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The flip side of Foreign Direct Investment
Indian retail market earlier consisted of culturally-evolved owner-managed small shops. During last decade, supermarkets in the home-grown private sector and single-brand foreign retailing shops have opened in the bigger cities of India to have a share of about 4 percent of the retailing industry.

INDIA, UNTIL late 2011, was against Foreign Direct Investment (FDI) in multi-brand retailing industry. However, FDI in single-brand, limited to 51% ownership, was allowed through a government controlled process.

It was in November, 2011 the UPA government announced retail reforms to allow multi-brand retailers such as Walmart, Carrefour and Tesco to enter into the fray. But in the wake of intense opposition, the government placed the retail reforms on hold till it reached a consensus.

On 14 September 2012, the opening of FDI in multi-brand retail, subject to approvals by individual states, was announced by the UPA government. Thereafter, on 20 September 2012, the reform was formally notified to be made effective under Indian law. Only today, i.e December 7, the government managed an easy victory in Rajya Sabha following a win in the Lok Sabha yesterday.

The critics of the reform have the following to say.

- There will be closure of a large number of independent owner-managed stores and immense job losses. It is believed that few thousand jobs of sales-persons may be created but work of millions in the labour market will be lost.

- The increased monopoly will force the suppliers to drop prices on the whims of multi-brand retailers. It is feared that this may not benefit farmers and the suppliers of Walmart.

- The local economy and services will receive a jolt. It is being held that the work will be done by fewer Indians and profits will go to foreigners as per the functioning style of Walmart.

- The large and rich retailers making huge profits most likely aren't going to spend money for local development.

- Social isolation will increase and similarity and homogeneity will kill the diversity of India. It is being felt the local touch of city shops will be lost and our cities will look like cities anywhere else in the world.

The opposition parties have likened the reform as a second entry of the East India Company in the country in the form of multi-brand retailing industry and eventual political takeover of the country in a new format. "The government claims modern retail will create 4 million new jobs. This cannot be true because Walmart, with over 9000 stores worldwide, has only 2.1 million employees," said a BJP statement.

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of In case you have a opposing view, please click here to share the same in the comments section.
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