Foreign Direct Investment in Retail: Historical Perspective and Prospects in Indian Context

Retailing is the connecting point between the producer and the individual consumer buying for its own consumption, Impact of Liberalization and Globalization during the last two decade has led India to become an investment friendly country rendering foreign direct investment (FDI) in this country to assume critical importance. AT Kearney, an international management consultancy firm, has rated India as the most attractive nation for retail investment. Consistently there have been efforts for FDI in the retail sector so that the trader can reap the rich benefit of FDI. As per the current regulatory norms, FDI in retail sector (except under single-brand product retailing — FDI up to 100 per cent, under the Government route) is prohibited in India. In India, FDI can be an effective catalyst to augment competition in the retail sector, owing to the current scenario of lesser competition and poor productivity. The policy of allowing 100% FDI in single brand retail has potential to benefit both the foreign investor and the Indian entity – foreign investor can get feel of local markets, while Indian companies can access global management practices, designs and technological knowhow. In recent past, The Indian Government decision to allow 51% Foreign Direct Investment (FDI) in Multibrand retailing has confronted fierce resistance in the country. Indian Government claims this decision as something very necessary and inevitable considering it a revolutionary decision that can change the retailing landscape in India whereas Resistance to this much awaited decision comes from major opposition parties whose stiff resistance has caused it to be put on hold although it has the support from the Confederation of Indian Industries (CII), FICCI etc. In this context, the present paper attempts to analyze the various pros and cons regarding the influx of foreign direct investment in the Indian retail sector in the context of past, present and future scenarios. Moreover, with the latest move of the government to allow FDI in the Multibrand retailing sector, the paper explores the various facets of the issue to arrive at conclusions and these conclusions of the study extend a helping hand in bringing out the apt recommendations for all stakeholders.