Foreign Direct Investment, Case Study: India

Original content created by Lina Abisoghomyan
  Photo Credits: Asia Tech Hub

Photo Credits: Asia Tech Hub

Walmart produce section in India; all with locally grown produce

The Players:

Walmart- A corporate giant like Walmart would have a direct interest in Foreign Direct Investment. In this particular case, this investment would be in the form of setting up cold-storage units. These units would affect Walmart’s profits directly, and would allow for the global market to access perfectly good produce, and reap profits off of goods that would otherwise spoil. 

Indian produce farmers- India has a huge potential output level of live produce, one of the highest in the world at 180 million Metric Tonnes (MT), but cool storage units with only 23.6 million MT of capacity.

Kiranas-  It is understandable that smaller shops, called kiranas, may look upon this competition unfavourably. But kiranas have been and always will be a part of the consumer market, and their customers will not necessarily disappear with the coming of larger chains. These small stores, though less stringently regulated, still operate with a profit margin because of cultural, economic, and logistical reasons.

  Photo Credits: Hindustan Times

Photo Credits: Hindustan Times

An Indian fruit vendor

The Background:

Foreign Direct Investment (FDI) would ‘open up’ India to American giant producers like Walmart by allowing for a higher percentage of foreign investment. Though this could be seen as greedy capitalistic gain strategy, there is no way to turn a blind eye to the benefits of the transactions that would ensue. In this case, foreign direct investment in this way would serve as a major debt-free financial resource for the expansion of businesses, production, and the infrastructure needed for that production.   In a country with a very low share of organized retail, farmers have no choice but to give up large amounts of their profits to middlemen in order to gain them access to the free market.

  Photo credits: India Online Seller

Photo credits: India Online Seller

A Walmart employee in India surveys the inventory

The Story:

The investment by large corporations institutes standards that would help address discrepancies in marketing, pricing, and product information management ultimately upgrading agricultural and consumer expectations. People in India are beginning to attain Western style jobs in IT and engineering, and would like to see their higher wages getting them higher quality goods.  Globalization comes with foreign direct investment, and promotes a more profitable and practical economy.  Currently, FDI has been cleared by the government in industries like railway infrastructure building in an effort to attract foreign advanced technology and these kinds of investments are expected to double just this year.

  Photo Credits: Frompo

Photo Credits: Frompo

An Indian Kirana shop

Gallery photo credit:  Reuters, CRS