FOREIGN DIRECT INVESTMENT AND CSR IN INDIA

INTRODUCTION:
Foreign Direct Investment can be complimented with FRI Foreign Redirected
Investment in bringing up the social status of this country. The Multinationals(MNCs)
stepping into the retail sector can use their exposure, extent and skills in realising their
Corporate Social Responsibility. This can be an important step in reducing the gap between
the haves and the ones having less.
Essentials of Foreign Redirected Investment or the *Conditions Apply
1. MNCs in retail sector should adopt and develop 3-5 villages near the city of their major
operations.
2. 50 % of the produce of the adopted villages should be consumed my these MNCs.
3. Not just the big cities but FDI should also make its way in tier 3 and tier 4 cities. They can
also open small sub stores to cater to the bottom of the pyramid in these tier 3 & 4 cities like
Mangalore, Jalandhar, Kanpur, Varanasi, Allahabad, Jabalpur, Raipur, Bhilai, Baroda, Nasik,
Rajkot, Jammu, Dehradoon, Kasauli, Rishikesh and many more.
4. These MNCs should only hire Indians, after training from their respective foreign staff for
about two months (this time is enough for training the Indian employees, will also add to the
exposure of the foreign staff).
5. Existing retail outlets around the areas of the expected Foreign retail outlets, should be
moved to other scattered areas of the cities. The state government should assist their
relocation. This will help the local retail stores expecting losses due to the bigger chain of
foreign retail establishments. It will also assist in reducing the economic disparity of the
areas.
6. These small Indian retailer can be given tax benefit in direct or indirect taxes, to match the
competition created due economies of large scale selling by foreign retailers.

7. A mandatory condition can be laid on foreign retailers to use the products made in India for
80% of their selling.
8. Also the services of these foreign retailers can be used in Public Service Departments like,
Railway stations& Trains, Army canteens, stores in big public sector organizations. This will
not only improve quality but also a healthy competition will be created to supply the best.
India and Indians need to protect their interest and that can only be done, by being selfish in
the interest of the Nation. In the era of fierce Globalization, once again we can not be looted
by a new form of East India Company (MNC). These Foreign companies are knocking India's
door because they see an opportunity, we have failed to capitalize on. Invitation card to these
companies should be an invitation for equal growth of the country and not the individual
growth of the Multi National Company.
Companies that engage in foreign direct investments (FDI) in developing countries should at
least some degree have sustainability approach to their business processes or should they?
When we do our every day purchases in stores and shops in our local neighborhood there is a
high possibility that we will be buying wares produced in a developing country. Some of the
thing we buy will be as bought on the open market on the commodities such as a lot of Fruit,
Cacao or Coffee etc. while others are produced, manufactured and exported as part of the
same corporate supply chain. These production facilities are being put in place in order for
the parent company (normally in a developing country) to save costs on procurement, wages
and in order to better control their supply chain (upstream vertical integration).
FDI is characterized as an investment that is made in another country or territories, between a
parent company and its subsidiary. Normally we will look at two types of FDI outward and
inward.
An outward FDI is an investment that is backed by the government against all types of
associated risks. This form of FDI is also closely related to governments export subsidies,
partnerships like strategic philanthropy Risk and different forms of government aid in relation
to establishing corporate presence.
When governments want to attract investments then they can use different forms of economic
factors in order to encourage inward FDIs. These can include low interest loans, tax breaks

like in special low tax areas, grants, subsidies, and the removal of different forms of
restrictions and limitations. Factors detrimental to the growth of FDIs include necessities of
differential performance and limitations related with ownership patterns.
Link between CSR and FDI
We would like to believe that we are serious about our efforts to develop and create a basis
for sustainable business, but how could we encourage and facilitate such a process. In India
there are concerns that the CSR movement will make life harder for companies trying to
export seeing CSR as a threat to FDI because it puts pressure on some of the areas were
developing countries are actually able to compete such as wages, working environments,
labor rights etc.
Indian authorities think that the ISO standards could be used by developed countries as a
way to decrease trade coming from developing countries. India has appealed that the ISO26000 should not be deemed an international standard, guideline or recommendation to
follow. India Briefing News
This statement is to a large extent in contrast to the popular thinking that CSR is something
that is welcomed in the developing world. The CSR standard is being developed by
the International Standards Organization (ISO) to encourage more corporations to implement
socially responsible practices in among other places their supply chain.
The whole idea behind the move seems to be to achieve factor price equalization by
imposing minimum wage standards on developing countries, Biswajit Dhar, director general
of Research and Information System for Developing Countries told the Economic Times.
The question is we morally obligated to implement the same standards as we would at home
as we do abroad?
What if we turn the tables and tell companies that if they want to benefit from the economic
advantages that come with setting up a business in a developing country, they will have to
apply the same sustainability standards which are present in the region they come from. So
for example if a local garment company sets up a factory in Bangladesh in order to get access
to cheap labor it should as a minimum live up to the same standards as it is under in a local
context in order for them to export garments back to the country of origin. Or if on IT-

company sets up operations in Mumbai, India it would have to employ IT professionals at the
same terms that they do it home.
Its a tempting thought that some of the social dumping issues that are part of the FDI
thinking could actually be tackled through the active utilization of CSR.