Foreign direct investment versus local Indian market

For any economy to grow it is essential to have competitiveness in the market. Whether with the international market or within the local market, competition makes the market more attractive to all investments. Simple logic behind this is in a healthy competitive environment everyone has the chance to showcase the extra which ultimately benefits the economy overall. 

Now when we talk of competition it is also necessary to know with whom are we competing. As mentioned above within the local market or with the outside market. For an instance, if an economy is purely export based meaning it has few imports from other countries, there market competitiveness declines as others wants their piece to make use of it for their economy. For import based countries, the competition within local market is negligible reason being they don't have enough resources to make use of it and sell it outside which devalues their currency.So the foremost requirement for any nation is to have healthy export as well as import based economy. Exports makes the local market strong and attractive whereas imports brings in more competition in the market.

When we talk of India, lot of things come into picture. For an economy where over a billion people make their living it certainly needs a lot of  resources to meet the demands for all. We have nearly 20% people who are below poverty line. The majority is the middle class, both upper and lower and around 10% make into the affluent society. So it is natural that demands will be different and vivid for different classes. This is the primary reason why India is seen as the biggest economic hub. The simple answer is -variety in demand. And this gives scope for many people both inside and from foreign countries to invest in India. Whether its retail shops, single brand showrooms or lavish auto mobile showrooms, everything sells in India. So the foreign investment has increased in India. Earlier FDI used to be limited to some auto mobile manufacturing units and single brand showrooms but now it has been pervasive. Now investors want to invest in food sector retail shops, mining sector, power sector and many more. This is indeed necessary as more foreign money enters any economy means it is a progressing economy. It increases the demand of local currency and lowers down inflation rates. 

Now let us analyse this sector wise. First lets talk of retail sector. India has allowed to invest in both single brand and multi brand products. Big single brand investors ,for example- Nike, have been successful to attract people from higher class, because of the cost and the quality. Now they are venturing into attracting all classes by producing different variety for all sections of people. This not only increase their competitiveness but also benefits all sections. But when we look into local brand investors, they do get a bad hit in major places. With the emergence of such brands in major cities of the country many local brands have perished due to lack of demand. Although in majority of the places local brands rule, but the major profit comes from cities. So this is an area of concern how to keep balance between foreign investors and local investors so that both benefit. Again multi brand retail shops like Walmart or Carrefour are making their way into the country which will certainly ensure quality in products and even in low cost which definitely will affect the local retail & grocery shops. So we can say FDI in retail ,especially in food sector will not be much beneficial as many will lose employment compared to few who get employed. So main benefit will go to certain section but will leave behind other sections.


The historic "Make in India Policy" which was introduced by the Modi government has though lot of promising outcomes for the Indian manufacturing sector. In this policy FDI is expected to be introduced in many sectors such as defence and railways. FDI in defence will mean big foreign invstors on weapons and artillery as well as aircraft carriers and fighter planes will sow seeds in India use Indian raw materials and human resources in all. This will enhance India's manufacturing in defence materials and will make India proefficient rather than importing all from outside. This will aslo help in employing many sevtions of the society without hampering any section. FDI in railways will be acheived through public private partnership which will help improvise the present standards and technology used for manufacturing various products such as high speed trains and efficient railway tracks. So in these cases FDI surely will be a boon for the economy.


So to conclude we can say that FDI does have its pros and cons but using the investments in proper way and less corruption involved will certainly help India to become economic superpower.