Retail Sector and Foreign Direct Investment in India

Topics: Retailing, Shopping mall Pages: 12 (3775 words) Published: October 3, 2012
Retail Sector and Foreign Direct Investment in India
Sagar G
3rd Semester, Department of Management Studies
Rajeev Institution of Technology, Hassan

In many countries, the retail dimension has gone well ahead the middle class clientele to penetrate the poor and its profound and rapid transformation has not parted India. The modern-day retail in India is reflected in rambling shopping centre, malls and huge complexes offer shopping, entertainment and food under one roof. There has been considerable growth in retail business in recent past and is hovering for much faster growth in coming days.

Though emerging market economies have gone well ahead and reaped the benefits of modern retail through FDI’s, India is still at its fork with regard to retail sector. The major role of FDI in supplementing domestic resources and ensuring employment generation in development of an economy is unquestionable but, given the robust growth to various retail dimensions, the current scenario of Indian retail sector can certainly be bright and promising.

Key Words: Retail, FDI, Indian Economy

Indian retail sector is highly fragmented and one of the most vibrant and rapidly growing industries with several players entering the market. The Indian retail sector is divided into organised and unorganised sectors. Organised retailing refers to trading activities undertaken by licensed retailers, like corporate-backed hypermarkets and retail chains and also the privately owned large retail businesses. Unorganised retailing on the other hand refers to the traditional low-cost retailing, like the small local kirana shops and owner manned general store. This shows a great potential for the organised retail industry to prosper in India, as the market for the final consumption in India is very large. Retail trade is largely in the hands of private independent owners and distributor’s for fast moving consumer goods consisting of multiple layers such as carrying and forwarding agents, distributors, stockiest, wholesalers and retailers. Thus, the growth potential for the organised retailer is enormous. In the next 2-3 years, India will finally see operations of a number of very serious international players- inspite of restrictions on 100% FDI in retail. The total concept and idea of shopping has undergone a sea change in terms of consumer buying behavior, ushering in a revolution in shopping in India. The India Retail Industry is the largest among all the industries, accounting for over 10 percent of the country GDP and around 8 per cent of the employment $17 billion by 2010 and is expected to grow by 25 per cent annually. Modern retail sector in India could be worth US$ 175-200 billion by 2016 (ASSCHAM). The future of the India Retail sector looks promising with the growing of the market, with the government policies becoming more favorable and the emerging technologies facilitating operations. The India retail sector is gradually moving towards becoming the next booming industry in coming years. The purpose of this paper is to understand the imperativeness of Indian retail sector in the growth of Indian economy.


India is the country having the most unorganised retail market. Retailing in India is witnessed to the boom in terms of modern retailing formats, shopping malls etc. The future of retailing for any product across the country will definitely be in hypermarket and malls, where the consumer can get range of quality products and ambience. However, inspite of continuous deliberation, recently Government has allowed up to 51% FDI in single brand retailing by foreign companies like Reebok and Louis Vuiton. As of now, single brand retailers operate through the franchisee route and there is a strong view that FDI in this segment would not displace jobs or impact the local industry but help create employment. Even today, the...

References: Articles
Sinha, P.K, Bannerjee and Uniyal D.P (2002), “Deciding Where to Buy: Store Choice Behaviour of Indian Shoppers”, Vikalpa, Vol. 27(2), pp. 13 – 28.
Fernandes M, Gadi C, Khanna A, Mitra P and Narayanaswamy S (2000), “India’s Retailing Comes of Age”, Mckinsey Quarterly, 4, pp. 95 – 102.
Sarma M.K, (2000), “Some Issues in Retail Management”, Vision 4(1), pp. 35 – 40.
Radhakrishnan K, (2003), “Original Retail: Forging Ahead”, Praxis, 4(1), pp. 47 – 51,
Technopak Analysis: Emerging Trends in Indian Retail and Consumer 2011
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