FOREIGN CAPITAL INVESTMENT IN INDIA AND ITS IMPACT ON AGRICULTURE

DR. RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY, LUCKNOW
2017-2018

ECONOMICS
TITLE OF THE PROJECT

FOREIGN CAPITAL IN INDIA AND ITS IMPACT ON

AGRICULTURE

Submitted To: Submitted By

Dr. Mitali Tiwari Prasoon Tiwari
Assistant Professor ROLL NO: 101
FOREIGN CAPITAL INVESTMENT IN INDIA AND ITS IMPACT ON AGRICULTURE
 FOREIGN CAPITAL INVESTMENT IN INDIA AND ITS IMPACT ON AGRICULTURE

ACKNOWLEDGEMENT

At the outset, I take this opportunity to thank my Professor Mrs. Mitali Tiwari from

the bottom of my heart who has been of immense help during moments of anxiety and torpidity

while the project was taking its crucial shape.

Secondly, I convey my deepest regards to the Vice Chancellor Prof. (dr.) Gurdeep

Singh and the administrative staff of RMLNLU who held the project in high esteem by

providing reliable information in the form of library infrastructure and database connections in

times of need.

Thirdly, the contribution made by my parents and friends by foregoing their precious

time is unforgettable and highly solicited. Their valuable advice and timely supervision paved

the way for the successful completion of this project.

Finally, I thank the Almighty who gave me the courage and stamina to confront all

hurdles during the making of this project. Words arent sufficient to acknowledge the

tremendous contributions of various people involved in this project, as I know Words are Poor

Comforters. I once again wholeheartedly and earnestly thank all the people who were involved

directly or indirectly during this project making which helped me to come out with flying colors.

Your sincerely

Prasoon Tiwari

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 FOREIGN CAPITAL INVESTMENT IN INDIA AND ITS IMPACT ON AGRICULTURE

TABLE OF CONTENTS

TABLE OF CONTENTS .................................................................................................. 2

INTRODUCTION ............................................................................................................. 4

FOREIGN CAPITAL........................................................................................................ 5

ROLE OF FOREIGN CAPITAL..................................................................................... 7

1. Increase in Resources ........................................................................................................... 7

2. Risk Taking .......................................................................................................................... 7

3. Technical Know-how ........................................................................................................... 8

4. High Standards ..................................................................................................................... 8

5. Marketing Facilities ............................................................................................................. 8

6. Reduces Trade Deficit.......................................................................................................... 8

7. Increases Competition .......................................................................................................... 8

CURRENT REGULATIONS TO MANAGE CAPITAL INFLOWS IN INDIA ....... 8

1. Foreign Direct Investment ................................................................................................... 9

2. Foreign Portfolio Investment ............................................................................................... 9

3. Foreign Venture Capital Investors ..................................................................................... 10

4. External Commercial Borrowings ..................................................................................... 10

FOREIGN CAPITAL INVESTMENT POLICY IN INDIA ....................................... 11

FOREIGN CAPITAL INVESTEMENT IN AGRICULTURE IN INDIA ................ 13

FDI INFLOWS IN DIFFERENT AGRICULTURAL SECTOR ............................... 14

1. FDI inflows to fertilizers industry in India ........................................................................ 14

2. FDI Inflows to food processing industries ......................................................................... 15

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3. FDI Inflows to Agriculture Services .................................................................................. 16

4. FDI Inflows to Agricultural Machinery ............................................................................. 17

OPPORTUNITIES AND CHALLENGES.................................................................... 17

The positive outcomes of the policy are as follows .................................................................. 17

The policy also comes with its share of disadvantages: ........................................................... 19

INITIATIVE TAKEN BY GOVERNMENT ................................................................ 20

Several of the recent major government initiatives in the sector are here ................................ 21

CONCLUSION ................................................................................................................ 22

BIBLIOGRAPHY ............................................................................................................ 24

BOOKS ..................................................................................................................................... 24

WEBSITES ............................................................................................................................... 24

ONLINE MATERIAL .............................................................................................................. 24

ONLINE JOURNALS .............................................................................................................. 25

