FDI in Indian Retail Industry

Abstract

India is one of the largest emerging markets, with a population of over one billion. India is one of the largest economies in the world in terms of purchasing power and has a strong middle class base of 300 million.

Around 70 per cent of the total households in India (188 million) reside in the rural areas, where mostly traditional retail outlets, commonly called kirana stores exist. These are unorganized, operated by single person and runs on the basis of consumer familiarity with the owner. However, recently organized retailing has become more popular in big cities in India and most of the metropolitan cities and other big cities are flooded by modern organized retail stores. Many semi-urban areas also witnesses entry of such organized retail outlets. Till now, entry of foreign retailers was restricted in Indian retail market because of the ban on Foreign Direct Investment in Indian Retail Sector. But recently, as government has changed its policy and the cabinet has allowed 51 per cent FDI in single-brand retail, the prospects of foreign players entering India became high.

Keywords: emerging market, organized/unorganized retail sector, purchasing power