Foreign Direct Investment (FDI) – Will it boost economy?

Switch to any news channel, pick any newspaper, one word you will obviously hear or read – FDI. Yes, it’s very hot topic these days and often seen being discussed by politicians, economists, traders, corporate etc. but still away from common man’s knowledge. So let us try to understand what exactly is FDI and why people are fragmented in support and oppose of this. FDI i.e, Foreign Direct investment is a provision in which some multinational companies can directly invest in some markets in the country up to 100 %. In present scenarios, investment ratio is 51 % and 49 % for Indian and Foreign companies respectively. Government has proposed 100 % FDI in retail, electronics, defence, telecom and other services and various political parties and economists have raised their concerns for allowing foreign companies to have hundred percent share in Indian operations. They apprehend that it will impact business of small scale traders, will make people unemployed and benefit will be restricted to corporate world only.

But reality is very different from this. In early 1990s, there was not presence of any multinational companies in India. After some reforms and change in investment policies in 1992, coca cola, pepsi and some other companies entered in India. That time too apprehensions were made by people but these MNCs provided direct and indirect employment to millions of people. Another apprehension by some conservative people is that companies will directly buy agro products from producers and will sell it on higher prices in retail market, thus common people living below poverty line will struggle to buy two times meals as well.

In this concern made by these people I would like to add that retailer will procure agro products according to the market demand and market’s segment for such retailers is restricted. Thus no retailer would like to buy such perishable products exceeding the market demand. Millions of ton food grains get perished in procurement, transportation, storage and distribution. So, it will be better if some reforms are made in PDS (Public Distribution System) and steps are made to minimize the wastage of food grains which get rot in rain and insufficient storage warehouses.

Now let’s come to unemployment issue. In 1990s, when there were no MNCs in India, were there employment opportunities? No, a fistful government jobs which were hardly available for youth generation. Compare 1990s with today and see the difference, I think I will not need to add something from me. There are easy options for all young graduates in various corporate houses in operations, productions, customer services and some indirect employment opportunities like distribution, transportation etc. In open economy, India is also becoming a place of skilled workforce which is making country a preferred destination for investment.

With foreign companies investing and manufacturing in India, export will increase and foreign currency will also be generated which will be spent in infrastructure development of the country. India will be able to meet it’s import needs of commodities like petroleum products, edible pulses and other important imports. There will be direct benefits to consumers, producers and common people of the country.

So, unemployment, offshoring, laying off the manpower are some wrongly raised issues by some people. FDI is allowed by various countries and it has successfully distributed opportunities for all. It has given boost to economy, employment, infrastructure, transportation, export, manufacture and production, agriculture, retail and other sectors. So, let us support FDI and benefit the opportunities being generated.