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third largest economy of the world within short span of time with high growth prospects and earning potential (Ahya & Sheth, 2006; Asher, 2007; World Bank, 2004; OECD, 1999)

Several research studies show that India has historically failed to attract a significant amount of FDI mainly due to the problems in infrastructure. This scenario is fast changing. The Indian government has undertaken huge projects in transportation and energy sectors to improve the same. The road transport development projects are worth around US$90 billion, whereas the railways have undertaken several projects each worth around US$20 million and for the development of ports and airports the estimates are around $ 80 billion. Outside this calculation priority is given to the investment in energy sector which is worth around USS 167 billion excluding the development in the nuclear energy. These huge investment overlay are changing the investment climate in the country for which investors will benefit hugely by that (Department of Industrial Policy and Promotion, 2005; Dua & Rasheed, 1998).

In spite of the investments there the infrastructure in India still needs to be improved a lot and as it is already under a huge strain. Added are the problems in matching the power demand shortfall, the port traffic capacity mismatch and the poor road conditions. In addition to this there is a heavy regulation burden in terms of time taken to start business or to property registrations in India.

Also indirect taxes, import duties and entry-exit barriers impede FDI inflows into India (Nagaraj, 2003; Planning Commission of India, 2002; USITC, 2007; World Bank, 2004).

FDI and its implication on the supply chain 外商直接投资及其对供应链的影响

Argument 1: It has been argued that FDI in multi-brand retail will reduce inflation as the main cause of inflation is the shortage of agricultural production particularly processed foods and vegetables. FDI in multi-brand retail would eliminate the current 40 percent wastage of food grain that occurs. This is achieved when the foreign investors will provide the warehouse storage capacity that India currently lacks.

The counter argument to this point is currently, the Indian corporate sector is more or less free to make contractual agreements with farmers for supply of output. However till date the domestic organized retail of agricultural products despite having huge tax breaks for investment in warehouse facilities and other allied facilities have failed to capitalize the opportunity. The question is why have the domestic agents not found this investment profitable? Or why is it expected that the foreign investors would do so?

One argument is that the lack of this investment is more due to the controlled nature of agricultural production that restricts the domestic agent from taking the risk which does not apply to the foreign investors.

Argument 2: FDI in multi-brand retail will give more remunerative prices to farmers. The answer lies in the land fragmentation in India. About 95 percent of Indian farmers have small farms of around one hectare or less. At presently, the law requires the sale and purchase of the farm produce in government-designated markets. So the Indian situation is very peculiar wherein the corporate sector can freely contract with the Indian farmers anywhere whereas the farmers tend to sell in regulated markets