FDI in Indian Retail Sector: The Implications and Challenges

Abstract

Retail in India has a good growth potential but this sector is the least evolved with the growth of organized retail being substantially slow. In such a scenario, the government of India in early 2013 allowed 51 percent FDI in multi-brand retail. FDI plays an important role in the economic growth of developing countries and is considered a major source of capital infusion that can provide the booster dose to country’s economic growth and by liberalizing it in the retail sector and attempt has been made by the Indian government to create an environment to attract more FDI in the country. Being encouraged by this liberalization and country’s growing retail boom many multinational companies have also started making a beeline to enter into Indian retail market. However, there is lot of opposition and debate against the government’s decision of allowing FDI in retail by local and small retailers. The present paper makes an attempt to understand pros and cons vis-à-vis opportunity and challenges of FDI in Indian retail sector and explore the reason as to why international brands are interested in investing in Indian market.

Keywords: Foreign Direct Investment, Retail, Economic Growth, Global Retail Development Index

JEL Classification: F14, F2, F3, F21, F23, F4, F40, G15, G18, H87, L80, L81