Why in news?
- Amazon.com Inc has secured approval to stock and sell food and groceries in India.
- It is the first under the policy allowing 100% foreign direct investment (FDI) in food retail chains.
What is FDI?
- It is an investment made by a company or individual in one country in business interests in another country.
- FDI are distinguished from portfolio investments (FII) in which an investor merely purchases equities of foreign-based companies.
What about FDI in India?
- Economic liberalisation started in India in wake of the 1991 economic crisis and since then FDI has steadily increased in India.
- In 2015 India overtook China and the US as the top destination for the FDI.
- Measures taken by the Government are directed to open new sectors for FDI.
- There are two routes by which India gets FDI.
- Automatic route - By this route FDI is allowed without prior approval by Government or Reserve Bank of India.
- Government route - Prior approval by government is needed via this route.
- The government currently allows 100% FDI in the food retail business.
What are the implications of the currrent move?
- The government’s approval for Amazon could be a good opportunity to scrap the confusing conditions that prevail in the retail investment policy.
- Big-ticket retail FDI has the potential to significantly expand the market for goods and services.
- FDI inflow comes with the latest technologies, products and processes.
- It helps farmers to some extent.
- A food store would generally prefer to have a tie-up with a group of farmers to pick up their produce as it ensures them steady and quality supply while ensuring they have control on the prices.
Source: Business Standard