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INTRODUCTION

Agriculture is the backbone of Indian economy. This sector plays a vital role in the
development of India with over 60 per cent of the countrys population deriving their
subsistence from it. Most of the industries also depend upon the agriculture sector for
their raw materials. But agricultural market of India is highly fragmented and
unorganized. ( International Journal of Commerce, Business and Management (IJCBM)

For economic and agricultural development, capital is the one of the most important
factor. Such capital may be front within the country or from outside the country. Foreign
capital has significant role for every national economy, regardless of its level of
development.(Anon. 2017) For the developed countries it is necessary to support
sustainable development. For the developing countries, it is used to increase
accumulation and rate of investments to create conditions for more intensive economic
growth.( A corporate balance-sheet approach to currency crises, Journal of Economic Theory)
When capital available within the country is not sufficient, capital from abroad is made
use of. For less developed countries, capital has been provided by international
organizations like World Bank and International Monetary Fund (IMF) all government
led. ("Indias Policies towards Foreign Investment", 2017)The recent technological
developments and spread of information technology have opened up the economys the
world over as never in the past. This in turn has increased the multi-national role and
importance of capital. It has been realized by many countries that inflow of capital from
abroad is vital not only in the early stages of economic development, but also for the
growth of a developing economy. Most of the countries now have been making use of
foreign capital and investment.

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FOREIGN CAPITAL

The term 'foreign capital' is a comprehensive term and includes any inflow of capital in
home country from abroad. It may be in the form of foreign aid or loans and grants from
the host country or an institution at the government level as well as foreign investment
and commercial borrowings at the enterprise level or both. Foreign capital may flow in
any country with technological collaboration as well. Capital inflow.( Credit Frictions and
Sudden Stops in Small Open economies: An Equilibrium Business Cycle Framework for
Emerging Markets Crises) can help developing countries with economic development by
furnishing them with necessary capital and technology. Capital flows contribute in filling
the resource gap in countries where domestic savings are inadequate to finance
investment.

It is interesting to note that even in Russia and East European countries foreign capital
has been allowed to flow in. In countries like China, Thailand, Malaysia and Singapore
contribution of foreign capital has been extremely encouraging. But in Latin America and
African countries foreign capital flow has not been satisfactory. Foreign capital is useful
for both developed and developing countries. Advanced countries try actively to invest
capital in developing countries. (Anon.2017)

In India, foreign capital has been given a significant role, although it has been changing
overtime. In the early phases of planning, foreign capital has been used as a means to
supplement domestic investment.("Paripex - Indian Journal Of Research(PIJR)
,PIJR|World Wide Journals", 2017) Later on there were technological collaborations
between foreign and Indian entrepreneurs. But since July 1991, there has been a
tremendous change in government's policy (commonly called liberalization policy) about
foreign investments.
Foreign capital is money entering the country in the form of concessional assistance or
non-concessional flows. There are many Forms of Foreign Capital Flowing into India

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such as banking and NRI deposits. The various Forms of Foreign Capital Flowing into
India has helped to bring in huge amounts of FDI into the country, which in its turn has
given a major boost to the Indian economy.

For economic and industrial development, capital is the most important factor. Such
capital may be front within the country or from outside the country. When capital
available within the country is not sufficient, capital from abroad is made use of. For less
developed countries, capital has been provided by international organizations like World
Bank and International Monetary Fund (IMF) all government led. The recent
technological developments and spread of information technology have opened up the
economys the world over as never in the past. This in turn has increased the multi-
national role and importance of capital. It has been realized by many countries that inflow
of capital from abroad is vital not only in the early stages of economic development, but
also for the growth of a developing economy. Most of the countries now have been
making use of foreign capital and investment. We shall first discuss about the meaning
aid role of foreign capital. Later we shall examine the advantages and disadvantages. The
government policy will regard to foreign investment shall also be discussed.
("ResearchGate | Share and discover research", 2017)

For economic and industrial development, capital is the most important factor. Such
capital may be front within the country or from outside the country. When capital
available within the country is not sufficient, capital from abroad is made use of. For less
developed countries, capital has been provided by international organizations like World
Bank and International Monetary Fund (IMF) all government led. The recent
technological developments and spread of information technology have opened up the
economys the world over as never in the past. This in turn has increased the multi-
national role and importance of capital. It has been realized by many countries that inflow
of capital from abroad is vital not only in the early stages of economic development, but
also for the growth of a developing economy. Most of the countries now have been

