FDI arrival to annihilate SMEs

Taking forward its so called controversial economic reforms juggernaut, the Union Government has green-signaled the FDI (Foreign Direct Investment) arrival into the multi brand retail sector and civil aviation into the country.

Coming within twenty four hours after the announcement of diesel price hike and capping of subsidized cooking gas supply to households, the government’s decision has sent shock waves across the country as allowing FDI into the retail sector may lead to the annihilation of the retail businesses.

Notwithstanding the threats of the UPA partners like Trinamool Congress to withdraw support to the Congress led alliance government, Prime Minister Dr Manmohan Singh has categorically said he would go ahead with reforms to increase employment and help the farm sector.

The Government, however, failed to explain how the FDI arrival would help expand employment opportunities and extend a helping hand to the farmers while experts have expressed the fears that lakhs of Kirana shops may face closure.

Observers fear that the retail market economy would be gradually slipped into the MNCs’ hands leading to total control of the economy by foreign companies. If one goes back into history, East India Company arrived in India to launch its business hundreds of years ago and ultimately it took control of the country.

Though such chances are ruled out in the country now because of the changed political circumstances, the ultimate control of the economy by foreign forces may spoil the indigenous sectors as most of the foreign retail giants may dump their products forcing people to buy them.

As per the government’s decision, 51 percent FDI is allowed into multiband retail sector while the FDI limit into the single brand retail sector has already been increased to 100 per cent from 51 per cent.

49 percent and 74 per cent FDI can flow into the civil aviation and broadcasting sectors respectively while 49 per cent FDI will be allowed into the power bourses. The government has also decided to sell part of share in PSUs and raise Rs.15,000 Cr to give a boost to the economy.

On the face of it, it is clear that the SMEs (Small and Medium Enterprises) may suffer most from the decision as their products would not find place in big markets which are now available to the people at every kirana shop and local retail outlets. 

(Updated on Sept 15, 2012)