Foreign Direct Investment In Multi Brand In India

Published Date: 02 Nov 2017

AUTHOR’S DETAIL-:

Name-: Hitesh Agrawal

Designation-: Student, IV year (SEM VIII), Institute of Law, Nirma University, Ahmadabad.

Name-: Naiana Jain

Designation-: Student, III year (SEM VI), Institute of Law, Nirma University, Ahmadabad.

"FOREIGN DIRECT INVESTMENT IN MULTI – BRAND RETAIL SECTOR IN INDIA [1] "

ABSTRACT

Foreign Direct Investment (FDI) has become an integral part of an open and effective international economic system. The developing country, emerging economies see FDI as the most important aspect for economic development, for adopting modernization, and increase per capita income and employment. India is the second largest developing country with the growing population. In India foreign investment in retail sector is 100% allowed in Single brand and 50 % in the Multi-Brand retail sector recently. The objective of this policy is to boost the retail business through adoption of international standards and practices. The government has made it mandatory for foreign multi brand retailers to place at least 50% of their total investment in the back-end infrastructure, thus giving a boost to facilities such as logistics and warehousing. FDI is one of the most essential aspects for budding Indian economy. The retail market in India is estimated about $400 (approx) which is dominated by the unorganized sector. The real estate industry is expecting high growth in the upcoming years. The big, giant firms and companies will come and invest in India. The investors will build the malls, stores as they have in other countries which will increase the real estate market. The RBI is also expecting to lower its interest rate so as it become helpful for consumers to purchase land and construct on it. On one hand, investment through FDI route will prosper the country but on the other hand it will poorly affect the livelihood of millions of people who are having some grocery shops, those who are intermediaries in the transaction and many others. By this paper the researchers will analyze the pros and cons of the policy enforced by the govt. Other than this the researchers will try to find out whether the Indian environment is capable of adopting the same policy or not.

INTRODUCTION

"A good investment climate is central to growth and poverty reduction. A vibrant private sector create jobs, provides the goods and the services needed to improve the living standards, and contribute taxes necessary for public investment in health, education, and other services. But too often governments stunt the size of those contributions by creating unjustified risks, costs, and barriers to competitions"

- Francois Bourguignon, Senior Vice President and Chief Economist, World Bank [2] .

It is undeniable fact that every developing country like India is today FDI starving to enhance its economic growth by leaps and bounds. According to experts, FDI in multi-brand retail is an area which will constitute next set of reforms to boost economic growth. The size of Indian Retail Sector is $590 Billion (Rs 26 Lakh Crore) [3] . FDI in multi brand offers multifarious benefits. The government’s chief economic advisor, Kaushik Basu, has said that the move will not hurt the job growth [4] . That by opening up of the FDI in multi brand will create the job opportunities for many people rather than destroying it.

The retail market in India is one of the largest in the world. The Indian retail market, is the fifth largest retail destination globally, has been ranked the most attractive emerging market for investment after Vietnam in the retail sector [5] . Organized retailing refers to trading activity undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc [6] . These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganized retailing on the other hand refers to the traditional formats of low cost retailing, for example, the local Kirana Shops, owner manned general stores, paan/beedi shops, convenience stores, hand arts and pavement vendors, etc. [7] India’s retail sector is wearing new clothes and with a three compounded annual growth rate of 46.64%, retail is the fastest growing sector in the Indian economy. Traditional markets are making way for new formats such as departmental stores, hyper markets, super markets and specially stores. Western style malls have begun appearing in metros and second rung cities alike, intruding the Indian Consumer to an unparalleled shopping experience [8] .

The Liberalization, Privatization and Globalization in 1990 have up surged India to foreign investment. One decision of the Government of India has lead FDI inflows in the country. The total amount of FDI in India came to around US$ 42.3 billion in 2001, in 2002 this figure stood at US$ 54.1 billion, in 2003 this figure came to US$ 75.4 billion, and in 2004 this figure increased to US$ 113 billion [9] . This shows that the flow of foreign direct investment in India has grown at a very fast pace over the last decade and still been growing at the larger pace. India today is regarded as one of the investment destinations recognized by the world at the very large scale. Complex corporate structures and the fact that intermediaries obtain a disproportionate share of value in the supply chain have always deterred foreign investments in the retail arena [10] .