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making use of foreign capital and investment. We shall first discuss about the meaning
aid role of foreign capital. Later we shall examine the advantages and disadvantages. The
government policy will regard to foreign investment shall also be discussed. (Foreign
Direct Investment in India: 1947 to 2007, Dr. Nitin Bhasin)

Need for Foreign Capital:-

Inadequacy of domestic capital.
Foreign capital can show the way for domestic capital.
For speeding up economic activity in a developing country.
Financing of projects needed for economic development.
Brings in technical know-how, business experience and knowledge.

ROLE OF FOREIGN CAPITAL

In the early stages of industrialization in any country foreign capital plays an important
role.
Their role can he better understood under the following heads:-

1. Increase in Resources: - Foreign capital not only provide an addition to the

domestic savings and resources, but also an addition to the productive assets of the
country. The country gets foreign exchange through FDI. It helps to increase the
investment level and thereby income and employment in the recipient country.

2. Risk Taking: - Foreign capital undertakes the initial risk of developing new lines of
production. It has with it experience, initiative, resources to explore new lines. If a
concern fails, losses are borne by the foreign investor.

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3. Technical Know-how:- Foreign investor brings with him the technical and
managerial know how. This helps the recipient country to organize its resources in
most efficient ways, i.e., the least costs of production methods are adopted. They
provide training facilities to the local personnel they employ.

4. High Standards: - Foreign capital brings with it the tradition of keeping high
standards in respect of quality of goods, higher real wages to labour and business
practices. Such things not only serve the interest of investors, but they act as an
important factor in raising the quality of product of other native concerns.

5. Marketing Facilities: - Foreign capital provides marketing outlets. It helps exports

and imports among the units located in different countries financed by the same firm.

6. Reduces Trade Deficit: - Foreign capital by helping the host country to increase
exports reduce trade deficit. The exports are increased by raising the quality and
quantity of products and by lower prices.

7. Increases Competition: - Foreign capital may help to increase competition and

break domestic monopoly. Foreign capital is a good barometer of world's perception
of a country's potential.

CURRENT REGULATIONS TO MANAGE CAPITAL INFLOWS IN INDIA

Capital flows contribute in filling the resource gap in country like India where the
domestic savings are inadequate to finance investment (Ghose, 2004; Dasgupta and
Ratha, 2000). Today, India requires approximately 500 billion US $ investment in
infrastructure sector alone in the next 5 years for sustaining present growth rate of
approximately 8-9 per cent.

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This amount is around 2.5 times more than the 10th Plan. Added to this, already, several
infrastructure projects have reportedly been shelved and indefinitely delayed. Such huge
mobilization of resources is not possible from Indias internal resources (Mohan, 2008).
Therefore, India need for capital in the form of ECBs and other foreign loans and aids.
Keeping in view the growing requirements of foreign capital in India, Indian government
has comp up with many policies and liberalized regulations to manage foreign capital in
India. Some of the important and recent measures taken by Indian government to manage
foreign investments in India are as under:

1. Foreign Direct Investment:

FDI is permitted under the Automatic Route in items / activities in all sectors up to the
sectoral caps except in certain sectors where investment is prohibited. Investments not
permitted under the automatic route require approval from Foreign Investment Promotion
Board (FIPB). The receipt of remittance has to be reported to RBI within 30 days from
the date of receipt of funds and the issue of shares has to be reported to RBI within 30
days from the date of issue by the investee company. Advance against Equity: An Indian
Company issuing shares to a person resident outside India can receive such amount in
advance. The amount received has to be reported within 30 days from the date of receipt
of funds. There is no provision on allotment of shares within a specified time. The banks
can refund the amount received as advance, provided they are satisfied with the bonafides
of the applicant and they are satisfied that no part of remittance represents interest on the
funds received. (Explaining the Cross Section of Expected Stock Return: An application of
Fama and French Model in India, Finance India, 22: 923-35)

