Banning fdi in supermarkets illogical when large domestic conglomerates already invest in them

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Information about Banning fdi in supermarkets illogical when large domestic conglomerates...
Business & Mgmt

Published on February 6, 2014

Author: gomyriaads

Source: slideshare.net

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The reversal of policy in Delhi and Rajasthan is also dangerous for another reason as it unsettles prospective investors, who start asking themselves whether to enter a market from where they might be booted out at the whim of a new political dispensation.

Banning FDI in supermarkets illogical when large domestic conglomerates already invest in them ET Bureau Feb 4, 2014, 05.24AM IST The new, BJP-led government of Rajasthan has banned foreign direct investment (FDI) in supermarkets from the state, the second state, after Delhi, to reverse policy in this regard. This belies the BJP claim to be a party that is pro-business and in favour of economic reforms. Like with Arvind Kejriwal and the Aam Aadmi Party (AAP) he leads, protecting incumbent big retail chains from competition in the name of protecting small traders is the net result. Big retail giants can leverage economies of scale and out-compete smaller rivals. Banning FDI in supermarkets makes little sense, when large domestic conglomerates already invest in them. The reversal of policy in Delhi and Rajasthan is also dangerous for another reason. It unsettles prospective investors, who start asking themselves whether to enter a market from where they might be booted out at the whim of a new political dispensation. Allowing FDI in retail was a decision taken by a government at the Centre, after being debated thoroughly in Parliament. The policy left the final approvals to state governments, which have powers over things like land and water. But if states start using this power to reverse the permission given by its predecessor government, investors would get the jitters and flee. This is reckless behaviour. Surely, this does not add to the probusiness, proreform credentials of the BJP. The governments of Delhi and Rajasthan should roll back the bans of FDI in retail. As new funds and management practices enter this sector, we could see a revolution in logistics, storage and delivery. Ultimately, the benefits of those will go to consumers and farmers. Consumers will get the benefits of lower prices and farmers could see higher margins, as middlemen are eliminated by compact supply chains. Conclusion: The reversal of policy in Delhi and Rajasthan is also dangerous for another reason as it unsettles prospective investors, who start asking themselves whether to enter a market from where they might be booted out at the whim of a new political dispensation. Reference: http://articles.economictimes.indiatimes.com/2014-02-04/news/47005023_1_aam-aadmi-partysupermarkets-delhi-and-rajasthan

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