Fdi- Pros and Cons

Topics: Retailing, Investment, Shopping mall Pages: 15 (4980 words) Published: May 26, 2013
International Journal of Emerging Research in Management &Technology ISSN: 2278-9359

Research Article 2012
Dr. Kapil Kumar Bansal Head, Research & Publication SRM University, NCR Campus, Modinagar

Foreign Direct Investment in Indian Retail Sector Pros and Cons K. R. Kaushik Research Scholar, SRM University, NCR Campus, Modinagar


On 20th September, 2012 the Government of India has approved 51% FDI in Multiband retail and 100% ( revised) in Single Brand retail sector through Government Route with some riders. Govt. of India is firm to implement the FDI in multi Brand Retail’ Agitation and Bandhs have been called by some political parties. Prime Minister of India has explained to the Nation the necessity and obligation under WTO agreement to allow FDI in Retail Sector. There is a mixed response about FDI in retail sector. Still some of the states are either not in favour of the FDI or indecisive on the issue as they feel that FDI in retail is harmful to local retailers in India. Everyone has the reasons for supporting or opposing the issue. Retail is one of the largest sectors of Indian economy the unorganized retail sector in India occupies 97% of the retail business and the rest 3% is contributed by the organized sector. The unorganized retail sector contributes about 13% to the GDP and absorbs 6% of our labour force. Hence the issue of displacement of labour consequent to FDI Retail Sector is of primal importance in India. Also there is divided opinion on the impact of FDI in the retail sector in India, Some say that FDI in the retail sector in India will lead to economic growth and creation of new jobs along with rural infrastructure development But the other view point is that mass scale job loss will happen particularly in manufacturing sector with the entry of the big MNCs like Wal-Mart and Carrafuer, Metro PLC and IKEA etc. This paper highlights Definition of Retail; Background & Division of Retail Industry, FDI Policy with Regard to Retailing in India, Foreign Investor’s Concern Regarding FDI in Retail sector, SWOT Analysis of Indian retail Sector, Govt.’s view point and Conclusion. Keywords: GATS, FDI, OECD I. Introduction India is the founder member of World Trade Organization and signatory to its General Agreement on Trade in Services (GATS). This agreement includes wholesale and retailing services and all member countries are required to open up the retail trade sector to foreign investment. There were initial reservations towards opening up of retail sector arising from fear of job losses, procurement from international market, competition and loss of entrepreneurial opportunities. However, the government in a series of moves has opened up the retail sector slowly to Foreign Direct Investment (FDI) in India.       II. Background Of Fdi In Retail Sector In India During nineties Mr. P V Narsimha Rao lead Govt. allowed limited FDI in retail and as a result “Dairy Farm” a MNC made entry in India. In 1997, FDI in cash and carry (wholesale) with 100 percent ownership was allowed under the Government approval route. It was brought under the automatic route in 2006. NDA Government was willing to introduce FDI in retail sector in May, 2002 but it could not materialize due to unknown reasons. 51% Foreign Direct investment in single brand retail was also permitted in 2006. In 2011 100% FDI was allowed in Single Brand retail withholding the FDI in Multi Brand Retail due to various political reasons. 100 % FDI in Single Brand (with revised guidelines) and 51% in Multi-Brand retailing with some conditions have now been allowed in India w.e.f. 20th Sept., 2012 with an option to the state Governments to allow or not to allow the FDI in retail sector in their states.

K. R. Kaushik

Page 7

International Journal of Emerging Research in Management &Technology ISSN: 2278-9359

Research Article 2012

Some Parties have opposed the FDI in Retail Sector particularly in the Multi Brand Retail....
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