The last few years witnessed the immense growth by this sector, the key drivers being changing consumer profile and demographics, increase in the number of international brand available in Indian market, economic implication of the Government increasing urbanization, credit availability, improvement in the infrastructure, increasing investments in technology and real estate building a world class shopping environment for the consumers [11] . This has lead to more complex relationship involving suppliers, third party distributors and retailers, which can be dealt with the help of an efficient supply chain. A proper supply chain will help meet the competition head on, manage stock availability, supply a relations, new value added services; cost cutting and most importantly reduce the wastage levels in the fresh produce [12] .

Over the past two decades, many countries around the world have experienced substantial growth in their economies, with even faster growth in international transactions, especially in the form of foreign direct investment (FDI). Foreign Direct Investment (FDI) plays an extraordinary and growing role in global business. It can provide a firm with new markets and marketing channels, cheaper facilities for production, access to new technologies, capital, processes, products, organizational technologies and management skills, and as such can provide a strong impetus to economic development [13] .

FOREIGN DIRECT INVESTMENT IN INDIA

The Foreign Direct Investment (FDI) in any country abroad is the net inflow of investment (capital or other), in order to acquire management control and profit sharing (10% or more voting stock) or the whole ownership of an accredited company operating in the country receiving investment. The foreign direct investment generally encompasses the transfer of technology and expertise, and participation in the joint venture and management. Highly productive advantages of foreign direct investment have been constantly being harvested by both governmental and private companies and organizations of all over the world [14] .

According to International Monetary Fund, FDI is defined as "Investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor. The investor’s purpose is to have effective voice in the management of the enterprise" [15] .

In India any Foreign Company who wants to conduct its business can set up its corporation either by-:

Incorporate a company under the Companies Act, 1956, as a Joint Venture or a Wholly Owned Subsidiary.

Set up a Liaison Office / Representative Office or a Project Office or a Branch Office of the foreign company which can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2000.

The Foreign Direct investment in India can be done either by Automatic route or by taking prior approval from the government.

Automatic Route – The Foreign Direct Investment through the automatic route can be done without taking permission from the government or the RBI in all the sectors which the government has allowed time and again by its policy.

Government Route – Foreign Direct Investment in the sectors prohibited by the automatic route need the prior permission from the government either by Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, and Ministry of Finance by making an application which is without fees.

Foreign investment is reckoned as FDI only if the investment is made in equity shares, fully and mandatorily convertible preference shares and fully and mandatorily convertible debentures with the pricing being decided upfront as a figure or based on the formula that is decided upfront [16] .

In India earlier FDI is prohibited which was opened by the wide action of Government of India in 1991 by the LPG policy. Foreign Direct Investment (FDI) is prohibited in retail trading, except in single-brand product retail trading, in which FDI, up to 100%, is permitted, under the Government route, subject to specified conditions. The Government of India has also decided to permit FDI up to 51%, under the Government route, in Multi-Brand Retail Trading, subject to specified conditions by development and declaration of the Government of India in September 2012 [17] .

FDI IN SINGLE BRAND RETAILING

The Government has not defined ‘Single Brand’ anywhere in the circulars or any notifications. Foreign Direct Investment in Single Brand means trading in a Single Brand i.e. a retail store with foreign investment can sell only one brand. Examples are Reebok, Adidas, etc. It means that the retail store of Adidas can sell the products of Adidas and if the one wants to sell the product of Reebok also with Adidas then separate approval of the government is required [18] .

In India the Government has allowed FDI up to 100% in Single Brand after the government’s approval. Foreign Investment in Single Brand product retail trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices.

FDI in Single Brand product retail trading would be subject to the following conditions [19] :

(a) Products to be sold should be of a 'Single Brand' only.

(b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.

