Franklin Salvi , St.Vincent College of Commerce, Pune.
FDI and Retail : A perspective from the other side
The Indian Economy has undergone a number of changes and witnessed many reforms since its Independence. The liberalization of Foreign Direct Investment (FDI) policy of the Indian Economy in 1991 was initiated by the then Finance Minister Dr.Manmohan Singh, was one of the most prominent steps taken by the Indian Government under which 100 % FDI was first allowed in Cash & Carry Wholesale stores and the First Cash & Carry Wholesale Store was opened by CARREFOUR in Delhi in 2010. On November 24, 2011, the Indian Government approved a proposal of allowing 100 % FDI in the Single-brand and 51 % FDI in Multi-brand retailing , subject to certain conditions, these decisions have raised mixed reactions from the economists , Big retailers and Small retailers , Entrepreneurs and experts.
The FDI In Retail Sector in India carries its own pros and cons that will affect the Indian Economy to a lager extent, any reforms to be implemented has to be studied critically to understand these pros and cons and the impact of the reforms on the economy in the long run . This article attempts to study the FDI in Retail sector and its adversarial impact on the Indian economy
Keywords: Foreign Direct Investment (FDI) , Retail Sector , Multi- Brand Retailing
The liberalization of Foreign Direct Investment (FDI) policy of the Indian Economy in the Retail sector permitting 100 % FDI in Single Brand Retailing and 51% FDI in Multi Brand Retaining, has opened up the doors to many multinational corporations such as Wal–Mart , Carrefour , Tesco etc. The large multinational corporations have recognized India as one of the largest potential markets for the purpose of investment especially after the recent recession in the American and European economies.
The Indian Retail Market is the second largest contributor to the country’s economy and it constitutes 14% – 15 % of the total GDP and is established to be among the fastest growing retail markets estimated to being worth US $ 450 billion, making it one of the top five retail markets in the world. The Indian Retail and Logistics Industry employing approximately 40 million Indians (3.3 % of the population)
The Retail Industry in divided in two categories
Organized retailing which refers to the activities undertaken by the licensed retailers i.e. those registered for sales tax, income tax etc. They include supermarkets, retail chains, privately owned large retail stores and corporate backed hypermarkets
Unorganized Retailing refers to the traditional format of shops commonly know in as the ‘kirana stores ’ i.e. owner managed general stores also including the convenience stores the hand carts, pavement vendors etc.
Foreign Direct Investment ( FDI) :
World Bank “Foreign Direct Investment or Foreign Investment can refer to the net inflow of funds to acquire a long term management interest in an enterprise operating in a foreign economy. It is the accumulation of equity, reinvestment of retained earnings, other long term sources of capital and short term funds as presented in the balance of payments.”
Retail: The High court of Delhi (2004) “a sale for final consumption in contrast to a sale for further sale or processing (i.e. wholesale). A sale to the ultimate Consumer. ”
Multi Brand Retailing: It is the sale of various brands from various manufacturers under one roof by a single store.
The objective of this paper is to understand the adversarial impact of FDI in Retail in India on the Indian economy and the Indian Retail sector. The FDI in Retail industry in India has raised many a discussions as to the positive and otherwise impact of this decision on the Indian economy; the adversarial impact of the same however, has not been studied in detail...