products go waste due to
    lack of storage and cold chain facilities. This decision will bring in funds
    for investment to improve supply chain infrastructure such as cold storage,
    transportation and procurement along with bringing in investment for growth
    of the economy.
  • This will bring huge employment opportunities in agro-processing,
    sorting, marketing and the frontend retail business. As per some estimates
    upto 10 million jobs will be created in coming years.
  • Moreover small retailers can benefit from sourcing their products from
    deep discount wholesale cash-and-carry big retailers. This will improve
    quality of their product and reduce their cost.

Q. What are the mandatory provisions/ safeguards of Multi Brand FDI
allowance?

  • Minimum investment by the global retailer will be $ 100
    million and 50% of which will be in backend infrastructure that will control
    wastage and help local farmers. Backend infrastructure will be in or near
    villages and will be of immense value for rural economy.

  • It has been made mandatory that 30% sourcing will be done
    from Indian small industry. This will promote local manufacturing, as Indian
    small industries will feel encouraged to expand capacities in manufacturing
    thereby creating more employment and also strengthening the manufacturing
    base of the country.

  • These stores can be set up only in cities with the
    population of more than 10 lakh.

  • In order to ensure supply to ration shops (PDS)
    government will have the first right to the procurement of agricultural
    products. This is important from food security point of view also.

  • As the policy will be implemented in only 53 cities (with
    population over 10 lakh) which will make it difficult for big retailers to
    crush competition. In many developing countries like China, Thailand,
    Indonesia, Brazil, Argentina, and Singapore, where 100% FDI is allowed,
    small retailers successfully co-exist with big retailers. Indian labour will
    continue to be protected by Indian labour law. It is an enabling policy
    framework.

  • States are free to adopt it or leave it. Those states
    that do not want to have FDI in retail are free not to allow them. This is
    done to maintain the freedom of states in federal structure.

  • FDI policy does not override the existing laws governing,
    trade and commerce in the country. The State Government laws and regulations
    in this regard would apply as much to the foreign players as to the
    establishment of any domestic businesses in the retail sector.

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