(c) 'Single Brand' product-retail trading would cover only products which are branded during manufacturing.

(d) The foreign investor should be the owner of the brand.

(e) In respect of proposals involving FDI beyond 51%, mandatory sourcing of at least 30% of the value of products sold would have to be done from Indian 'small industries/ village and cottage industries, artisans and craftsmen'. 'Small industries' would be defined as industries which have a total investment in plant & machinery not exceeding US $ 1.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. Further, if at any point in time, this valuation is exceeded, the industry shall not qualify as a 'small industry' for this purpose. The compliance of this condition will be ensured through self-certification by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts, which the company will be required to maintain.

FDI IN MULTI BRAND RETAILING

Selling of two or more similar and competing products by the same retail store under different and unrelated brands. While these brands eat into each others' sales (see cannibalism), multi-brand strategy does have some advantages as a means of

obtaining greater shelf space and leaving little for competitors' products,

Saturating a market by filling all price and quality gaps,

Catering to brand-switchers users who like to experiment with different brands, and

Keeping the firm's managers on their toes by generating internal competition [20] .

In India the government has declared 50% in FDI in multi brand retail sector with the prior approval of the government subject to following restrictions [21] -:

Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded.

Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million.

At least 50% of total FDI brought in shall be invested in 'backend infrastructure' within three years of the first tranche of FDI, where 'back-end infrastructure' will include capital expenditure on all activities, excluding that on front-end units; for instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of back end infrastructure.

At least 30% of the value of procurement of manufactured processed products purchased shall be sourced from Indian 'small industries' which have a total investment in plant & machinery not exceeding US $ 1.00 million.

Self-certification by the company, to ensure compliance of the conditions at serial nos. (ii), (iii) and (iv) above, which could be crosschecked, as and when required. Accordingly, the investors shall maintain accounts, duly certified by statutory auditors.

Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per 2011 Census and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking.

Government will have the first right to procurement of agricultural products.

The above policy is an enabling policy only and the State Governments Union Territories would be free to take their own decisions in regard to implementation of the policy. Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of multi brand retail trading.

Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for Government approval.

EXPERTS ON FDI IN MULTI BRAND RETAIL SECTOR- FAVOUR

Thomas Varghese, CEO of Aditya Birla Retail Ltd, said he is in favour of allowing 49% FDI in multi-brand retail. "If you are allowing FDI, do it in a calibrated fashion because it is politically sensitive and link it (with) up some caveat from creating some back-end infrastructure," he added

Whereas retailers like Shoppers Stop and Reliance Retail feel with the induction of FDI they can grow at a much more faster rate than now and can cover most of the Tier 2 and Tier 3 towns of India and share the joy and savings with them too and expertise of Wal-Mart and other Multinational retailers can help in building infrastructure which has been a point of concern for all the National retailers as there are no adequate warehouse, cold storage facility and failure of logistics companies in providing highly professional services which can be improved once the foreign retailers will foray into the Indian scenario [22] .

Foreign direct investment in multi-brand retail will help increase productivity and ensure an efficient distribution network, which in turn will check rising food prices, said Subir Gokarn, Deputy Governor, Reserve Bank of India [23] .

According to Mr. Pranab Datta, Chairman- Knight Frank India- The year 2013 will be a game changer for the real estate industry, in terms of policies and regulations, with most pending bills expected to be passed in Parliament in the coming quarters.

For FDI, he believes that by approving FDI in Multi Brand Retail Sector, RBI RBI can also be expected to lower interest rates in the coming months, which will benefit developers as well as consumers [24] .

EXPERTS ON FDI IN MULTI BRAND RETAIL SECTOR- AGAINST

The current national retailers in India have different view points on the proposal of FDI in India, Retail King of India Mr.Kishore Biyani of Future Group feels that the current situation in the Indian Retail is at a very nascent stage and any introduction of FDI will harm the interest of the National Retailers and believes there are enough investors in India and have been successful citing his own example wherein his home furnishing business investors have received 3x the amount invested [25] .

