A study on effects of FDI in retail on MSMES in India

The post-liberalization period observed a growing trend of FDI inflows in India with a high growth rate. The relaxation of policies towards international trade and investment supported by an affirmative response from capital exporting countries is also regarded as a prime mover of FDI inflows into India. Whether it is retail sector, education sector or information technology or telecommunication sector, there is a constant variation in FDI inflows into these sectors over the years. Indian retail industry is one of the sunrise sectors with vast growth potential. According to the Investment Commission of India, the retail sector is likely to grow nearly three times its current levels to $660 billion by 2015. Despite of the recent developments in retailing and its enormous contribution to the economy, retailing continues to be the least progressed industries and the growth of organized retailing in India has been much slower in contrast to rest of the world.

India is gaining significance globally as the country has become an investment hub over the last decade. World-wide investors have retained their trust in the flexible Indian economy even during the hard times. As a result, India is benefitted from high foreign inflows and investments when rest of the world was struggling to even stay alive. FDI in retail trade has broad implications on Indian economy. The choice to open FDI gates has not just impacted the traditional shops and traders, but also the manufacturers, particularly the small scale manufacturers. The association between small shop keeper, supplier and the manufacturer is quite symbiotic. All these stakeholders know the requirement of Indian consumers and thus function strongly to satisfy and fulfil the needs of consumers. With opening of FDI in retail, the MSME sector faces the challenge of continued existence. Micro, small and medium enterprises forms the back bone of our country. It is not only producing and supplying goods to traders and end consumers, but also help India becoming self-sufficient. The chief advantage of this sector is its employment potential at low capital cost. Our micro, small scale and medium industries, sustains millions of population, who are struggling very hard to lead a decent social life.

The present paper aims to analyse the impact of FDI (Retail) on MSMEs in India and major challenges and threats faced by Indian MSME sector. The study is based on secondary data. Secondary data had been collected from various books and journals. The study covers the thoughts and writings of various authors in the stream of industry, academicia, and research. The study reveals that India must act in its self-interest. India must launch a proposal and concentrate in areas where there are several opportunities to be exploited through trade. Along with existing legal and regulatory framework, strong enforcement mechanism is necessary to ensure that big retailers do not dislocate small retailers by unfair means and there is peaceful coexistence of both the arms of retail sector. The back bone of India, which is trade by small shopkeepers and the supply by the MSME remains united, in order to keep the nation's interest. The Competition Commission of India (CCI) would need to play a proactive role. In short, it is better to act and watch than not to act at all.