2. Foreign Portfolio Investment:

FIIs: FIIs Investment by non-residents is permitted under the Portfolio Investment

scheme to entities registered as FIIs and their sub accounts under SEBI ( Ghose, A.K.
2004) (FII) regulations. Investment by individual FIIs is subject to ceiling of 10 percent
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of the PUC (Pollution under Control) of the company and limit for aggregate FII
investment is subject to limit of 24 percent of PUC of the company. This limit can be
increased by the company subject to the sectoral limit permitted under the FDI policy.
The transactions are subject to daily reporting by designated ADs (Authorized Dealers)
to RBI for the purpose of monitoring the adherence to the ceiling for aggregate
investments. NRIs: The investment by NRIs under the Portfolio Investment Scheme is
restricted to 5% by individual NRIs/OCBs (not incorporated in Bangladesh and Pakistan)
and 10% in aggregate (which can be increased to 24 percent by the company concerned).
ADR/GDR: Indian companies are allowed to raise resources through issue of ADR/GDR
and the eligibility of the issuer company is aligned with the requirements under the FDI
policy. The issues of sponsored ADR/GDR require prior approval of ministry of finance.

3. Foreign Venture Capital Investors:

FVCIs (Foreign Venture Capital Investors) registered with SEBI are allowed to invest in
units of venture capital funds any limit. FVCI investment in equity of Indian venture
capital undertakings is also allowed. The limit for such investments would be based on
the sectoral limits under the FDI policy. FVCIs are also allowed to invest in debt
instruments floated by the IVCUs (InVacare Corporation-US). There is no separate limit
stipulated for investment in such instruments by FVCIs.

4. External Commercial Borrowings:

Under the Automatic Route, ECB up to US $ 500 million per borrowing company per
financial year is permitted only for foreign currency expenditure for permissible end-
users of ECB. Borrowers in infrastructure sector may avail ECB up to US $ 100 million
for Rupee expenditure for permissible end-uses under the Approval Route. In case of
other borrowers, the limit for Rupee expenditure for permissible end-uses under the
Approval Route has been enhanced to US$ 50 million from earlier limit of US $ 20

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million. Entities in the services sector, viz., hotels, hospitals and software companies
have been allowed to avail ECB up to US $ 100 million, per financial year, for the
purpose of import of capital goods under the Approval Route. The all-in-cost interest
ceiling for borrowings with maturity of 3-5 years has been increased from 150 basis
points over 6-month LIBOR .( Gopinath, G. (2004) Lending booms, sharp reversals and real
exchange rate dynamics, Journal of International Economics) (London Inter-bank Offered
Rate) to 200 basis points over 6-month LIBOR. Similarly, the interest ceiling for loans
maturing after 5 years period has been raised to 350 basis points over 6-month LIBOR
from 250 basis points over 6-month LIBOR.

FOREIGN CAPITAL INVESTMENT POLICY IN INDIA

In simple words foreign capital investment refers to capital inflows from abroad that are
invested in or to enhance the production capacity of the economy. Foreign Investment in
India is governed by the FDI policy announced by the Government of India. The main
governing bodies that define the future role of agriculture in India are the Ministry of
Agriculture, the Ministry of Rural Infrastructure and the Planning Commission of India.
It aims at developing agricultural sector of India.

The latest developments in FDI in Indian agriculture sector are as follows FDI up to
100% is permitted under the automatic route in activities such as development of seeds,
animal husbandry,cultivation of vegetables and mushrooms etc under controlled
conditions and services related to agro and allied sectors. ( HCTL Open International
Journal of Technology Innovations and Research (IJTIR) Volume 14, April 2015)

A foreign company can start operations in India by registration of its company under the
Indian Companies Act 1956. Foreign equity in such Indian companies can be up to 100%.
At the time of registration it is necessary to have project details, local partner (if any),
structure of the company, its management structure and shareholding pattern. A joint

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venture entails the advantages of established contracts, financial support and distribution-
marketing network of the Indian partner. Approval of foreign investments is through
either automatic route or Government approval.

