Impact of FDI in Retail on Indian Agriculture

Abstract

Foreign direct investment in retail business has been steadily growing in India, however organised retailing in the Indian agriculture sector is still at a nascent stage. This paper attempts to find out possible impacts of such FDI in agricultural retail marketing. The Government’s decision to allow FDI in multi-brand retail has been criticised by many groups. However, the Government has defended this policy decision by claiming that introduction of FDI would benefit the farmers in a number of different ways, notably by eliminating the exploitative middlemen and giving better prices to farmers. It has also been claimed that entry of retail giants will greatly improve the agricultural marketing infrastructure and wastage problems will be solved. However several concerns have been raised regarding this policy. It has been argued that these retail giants will form a monopolistic regime which will adversely affect the interest of the farmers in the long run. It is also believed that entry of retail giants in agricultural marketing will result in the displacement of small farmers, asset- poor small farmers will be unable to meet the quality demands set by the retail giants and will be eventually driven out of the market. This paper attempts to analyse the pros and cons of this policy decision and to find out the reasons behind the deplorable conditions of Indian farmers and determine whether allowing FDI in multi-brand will help solve the situation.