A discussion paper, prepared by the Department of Industrial Policy and Promotion for eliciting public opinion, has made out a strong case for the entry of multinational multi-brand retailers into the country. The paper, released for public comments on Tuesday, has favored allowing 51 per cent Foreign Direct Investment (FDI) in the multi-brand retail sector which would allow the global giants to directly set up in the country [26] .

Nobel laureate American economist Joseph Stiglitz today said that FDI in multi-brand retail in India would promote instability due to exploitative and corrupt practices adopted by MNCs to monopolize the retail markets in any country [27] .

DIMENSION OF MULTI BRAND RETAILING

AGRO - INDUSTRY: - India’s economy is a farm based economy and FDI is a very vital step for the agriculture sector. More than 70% of India’s population is in agriculture industry and most of them being the small holder of land and income. So keeping this view in the mind the policy makers have given some benefits to them. At least 30% of the procurement of manufactured/ processed products shall be sourced from `small industries. Compliance with this condition will have to be self-certified by the company and then crosschecked by statutory auditors [28] . The mandatory local sourcing requirement in case of multi brand retail trade is aimed to provide a boost to small industries. It may be easier for Multi Brand product retailers to meet this condition since they have a large spectrum of goods to offer [29] . But the policy makers have not covered the major aspects such as policy does not include any restrictions on procurement of farm and allied produce to protect the primary producer or shareholder interest. In fact, there are no incentives even to encourage small farmer inclusion. Even the decision regarding the formal registered contract for farming is not mandatory and even not discussed anywhere. The supermarkets operating in the India, large part of procurement is from whole sale market not from farmers [30] .

The FDI in multi brand retail trade in agriculture industry has both pros and cons. The debates regarding the same are going on. The majority view is against the FDI, according to them FDI will have adverse effect on farmers. The instances of the same can be seen from various countries where entering of MNC’s in the country has been harmful for farmers specially the smaller one and in India major farmers are small one [31] . Farmers and farming today are suffering much more from marketing imperfections and inefficiencies. The Marketing legislation, regulatory framework and infrastructure have not kept pace with changing requirements and environment [32] .

Agriculture Minister, Sharad Pawar, on the contrary supported FDI and told that FDI in multi brand will provide good prices for farmers and better choice and lower prices to consumers. According to him "Farmers will gain on at least two counts: significant reduction in post-harvest losses, and better prices" [33] . It will also result in the strengthening of the backend infrastructure and lead to direct purchase by the retailers. The FDI in multi-brand retail trading will also result in the strengthening of the supply-chain infrastructure for all products, ranging from storage to processing and manufacturing infrastructure, which would reduce post-harvest losses [34] . 

CONSUMERS -: Indians have an ability to append USD 30,000 a year on conspicuous consumption [35] . This means that an Indian middle class man has greater disposable incomes and it is expected to rise to 8.5% p.a. The consumers are the beneficiaries of the FDI in multi brand retail sector. Although they will not be able to bargain at the big stores as they are bargaining in the small grocery shops. But they will get the best product at the very reasonable rates which will generate honesty among retailers and consumers [36] . On the lowest price they will be able to get the best product. Not only this, the standard marks for food safety will result in improvised testing and aggregation facilities. They would get more choices to pick the product that suits to them. This policy measure is most likely to benefit the poorest sections of the society. Lowering of prices would arrest the erosion of real incomes and the current incomes of the economically disadvantaged sections would hence be able to buy more than before [37] . Agriculture Minister has rightly pointed out that by "FDI in Multi-Brand retail sector Consumers will gain from lower prices, greater choice, and higher quality products" [38] .

TRADITIONAL SUPPLIERS -: Since time retailers have tried to exploit relationships with suppliers. One of the examples was seen in 1970, when Sears sought to dominate the household appliance market. Sears set very high standards for quality; suppliers that did not meet these standards were dropped from the Sears line [39] . The survey conducted by one of the recognized has concluded that retail stores like Walmart store can substitute for more than a thousand average retail stores in India [40] . C. Rangrajan, Prime Minister’s Economic Advisory Council said that it would affect the small traders, who need to become part of the modern retail change story.

