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)