Feasibility of FDI in Retail Trade in District Darrang, Assam
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IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 5, Issue 5. (Sep.-Oct. 2014), PP 75-89 www.iosrjournals.org Feasibility Of FDI In Retail Trade In District Darrang, Assam. Abdul Aziz. HoD Commerce, Kharupetia College, Darrang (Assam) Abstract: India has now become a prestigious member of the Global Village. Restrictions are reduced from borrowing foreign capitals for the development of its small as well as large-scale industrial sectors viewing employment opportunities, rehabilitation of infrastructure and logistics corresponding with developed countries. India being a developing country, Foreign Direct Investment becomes a vital economic reliability for its future growth because of its several economic problems. The Indian people are also fighting with the poverty alleviation, improvement of living standard, increasing employment, savings and modernization of agriculture and socio economic conditions through their industrial activities. The width of this study will be confined to the retail sectors of district Darrang, a belonging agriculture based district of Assam. The people of this district are very hard working and capital deficiency is the main problem with them. They do not have projected amount to run their retailing, traditional methodologies govern their business activities. Foreign capital is magnetized for the growth of the district’s total economic infrastructure; like, electrification, roadways, permanent market sheds, construction of warehouses and cold-storage for the agrarians etc. They handle businesses range between hawkers to dealers in the unorganized retail sectors. Wastages are their regular expenditures due to prevail of rule of thumb practices. On the other hand, since the liberalization of Indian economy in 1991, many foreign Companies are also waiting to invest in Indian retail markets. GoI has also undertaken many reforms and liberalized the retail sectors; thereby attracting significant foreign investments to bring the new challenges and opportunities expecting sustained growth in the retail sectors. Key Words: FDI, Retail Sector, Economic Development. I. Introduction: Since the liberalization of Indian economy, many foreign investors have been waiting with a view to investing in Indian retail trade (multi brand or single brand). The growing markets of Indian economy also magnetize Foreign Direct Investment in its retail sectors to promote economic development. In interaction with foreign investors, Indian retail sectors see the glimpse of mutual benefits. The flow of Foreign Direct Investment is not a new inspiration to the economy. Before the First World War, its flow was tremendous in needy countries. The rapid development of some countries was possible through FDI. When Libya became an independent country in 1951, its total economic scenario was very disappointing and they then sought substantial capital assistant as well as technical supports from abroad. While refer to USA, a richest country of the world, borrowed heavily in 19th century for its development. In this way, England is owed to Holland, China and Soviet Russia. In recent years, the flow of FDI from government and international agencies has increased in hastily. The trend of FDI in government level in Indian economy since 1991 to recent days is also being made up by the contributions from foreign countries e.g.; Malaysia, Mauritius, USA, Japan, Germany, Netherland and ASEAN countries as well as from international development agencies like IBRD, IDA, IMF, ADB in the forms of loans and grants. Country-wise FDI inflows to India since 2008. (US $ million) Country 2008-09 2009-10 2010-11 2011-12 2012-13 E 2013-14 E Mauritius 10,165 9,801 5,616 8,142 8,059 3,695 Singapore 3,360 2,218 1,540 3,306 1,605 4,415 U.S.A 1,236 2,212 1,071 994 478 617 Japan 266 971 1,256 2,089 1,340 1,795 Netherlands 682 804 1,417 1,289 1,700 1,157 UK 690 643 538 2760 1,022 111 Germany 611 602 163 368 467 650 Others 5,687 5,210 3,338 4,525 3,615 3,614 Total FDI 22,697 22,461 14,939 23,473 18,286 16,054 E : Expected.