According to him, "The existence of large retail chains even in advanced countries has not wiped out the small shopkeepers or what are called 'Mop and Pop' stores. They retain a personal touch which is absent in large retail outlets. Also, their proximity to where people live is a great advantage" [41] . Foreign direct investment in the retail sector would also incentivize the existing traders and retail outlets to upgrade and become more efficient. This would usher better services to the consumers, and also good remunerations to the producers from whom they source the products. [42] 

SMALL AND MEDIUM MANUFACTURERS -: According to the policy, at least 30% of the value of procurement of manufactured processed products purchased shall be sourced from Indian 'small industries' which have a total investment in plant & machinery not exceeding US $ 1.00 million [43] . This would provide the small scale industry to boost up and will also increase the employment in manufacture side. These industries also stand to get added advantages of technology up gradation, which would give them an upper hand in productivity and local value addition, thereby raising the profitability and earnings of the small manufacturers [44] . 

EMPLOYMENT AND INFLATION RATE -: Investments in the organized retail sector will see gainful employment opportunities in agro-processing, sorting, marketing, logistic management, small manufacturing sector like textiles and apparel, construction, IT, and other infrastructure [45] . This sector now employs an estimated 30 million people in India (about 7-8% of working population). Most of these are low-end jobs with meager incomes. Of these, about 10% are in large cities where FDI in retail chains is permitted. Probably about 3 million people are eking not a precarious livelihood in big cities of one million plus population. Evidence shows that about 1.7% of the small retailers are closing down annually on account of competition from large chains wherever such chains are established. This translates into loss of about 51,000 livelihoods in big cities, if all cities have organized retail chains. It is estimated that about 1.5 million direct jobs will be created by organized retail at the front-end over the next five years [46] .

According to the latest Central Statistical Organization (CSO) data, the Indian economy grew at a sluggish 5.5 percent in the April-June 2012 period as compared to 8 percent in the corresponding quarter of the previous year [47] . Thus FDI will not only increase employment opportunities but also boost the Indian Economy.

CHALLENGES FOR FDI IN MULTI – BRAND RETAIL SECTOR

RESOURCE CHALLENGE -: In India there are huge resources, some are well developed and some exploited and some under exploited. There are even significant numbers of man power and as well as fixed and working capital are available. The resources are well located in both urban and rural areas, the focus is to increase infrastructure 10 years down the line, for which the requirement will be an amount of about US$ 150 billion which is very high amount [48] .

EQUITY CHALLENGE -: India unlike other developing countries is going at the very faster pace. But while its journey towards its development the most important part of India, i.e. the rural part is not taken in to consideration much. So for the development the need is to give equal care to both rural as well as urban areas. Fostering social equality along with development leads to balanced economic growth.

POLITICAL CHALLENGE -: In India there are always been conflicts between the governing party and the opposite party. Whenever any decision is taken by the government opposite party opposes it. The opposite party does not support FDI in Multi – Brand retail sector because of some self interest in it they have [49] . The support of the political structure has to be there towards the investing countries abroad [50] .

EXECUTION CHALLENGE -: Very important among the major challenges facing larger FDI, is the need to speed up the implementation of policies, rules, and regulations. The vital part is to keep the implementation of policies in all the states of India at par. Thus, asking for equal speed in policy implementation among the states in India is important [51] .

MISCLLANEOUS CHALLENGES –: Apart from these challenges the Foreign Company entering into India have to face many challenges like Regulations restricting real estate purchases, and cumbersome local laws, Taxation, which favours small retail businesses, lack of trained work force, low skill level for retailing management and various other challenges [52] .

ADVANTAGES OF FDI IN INDIA

There are many advantages of FDI in India. They are-:

In India 70% of population is dependent on farming but we do not have proper mechanism for farmers and farming. The FDI in multi- brand retail sector will be beneficial for farmers. FDI will bring contract framing and farmers will get access to new varieties of seeds and other technologies and there will be an assured buyer for the farm products with good price and the farmers no longer need to negotiate with the mediators for the price [53] .

