The entry of Foreign Direct Investment (FDI) into the multi-trade retail sector has been a pivotal development with far-reaching implications for supply chain management and commodity trade patterns within economies. This phenomenon represents a significant shift in the dynamics of retail operations, as multinational corporations bring in their expertise, capital, and global supply chains. Consequently, this has triggered a transformation in the way commodities are traded, distributed, and consumed within the economy. In this discussion, we will delve into the profound impact of FDI entry into the multi-trade retail sector on supply chain management and how it influences commodity trade patterns, thereby reshaping the economic landscape.
Tag: Investment models.
Decoding the Question:
- In the intro try to write the definition of FDI.
- In Body,
- Discuss the impact of FDI on supply-chain management in commodity trade patterns.
- Try to conclude the answer by highlighting the need for FDI in the multi-trade sector.
Answer:
FDI in retail in India has always been a contentious issue. The government has been progressively liberalizing the retail sector in India for foreign direct investment. The last major move came in 2012 when 100% FDI was allowed in single-brand retail. In this article, we discuss the issue of FDI in retail in India and the advantages and disadvantages of the same. We also talk about how the Indian economy is affected by the liberalization in the government’s FDI policy.
FDI in Retail Background:
The Indian retail market is said to be worth USD 600 billion. It comes in the top-five retail markets worldwide by economic value. It is also one of the fastest-growing markets with a surging population of more than a billion people. The retail market is expected to grow tremendously. The total consumption expenditure is estimated to reach about USD 3600 billion by 2020. The retail market is estimated to have reached USD 1.1 trillion by 2020. Online retail sales are also estimated to grow at a rate of more than 30%.
Impact on the multi-trade retail sector:
- Improved Supply: Once FDI is allowed in the multi-brand retail sector various suppliers in different brands will synergize their supplies to various areas. This synergies supply will improve the overall chain.
- Improve Warehousing: warehousing facilities may improve as huge investment will come in this sector. This improves storage facilities and helps to augment various brands’ value and improve their sales in the market.
- Employment Generation: FDI in the multi-brand retail sector will increase employment as many logistics-related jobs, delivery boys, and sales girls/boys demand will increase. Hence, this will give full employment to youths.
- Technologies: Cold storage facilities may be improved and bring newer technologies to the cold storage system. India currently needs investment and technologies concerning cold storage both static and mobile cold systems.
- Opportunities for Everyone: Opening up the multi-brand retail trade sector has brought opportunities for small traders, producers, tribal people to participate in huge markets and sell products all over the country as well as exporting these products helps them to earn more.
FDI in retail – Disadvantages, and apprehensions:
- FDI may drain out the country’s revenue share to foreign countries which can harm the nation’s overall economy.
- The domestic retail players might not be able to withstand the competition from MNCs and may be wiped out from the market or at least absorbed by the bigger players.
- Prices may be brought down initially, but once the MNCs get a stronghold in the market, they can cause price rise and may also form cartels harming the consumers.
- Farmers, who may benefit initially, may also be at the mercy of these bigger retailers after they get a strong share of the market.
- The predatory pricing policies of these big retailers will harm small and medium players in the sector.
Though there is a lot of controversy regarding allowing FDI in the retail sector, these controversies regarding policies need to be resolved and promote FDI in various other sectors as well. India needs FDI to generate employment and a value chain.
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