(source : RBI) Foreign Investors route to the Indian economy in the forms of Joint Ventures, Franchising agreements, direct and portfolio investment in the free hand consumer products of the retail industry, stores, commercial complexes, agencies and companies expecting the victory of the 4 P‟s of marketing mix. The Foreign Investment Promotion Board, in the Ministry of Finance, Government of India paves the way and approves the www.iosrjournals.org 75 | Page Feasibility Of FDI In Retail Trade In District Darrang, Assam. entry routes for the foreign investors and all the interactions are regulated by Foreign Exchange Management Act (FEMA) 1999, formerly known as FERA. Hence the factual inflow of FDI into Indian market has been picked up to 1000 times more at present than it was in 1991 being moral supports of more than 40% Indian people. Glimpse of FDI. The World has now been changed into a global village with many reforms in PSUs, Financial, and capital flows as well as government policies based on LPG to rise new market opportunities that brings growth and development. In this context, World Trade Organization, the highest authority of multilateral trade, has promoted number of General Agreements on Trade in Services, Agriculture, Fashion Textile and Clothing etc to make trade friendly environment among the countries in global level which are included both in retail and wholesale to well built with the auspices of foreign investment. In India, the unorganized retail sector covers more than 97% of its business and contributes 15% GDP to the nation providing 10% employment for energetic youth in relation to optimal use of the country‟s resources. The WTO also emphasizes on standard of living, creating employment, increasing per capita income with GNP, boosting production volume to the needs of the nations, providing opportunities for import liberalization, through de-licensing, open general licensing, removing quantitative restrictions, lowering high custom rate from global competition etc. Former President of India, Dr. Kalam lectured on FDI as: Averring that the factors separating the developed and the developing world were "aggressive marketing" and "competitiveness", "As long as we can build the capacity of aggressiveness in marketing and competitiveness, FDI is not a dangerous thing." The Millennium Declaration 2000 by United Nations also emphasized on global partnership among the countries of the world for development and to open true based trading and financial system to eliminate worldwide poverty replacing the Traditionals by Modern Technologies. While go through study on Adam Smith‟s view on free trade and foreign collaboration, it is long ago in 1776, the Father of Modern Economics stated, “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantages” Collating to the situations, the International Monetary Fund also refers to an investment made to acquire lasting or long-term interest in enterprises operating outside of the economy of the investors hence terms as Foreign Investment. Foreign Direct Investment is systematically classified into two categories; I) Direct Investment and II) Portfolio Investment. When a company directly invests in properties of a foreign company‟s plants and machinery with a view to undertake long term production and marketing of goods and services is termed as Foreign Direct Investment. While Portfolio Investment, on the other hand, is an investment that a company makes into another company acquiring shares or providing loans and earns short term income by way of dividend or interest. The Global scenario of FDI is multidimensional from nation to nation. Countries all over the world are by no means self reliance hence goes for cross border investment and become closer to one another. Countries that were cut-off from one another due to either some political, geographical or any other barrier distances, have now started increasingly interacting in cross border transactions (lately South Korea and Japan, India and Pakistan). The time to time reforms of Government‟s Policies of different countries have also been major contributory factors to the development of Multilateral Trade Scenario. The worldwide collaboration leads the world into a global village and people begin to say good bye the word „Foreign‟ from their universal alliances. Government of India’s Challenges of FDI: GoI has undertaken many reforms and liberalized its economy thereby attracting significant foreign investments to bring the new challenges and opportunities expecting sustained growth in retail sectors. The parliamentary and administrative policies of Indian Government have been replaced and reoriented time to time bringing new challenges and opportunities in its economy. Accordingly, GoI has facilitated through FIPB to promote foreign investment category wise either automatic or government routes e.g. – % of FDI Through routes of FDI inflows Category allow Government Route Automatic Route Category-I No allow Nil Nil Manufacture of items for small Category-II 24% Nil industrial sectors. Broadcasting, TV Channels, Category-III 26% Publishing news papers and Insurance sector periodicals. www.iosrjournals.org 76 | Page Feasibility Of FDI In Retail Trade In District Darrang, Assam. Hardware, Cable Network, DTH 49% Scheduled air transport services.