Government of India facilitates Foreign Direct Investment (FDI) and investment from
Non-Resident Indians (NRIs) including Overseas Corporate Bodies (OCBs),
predominantly owned by them to complement and supplement domestic investment.
Foreign technology induction is encouraged both through FDI and through foreign
technology collaboration agreement. Foreign Direct Investment and Foreign technology
collaboration agreements can be approved either through the automatic route under
powers delegated to the Reserve Bank of India (RBI) or otherwise by the Government.
India is a developing country, like many other developing countries, international capital
flows has significant potential benefit on the Indian economy.

Under the liberalized foreign exchange transactions regime, the results were dramatic.
The liberalization of the portfolio investment led to a surge in inflow of capital for
investment in the primary and secondary market for Indian equity and corporate (and
subsequently sovereign) bond market. The composition of capital inflow has changed
significantly over the years. Dependence on aid has vanished and foreign direct
investment (FDI), foreign portfolio investment (FPI), (Chakraborty, Indrani. 2001) external
commercial borrowings (ECB) (Chao, C. and E. Yu (1994a) Foreign Capital Inflows and
Welfare in an Economy with Imperfect Competition, Journal of Development Economics ) and
nonresident Indians (NRI) deposits dominate the capital flows.

FDI upto 100% is allowed under the automatic route from foreign/NRI investor without
prior approval in most of the sectors including the services sector. FDI in
sectors/activities under automatic route does not require any prior approval either by the
Government or RBI. In pursuance of Government commitment to further liberalise the

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FDI regime, all items/activities have been placed under the automatic route for FDI/NRI
and OCB investment, except the following:

All proposals that require an Industrial License, which includes

The item requiring an Industrial License under the Industries (Development &
Regulation) Act, 1951;
Foreign investment being more than 24% in the equity capital of units
manufacturing items reserved for small scale industries; and
All items which require an industrial license in terms of the location policy
notified by Government under the New Industrial Policy of 1991.
All proposals in which the foreign collaborator has a previous venture/tie up in
India.
All proposals relating to acquisition of shares in an existing Indian company in
favour of a foreign/NRI/OCB investor.
All proposals falling outside notified sectoral policy/caps or under sector in which
FDI is not permitted and/or whenever any investor chooses to make an application
to the FIPB and not to avail of the automatic route.

FOREIGN CAPITAL INVESTEMENT IN AGRICULTURE IN INDIA

Prompted because of the Indian government's initiatives, there is various investments

from the Indian agricultural sector. The Indian agricultural services as well as the
agricultural machinery sectors have cumulatively attracted foreign direct investment
(FDI) equity inflows for the tune of US $ 2,153.61 million in the period April 2000-
December 2014, Department of Commercial Policy and Promotion (DIPP). Some of the
major investments and developments in agriculture in the recent past are as follows:

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IVRCL Ltd's irrigation and water divisions have won orders worth Rs 1,255.67
crore (US $ 201.58 million). The business is predicated outside of Hyderabad.
The Oman India Joint Investment Fund (OIJIF), a joint venture (JV) between State
Bank of India (SBI) assuring General Reserve account (SGRF), has invested Rs 95
crore (US $ 15.25 million) in GSP Crop Science, a Gujarat-based agrochemicals
company.
Israel based world's seventh largest agrochemicals firm ADAMA Agrochemicals
promises to invest at least US $ 50 million in India within the next four years
Tate Motors and Tractors Ltd (TAFE) has invested around US $ 140 million
through equity in America-based AGCO Corporation, an internationally
manufacturer and distributor of agricultural equipment.
Canada is keen to partner with India inside the agriculture and processing sectors,
especially in pulses and canola oil (HCTL Open International Journal of Technology
Innovations and Research Volume 14, April 2015)

FDI INFLOWS IN DIFFERENT AGRICULTURAL SECTOR

1. FDI inflows to fertilizers industry in India

The government of India has allowed foreign direct investment in the fertilizers industry
of the country. Foreign Direct Investment (FDI) in fertilizers in Indiais allowed up to
100% under the automatic route in India. The various advantages of FDI inflows into
fertilizer industries are growth, quality, improved technology and expansion of fertilizer
industry. It is widely believed that these steps will aid in the growth of agriculture
infrastructure in the country and will benefit the sector in the long run
Sector-Wise Foreign Direct Investment Equity Inflows in India during April, 2000 -
January, 2014 (Department of Industrial Policy & Promotion, Ministry of Commerce &
Industry, Govt. of India.)