The Real State sector which has become low now days will boost up by the FDI. In consonance with FDI various other bills need to be passed. They are Real Estate Acquisition Bill and Land Acquisition Bill. According to Pranab Mukherjee and Mr. Datta "The change in sentiment on account of the above measures will have a positive impact on all the segments of real estate whether it is retail, office or residential and will certainly make 2013 a much better year in comparison to the last umiryear" [54] .

According to Sobarn Gokaran, Deputy Governor, Reserve Bank of India, "Foreign direct investment in multi-brand retail will help increase productivity and ensure an efficient distribution network, which in turn will check rising food prices" [55] . The global retailers have better experience and have efficient management system and adopt new and better technology which will increase the productivity and efficiency.

The arrival of Foreign Retail chains has two unfold advantages. First, those companies set up supply chains and logistical capabilities, spurring significant improvements in the infrastructure needed to source, ship, store and deliver products (covering all aspects of value chain and supply chain activities, including storage, warehousing, and information-intensive operations). Second, their entry and expansion induce domestic competitors to invest in infrastructure and logistics, as well as greatly speed up the emergence of product standards (especially in perishables and personal consumables), and begin the process of by passing monopoly buyers and traders that dominate procurement in many product categories today [56] .

FDI can be a powerful catalyst to spur competition in industries characterized by low competition and poor productivity. Examples include the cases of consumer electronics in Brazil and India, food retail in Mexico, and auto in China, India, and Brazil [57] .

Economy on the whole will gain momentum as foreign investment along with the required skills is coming into the country, consumers are benefiting, supply chain system will improve, better logistics and warehousing facilities in the country, quality food, jobs to the middle class and it can be expected that farmers will get good price and contract farming concept may develop in India [58] .

According to Abhijit Sen, Member of Planning Commission, "The FDI, which will enable investments in technology, will help 5 lakhs villages in having infrastructure, trained manpower and other facilities. This will enable contract farming, which provides assured price and also price discovery mechanism. [59] "

With the growth in efficiency and productivity there will be growth in inflation. According to Subir Gokarn, "India has effective distribution system, increasing productivity and making the distribution system very efficient will go a long way in checking inflation [60] . 

As multinational players are spreading their operation, regional players are also developing their supply chain differentiating their strategies and improving their operations to counter the size of international players. This all will encourage the investment and employment in supply chain management [61] .

"Foreign investment in retail is a process rather than an immediate response. It will take two-three years to see the result," says Jonathan Yach, chief executive officer, Propcare Mall Management, owned by Bangalore-based Mantri Developers [62] .

IS FDI AGAINST CONSTITUTION OF INDIA

The Preamble of Indian Constitution states about "Sovereign, Socialist, Secular, Democratic, Republic". But the present minority government's unabashed championing of privatisation and FDI in all sectors, including multi-brand retail, shows we are moving away from the basic tenets of our supreme national law – Leader of Trinimool Congress Parliamentry Party Sudip Bhandhopadhyay [63] .

The term "socialist" is questioned in this regard as according to small scale industrialists FDI in Multi – Brand Retail will take off jobs and employment of many people which is against the societal welfare. Although the word "socialism" is not defined anywhere but it has been tried by various jurists over the period of time. Socialism means elimination of inequality in income and status and standards of living. [64] In "Minerva Mills & Ors. v. Union of India & Ors." [65] â€˜ The word socialism is defined as providing adequate means of livelihood for all the citizens and the distribution of material resources of the community for common welfare to bring about a fundamental change in the basic structure of the Indian society. Equality of opportunity and status would thereby become the bedrocks for the social integration. In a socialist democracy governed by rule of law, private property, right of the citizen for development and right to employment and his entitlement for employment to the labour, would all harmoniously be blended to serve larger social interest and public purpose.’ The FDI will be doing the same as it will provide employment to many, will increase the standard of living; people will get greater choice and will get the best product as the cheaper rate. Looking from the job perspective, FDI will not take employment of many as according to the policy the Foreign Investor investing through FDI have to purchase 30% of its raw material from the small scale workers. With the coming of many MNC’s job demand will also increase with the increase in salaries and wages.

