Fdi- Boon or Bane

Topics: Retailing, India, Department store Pages: 12 (4214 words) Published: March 30, 2013

The research paper aims to understand whether the FDI policy introduced in the Retail sector in India is a Boon or a Bane. The paper gives an outlook of the Indian Retail Sector, its growth trajectories and its contribution to the national GDP. It also entails in detail the policy of FDI in this sector and its various clauses. The paper, in the end, talks about the benefits of implementing the FDI policy, and also what disadvantages it possess.

Indian retail sector is the most booming sector in the Indian economy and largest sources of employment after agriculture. Trade or retailing is the single largest component of the services sector in terms of contribution to GDP. Its massive share of 14% is double the figure of the next largest broad economic activity in the sector. India is the second most attractive retail destination ‘globally from among thirty emergent markets. It has made India the cause of a good deal of excitement and the cynosure of many foreign eyes. With a contribution of 14% to the national GDP and employing 7% of the total workforce (only agriculture employs more) in the country, the retail industry is definitely one of the pillars of the Indian economy. It is undergoing a transitional phase to usher organized retail.

The attitudinal shifts of the Indian consumers were in terms of “Choice Preference”, “Value for money’ and the emergence of organized retail format. The overall Indian retail sector is expected to rise to US $ 833 billion by 2013 and to US $ 1.3 trillion by 2018. In line with the global developments in the retail industry, Indian retail is largely dominated by the unorganized retailers. It has witnessed a massive transition in the last decade. Of the total retail sales, the food and grocery segment constitute the major chunk. Growing in tandem with the economy is the Indian retail sector. The sector is on a high growth trajectory and is expected to grow by more than 27 per cent over the next 5 to 6 years.

Initially it was predominately fragmented through the owner- run “Mom and Pop Outlets”. The change in lifestyle, education, travel and disposable income has changed the pattern of consumption. Customers are aware of their surroundings and developments. The awareness was created through the advent of technology such as television, cable and satellite channels. They are accustomed to the organized retail format. Understanding the pulse or trend of the market the large corporate groups like ITC, Reliance, Tata, Rahejia and others are infusing staggering amounts of capital into organized retail sector. Some of the leading Indian retailers who had tapped this market were Bata India Ltd, Big Bazaar, Crossword, Ebony Retail Holdings Ltd., Food Bazaar, Globus Stores Pvt. Ltd., Liberty shoes Ltd., Music World Entertainment Ltd., Pantaloon Retail India Ltd., Shoppers Stop, Subhiksha, Titan Industries, Trent, Benetton, Addidas, Reebok, Levis, Diary Farm, KFC, Metro, WalMart, Marks & Spencer’s etc are some of the popular global retail brands that have set up retail business in India.

The organized retail sector comes with the concept of malls, supermarkets and department stores. Like Subhiksha, Marks & Spencer’s, Oberon etc it gives a different feeling and the environment of pick and choose from a variety of products. The modern retail formats are encouraging development of well-established and efficient supply chains in each segment ensuring efficient movement of goods from farms to kitchens, which will result in huge savings for the farmers as well as for the nation.

The Government also stands to gain through more efficient collection of tax revenues. In the coming years it can be said that the hypermarket route will emerge as the most preferred format for international retailers stepping into the country. At present, there are 50 hypermarkets operated by four to five large retailers spread...
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