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Name of the sector FDI Inflows in FDI Inflows in(US$ Percentage Share in
(crores) million) Total

Fertilizers 1538.09 318.55 0.15

2. FDI Inflows to food processing industries

Food processing industryis a predominant segment in the Food Industry in India and
accounts for 32 percent share in the industry. The food processing industry comprise of 2
percent of fruits and vegetables and 15 percent of processed milk. Important initiatives by
the Indian government have led to significant growth in FDI Inflows to Food Processing
Industries. While FDI Inflows to Food Processing Industries are estimated to reach USD
325.93 million by 2009, a target of USD 25.07 billion worth of FDI Inflows to Food
Processing Industries has been set to be achieved by 2015.

The food processing industry contributes to 6.3 percent of the Gross Domestic product of
India, 19 percent to the Indian industry, and 13 percent to the export production. (Foreign
Direct Investment Inflow Matter? Working Papers 115, Institute for Social and Economic
Change. Bangalore) The export production in food processing sector has increased from
USD 6.98 billion in 2002-03 to USD 20.51 billion in 2006-07, accounting for a
phenomenal rise of 193.83 percent. The government of India has set a target of USD
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25.07 billion of FDI Inflows to Food Processing Industries to be achieved by 2015 which
will increase India's global food trade from 1.6 percent to 3 percent along with a rise in
perishable processed food items from 6 percent to 20 percent.

The food processing industry is expected to witness a growth of 10 percent in the recent
years to come. Government of India gave an estimation of Foreign Direct Investments
(FDI) Inflows to reach USD 325.93 million by 2009 keeping in view the rising demand
among the corporate players in Indian retail industry:

A number of active measures have been taken up by the government to ameliorate the
food processing units in terms infrastructure, human resource, and research and
development
100 percent FDI is permitted in almost all the food processing units with the exception
of alcohol.
Enactment of the Food Safety and Standards Bill 2005 has introduced a governing body
for the food processing sector.
This legislation has also allowed a 100 percent tax deduction on profits for five years
and 25 percent for the next five years especially to the upcoming agro-processing
industries.
Most of the items in food processing sector are exempted from license agreement
excepting those which are kept in reserve for the small-scale sectors. (Anon 2017)

3. FDI Inflows to Agriculture Services

The Ministry of Agriculture, the Ministry of Rural Infrastructure, and the Planning
Commission of India are the main governing bodies that define the future role of
agriculture in India and it aims at developing agricultural sector of India. No FDI / NRI /
OCB are allowed in the Indian Agriculture sector.

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The FDI Inflows to Agriculture Services are allowed up to 100% and allowed through the
automatic route covering horticulture, floriculture, development of seeds, animal
husbandry, pisciculture, aqua culture, cultivation of vegetables, mushroom and services
related to agro and allied sectors. Only in Tea sector, 100% FDI is allowed, including,
plantations of tea. This requires Government of India approvals.

Further, it requires compulsory divestment of 26% equity in favor of the Indian partner or
Indian public within a maximum period of five years. This also requires approval from
the concerned state government in case of change in use of land for such activities. And
this holds true for any fresh investments in the above-mentioned sector. FDI inflows to
agriculture services also facilitated growth of other allied areas like Irrigation, Roads,
Housing, Water Supply, Electrification, and Telecommunication Connectivity.
(Choudhury, S., 2012)

4. FDI Inflows to Agricultural Machinery

Important aspects of the agrarian sector and rural sector in India that have a positive
impact on FDI Inflows to Agricultural Machinery. 100% foreign direct investment (FDI)
allowed through the automatic route covering horticulture, floriculture, development of
seeds, animal husbandry, pisciculture, aqua culture, cultivation of vegetables, mushroom
and services related to agriculture and sectors associated with it. (Renuka, R., ets, 2013)

OPPORTUNITIES AND CHALLENGES

The positive outcomes of the policy are as follows:

Permitting foreign investment in agricultural retailing is likely to ensure adequate

flow of capital into rural economy in a manner likely to promote the welfare of all
sections of society, particularly farmers and consumers. It will bring about
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improvements in farmer income and agricultural growth and assist in lowering

consumer price inflation.
Due to lack of adequate infrastructure facilities and lack of proper storage facility
farmers are forced to sell their products at very low price which sometimes cannot
even cover their cost of production. It is assumed that now farmer could be sell
their all producer.
Since the inflow of FDI in retail sector is bound to pull up the quality standards
and cost
competitiveness of Indian farmers. It, therefore, seems that FDI in agricultural
retailing has the potential of sustaining agricultural growth.
This is expected to boost the countrys domestic manufacturing industry that
foreign retail companies have to be source at least 30 per cent of the commodities
from small and micro industries.
The minimum investment limit has been set at US$ 100 million for foreign
companies, out of which at least 50 per cent must be used to improve
transportation, distribution, storage, and packaging facilities, and develop farm
allied infrastructure.
Due the FDI inventiveness, the concept of the middleman, which has dominated
farmers in India for decades, can be eradicated and farmers can now get the full
benefit of their produce.
Foreign companies are expected to take some constructive steps for the creation of
supply chain. Entry of foreign players, storage and refrigeration infrastructure will
improve significantly.
Job opportunities in sectors such as transportation, packaging, agriculture
processing and such like are expected to flourish. According the Government of
India, FDI in retail sector is capable of generating approximately 4 million direct
jobs and around 5 to 6 million indirect jobs within a span.

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The policy also comes with its share of disadvantages:

Small retailers and owners of Pop and Mom stores might suffer, as the large
retailers like Wal-Mart and Tesco are likely to alleviate out these small and micro-
level shop owners.
There might be job losses in the manufacturing segment. Though the government
has capped the sourcing of commodities from the domestic market at 30 per cent,
the rest of the 70 per cent can be bought from the foreign markets.
The Indian retailers might not be able to cope up with the increasing competition
from the foreign retailers who are well prepared with better infrastructure and
management procedure. Slowly this might lead to the replacement of the Indian
retailers to a considerable extent.
As the foreign brands will be available at a larger rate, the consumers inclination
towards international brands might affect the countrys in-house brands.
According to the non-government cult, FDI will drain out the countrys share of
revenue to foreign countries which may cause negative impact on Indias overall
economy.
Now Wall mart is the single buyer and play as a monopolist and it will be force to
farmer to reduce the price of their produce.
It is said that FDI might provide employment opportunities, but it is argued that it
cannot provide employment opportunities to semi-illiterate people. This argument
gains more importance because in India, large numbers of semi-illiterate people
are present.
Though Government has predetermined that 30 per cent procurement should be
from Indian sources, this may get diluted over the years. The remaining 70 per
cent procurement from cheaper countries will make the people run towards that

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stuff and the 30 per cent supply from Indian small industries will have their own
death, unable to compete with low price Chinese goods.

INITIATIVE TAKEN BY GOVERNMENT

The Department of Agriculture & Cooperation under Ministry of Agriculture has

requested for MOUs/Agreements with 52 countries including United State of America.
Also, Department of Agriculture Research & Education (DARE) and Department of
Animal Husbandry, Dairying & Fisheries (DAHD&F) under Ministry of Agriculture are
creating MOUs/Agreements for many other countries making one more amount of
countries to 63. Agreements basic countries provide better agricultural facilities caused
by cooperation in areas like Research and Development, Capacity Building, Germ-Plasm
Exchange, PostHarvest Management, Value Addition/ Food Processing, Plant Protection,
Animal Husbandry, Dairy & Fisheries and in addition help you with enhancing bilateral
trade. (Anon. 2017)

Recognizing importance of Agriculture Sector, the government throughout the budget