The Indian Constitution empowers every citizen of the country the right to development, right to seek employment and right to live with dignity. In "Kesavananda Bharti v. State of Kerala" [66] it was held that ‘a socialist state must take an attempt to build a new social and economic order free from exploitation, misery, and poverty, in the manner those in charge of framing policies and making appropriate laws consider best for serving good’. This amongst others of on economic side envisaged economic equality and equitable distribution of income. The Supreme Court observed that "It was such a socialist state which the preamble directs the centers of power – Legislative, Executive and Judiciary – to strive to set up. From a wholly feudal exploited slave society to a vibrant, throbbing socialist welfare society is a long march but during this journey to the fulfillment of goal every State action taken must be directed, and must be so interpreted, as to take the society one step towards the goal." [67] In "State of Karnataka v. Ranganatha Reddy" [68] it was held that ‘the aim of socialism is the distribution of material resources of the community in such a way as to sub-serve the common good. In India the goods and material are not properly divided, rich are getting rich and poor’s are getting poor. So there is an urgent need to uplift the lower side of the country where such investments will bring large benefits to such area of India.

FDI has many advantages favoring India which reflects the growth and development of India. So as FDI is providing such a high benefits not only to the economy of the country but also to the people i.e. citizen of the country too which means it does not infringe and violates the word "socialism" mentioned in the Preamble of the Indian Constitution. So, it is concluded that FDI is not against the Constitution of India.

CONCLUSION

For the developing countries the FDI in Multi - Brand retail sector has become one of the important components for development. India too is one of the developing countries sees FDI as one of the means of its development. It is not right to say that by the introduction of FDI in India, it will develop. The developments through FDI will not be seen today but the upcoming years and days will witness the growth by FDI. The firms or companies investing abroad do it in three phases. At first, it will come and view the scenario of the country, the consumers, suppliers, etc. for which it will first invest through partnership with the Indian companies and firms. After looking the scenario of India, in second phase, these foreign retailers will expand their business by opening its retail stores at many places, give its Franchise, and increase its real estate investment, putting in operational infrastructure, establish sourcing relationship, etc. In the third phase, the expansion will grow at the high pace. As volumes grow and urban and semi urban retail locations get saturated, companies look for new locations and bring in investment that is calibrated to growth in volumes.

By the FDI not only an economy will develop but the society at large will also develop. The employment will rise with the introduction of MNC’s and big firms, competition will increase which will enable the Indian industrialist to think new mechanism to carry out their work with the innovation. This will even lead to increase in technology, by which the supply and consumption will both increase. The people will then focus of education as the firms will need the educated people, so illiteracy will remove. Many sectors in India which have decelerate like real estate and other will increase as the demand of land will increase. This will even benefit the ordinary people as with the increase in real estate sector, bank will reduce interest rate. So people will get loan at low interest rate.

The FDI on the one hand having many benefits, on the other hand is also not good for the people employed in the Kirana or small stores as people will prefer to go to big retail stores where they are getting many choices and above all many products at low prices as there are many schemes on the products. The government in this regard in the policy has provided certain policies which are although beneficial but not complete. The government has given the 30% criteria but not fixed the rates. More than 70% of India’s population is engaged in farming industry, so there can be chances the supply of raw material takes place at very cheaper rates. For growing the small scale industries the government has not provided incentives, and most of them are not even encouraged to do their particular functions.

From above it can be concluded that the FDI has more benefits then the pitfalls. The effort of the government in this regard should be appreciated and should be recognized. Not much time had been elapsed after the enforcement of policies, not even the foreign companies and firms entered into the territories of India. So, the story is till yet not completed and without experience no recommendations can be given. In all it can be said that India should invite Foreign Companies and Firms openhandedly and hope this step of government change the economic condition of the country.