FDI Myth
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Transcript of FDI Myth
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7/28/2019 FDI Myth
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7/28/2019 FDI Myth
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inflation. India Inc also feels its a win-win solution. Some argue that India Inc has found a new
business/financial partner during these tough economic times. Political opponents vehemently argue that it
will displace farmers, create huge unemployment and will leave consumers at the mercy of a powerful cartel
known for its tough bargaining power.
The leading retail chain in the world is Walmart. Its annual turnover at the end of last fiscal was close to $450billion. The others in the top 5 put together will contribute to another $350 billion. Put together, they
constitute `44,00,000 crore in combined revenue while the Government of Indias estimated revenue for the
fiscal 2012-13 is `9,77,355 crore, lesser than Walmarts annual revenue in rupees. No prizes for guessing the
unflinching power that they can command over the dwarf-like Indian unorganised retailers. With such high
bargaining powers, it does not need a consultant to say that small retailers will be squeezed by these big guns
and the so-called big Indian retailers may find it attractive to get sold.
US Economists Stephan J Goetz and Anil Rupasingha in their study titled Wal-Mart and Social Capital, which
was published by the American Journal of Agricultural Economics have found that the presence of Walmart has
reduced social assets in the nearby communities. It is commonly believed that communities with high levels ofsocial capital are relatively healthier and resilient. In fact, this was one of the main reasons for Indias
resilience during the global financial crisis. Their study examined both communities in which new Walmart
stores were built in the 1990s and those that already had a Walmart at the beginning of the decade and
controlled other variables known to affect social capital stocks in a community, such as educational
attainment. They found that communities that gained a Walmart during the decade had fewer non-profit
groups and social capital-generating associations (such as churches, political organisations, and business
groups). They also found that Walmarts presence depresses civic participation. Communities that had or
gained a Walmart store in the 1990s had lower voter turnout in the 2000 presidential election. Walmart harms
not only local retailers, but also a wide variety of other businesses and professionals that serve local retailers,
such as banks and accountants. Another factor is the decline of the downtown and other neighbourhood
business districts that have long served as gathering places and helped to sustain the web of connections that
knit communities together.
With this single example there seems to be a reasonable concern that FDI in multi-brand retail will not only
distort the existing economic harmony in Indias unorganised retail but also will dismantle the economic spine
of our country, its social capital. FDI in multi-brand retail will enrich corporate capital but impoverish Indias
social capital. Result: Gini Gini high high.