2014-15 took many steps for sustainable continuing development of Agriculture. These
steps include enhanced institutional credit to farmers; the promotion of scientific
warehousing infrastructure including cold storages and cold chains in your area for
increasing life-span of agricultural produce; Improved usage of irrigation through
Pradhan Mantri Krishi Sichayee Yojana; provision of Price Stabilization Fund to mitigate
price volatility in agricultural produce; Mission mode scheme for Soil Health Card;
Starting of Agri-tech Infrastructure fund for producing farming competitive and
profitable; provide institutional finance to joint farming sets of Bhoomi Heen Kisan
through NABARD; continuing development of indigenous cattle breeds and promoting
inland fisheries in conjunction with non-farm activities to supplement the salary of
farmers. (Kumar, S., 2014)

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Central Government recognizes and discharges its responsibility to help you State
Governments in overall growth and development of Agriculture sector. Effective policy
measures have been in position to further improve agricultural production and
productivity and address problems of farmers. State Governments can also be impressed
upon to allocate adequate funds for progression of agriculture sector in State plan, in
addition to initiate other measures needed for achieving targeted agricultural rate of
growth and address problem of farmers.

The Government of India realizes the need for agriculture for the growth and
development of this nation. Notable most notable are Rashtriya Krishi Vikas Yojana
(RKVY); National Food Security Mission (NFSM); National Horticulture Mission
(NHM); Gramin Bhandaran Yojana; Integrated Scheme of Oilseeds, Pulses, Oil palm,
and Maize (ISOPOM), etc. ( HCTL Open International Journal of Technology Innovations
and Research Volume 14, April 2015)

Several of the recent major government initiatives in the sector are here:

1. The Ministry of Food Processing Industries has had newer and more effective
initiatives to formulate their food processing sector which will also help assist the
incomes of farmers and export of agro and processed foods and stuff like that.

2. The country's Dairy Development Board (NDDB) has announced 42 dairy projects
by using a financial outlay of Rs 221 crore (US $ 35.47 million) so as to boost milk
output near you and increase per animal output of milk.

3. The federal government of India has planned obtain Rs 50,000 crore (US $ 8.02
billion) to bring back four fertilizer plants and hang up up up two new plants to
produce farm nutrients.

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4. Government entities of Telangana has allocated Rs 4,250 crore (US $ 682.31 million)
for the first phase of farm loan waiver scheme. The scheme is anticipated to learn 3.6
000 0000 farmers who had taken loans of Rs 100,000 (US $ 1,605.46) or below
before March 31, 2014.

5. Israel has grown its cooperation with Indian agriculture, helping farmers multiply
their income with better practices, yields and deciding on the best crops or vegetables
within a success story that may be boosting bilateral ties who've strengthened
beneath Government of Mr. Narendra Modi, Premier of India.

CONCLUSION

The subsequent continuing development of the Indian agriculture sector through FDIs is
predicted undertake a significant positive influence on the 700-million strong rural
populations, moving into about 600,000 small villages of India. Rapid investments in
technology development, irrigation infrastructure, increased exposure of modern
agricultural practices and provision of agricultural credit and subsidies are classified as
the major factors contributed to agriculture growth.

FDI in Indian agriculture sector increase employment opportunities and remains

permanent in the host country with the development in the infrastructures from the host
country. Therefore, there exist the long term relationship between levels of GDP and
foreign authorized shares. If the entry of FDI is permitting in agriculture retailing, it will
ensure adequate flow of capital into rural economy in a manner more likely to promote
the welfare coming from all parts of society, particularly farmers and consumers.

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Though, the concern with farmers can be not imaginary. We already had a bitter example
of such entry of foreign trader, therefore tailor-made entry of FDI should be allowed in
agriculture retailing. Accomplished by integrating into your likes and dislikes for FDI
retailing certain inbuilt safety valves. To make certain the foreign investors complete a
genuine contribution towards the development agriculture retailing. Reconstituting the
poverty stricken and stagnating rural sphere right into a forward moving and prosperous
rural sphere generally is the justifications for introducing FDI in agricultural retailing but
the government should executed a special regulatory framework. It will ensure that the
retailing giants do make use of predatory pricing or acquire monopolistic tendencies.

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BIBLIOGRAPHY

BOOKS
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Lalita Shukla
5. Foreign Direct Investment in India Punjab University
6. Foreign Direct Investment in India: 1947 to 2007, Dr. Nitin Bhasin 9

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