The important difference between FDI in industries and FDI in retail...

Foreign direct investment (FDI) is direct investment into production in a country by a company located in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is done for many reasons including to take advantage of cheaper wages in the country, special investment privileges such as tax exemptions offered by the country as an incentive to gain tariff-free access to the markets of the country or the region.

It is not Portfolio Management where you buy stocks and bonds as securities of another country. It is deeper than that, The foreign investment that is set up in the retail brand, creates certain amount of job opportunity, but in return sucks away the profit to their country, not only profit but also the taxes are paid in their own country. Thus, the product that is being sold to people of, for ex. India and the earnings are transferred to the country of origin and hence the Indian wealth goes offshore.

It is another thing to invite industries to India, which brings know-how and new job opportunities which were non-existant in India. Retail business is already well-establish in India since last 5000 years. What know-how will foreign multi-brand retail bring to us? Our own multi-brand stores are  well-set like Reliance, Tata etc. Moreover, the foreign industries which come to our country, for setting up industry here, come with technological updates but set up the industry, on local soil where the entire production takes place. Thus, apart from creating huge job opportunity, it also ensures control over production according to Indian laws and norms. For ex. Bondage labour and child labour is prohibited in India. Production taking place in India, will not be permitted to do so but in muti brand retail, where the finished good arrives in India for selling purpose, does not ensure control over production. Secondly, the small manufacturers of India, whose products, may have qualitative values will be doomed as their products can not compete with multi brand retail products which are produced in bulk. Thirdly, the skilled laborer of the country will diminish. For ex. For years, cobblers, carpenters, tailors have provided community service but with multi-brand retail, they will cease to exist.

During Maughal era, Jahangir had permitted British to do trade in Surat and finally, it brought East Indian Company to India and along with that more than 200 years of British rule!!!

 Are we, on onset of the same???