Impact of FDI on Indian Organized retail players
The Indian Retail Industry is the largest amongst all the industries, accounting for over 10 percent of country’s GDP and 8 percent of employment. The retail industry has come forth as one of the most dynamic and fast paced sector with several players entering the market. Though, the Indian retail sector is majorly unorganised but the organised sector is also making giant strides. The total concept and idea of shopping has undergone an attention drawing change in terms of format and consumer buying behaviour. The Indian economy has been booming ever since India came out of the shackles of
imperialism and emerged as a politically, socially as well as financially independent nation.
Although India attained its freedom more than about sixty years ago, the emergence of the
Indian economy on the global scene has been a rather recent development. This is because of
the realization of the true economic growth potential of India, by the foreign investors as well
as business houses. Till about the recent times. India continued to be a whole soul agricultural
economy, which had been impregnated with various types of beaurocracy, exploitation and
corruption. In spite of this, the westerners saw tremendous potential in India to develop as an
economically strong adobe for investment and ploughing in of cash in order to start off a new
venture. But till recently, there were various jurisdictions prevalent in the code of law in
India, that prevented the full strength inflow of foreign direct investment in India. But
fortunately for all, the Indian government was quick to realize the actual potential embattled
in the Indian economy and what was holding it back.
The main reasons for the changes in the organised retail format are: * Rising Incomes and consequent increase in disposable income. * Large working population with median age of 24 years.
* Nuclear families in urban areas.
* Rise in consumer awareness.
* Consumer keenness to buy branded products.
* Consumer desire to purchase quality products and services at cheapest available price.
The growth pattern in organised retailing and in consumption made by Indian population is following a rising graph. In India, the vast middle class and almost untapped retail industry are key attractive forces for global retail giants wanting to enter into newer markets. Some of the plans by international retailers are as follows:
* WalMart in partnership with Bharti is planning to enter the Indian Organised sector * Tesco is also keen to enter the Indian retailing industry * Sara lee corporation is planning to enter the Indian apparel market * Louis Vuitton Moet Hennessy group is planning to include India among its top 12 world markets
At present 100% FDI is permitted, under the automatic route for wholesale cash and carry trading subject to certain end sale limitations and restrictions. And while as a general rule, FDI in retail trading is prohibited, an exception for FDI up to 51%, with government approval, is permitted in single brand retail. But, till now no FDI is permitted in multi-brand retail on the belief that it would adversely impact the large unorganised retail sector and the developing domestic organized sector.
The government of India pulled a sensitive issue in the reforms agenda out of cold storage on 6 July 2010, with the Department of Industrial Policy and Promotion(DIPP) releasing a Discussion Paper on permitting FDI in multi brand retail chains such as WalMart Stores etc. It was quite obvious that the path ahead for the international retail behemoths won’t be easy in a country where majority of the sector is unorganised. But, with globalisation of economies FDI can just be postponed but not averted. It’s an evolutionary process.
1) Underdeveloped Organized sector
The argument is that the Indian retail...
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