FDI in Indian Retail: Food and Grocery Industry

Indian retail industry is one of the sunrise sectors with mammoth growth potential. The recent wave of reforms by the Government to incentivize Foreign Direct Investment (FDI) in various sectors is bringing a new zest to the investment climate in India. One of the most debated reforms is the policy for allowing 51 per cent FDI in multi-brand retail. Organized retail sector considers 8% of total retail sector, which is expected to grow 20% by 2020 by various estimates. The Indian retail industry has experienced growth of 10.6% between 2010 and 2012 and is expected to increase to USD 750–850 billion by 2015. Food and Grocery is the largest category within the retail sector with 60 per cent share followed by others. The demand-push impact of a young consuming class with growing disposable incomes, India offers significant investment opportunities in the food and agri-business sector.

This paper explains the impact of FDI in Multi-Brand Retail Trade (MBRT) in relation to food and grocery sector, by balancing the interests of different stake holders like farmers -corporate -government-consumers. The change in some of the policy conditions indicates government intention to "move food from farm to plate". With its backward and forward linkages, MBRT can act as wealth and health creator for the nation. Some of the thrust areas of the MBRT are to develop Infrastructure, to enhance productivity and quality, development of SME sector, taming inflation and others.

The first part of the paper contains the introduction about the FDI in retail segment of food and grocery, continued by evaluation of various opportunities and challenges with the entry of FDI which can be buoyed by a favorable policy environment by government to protect the basic standard of the industry.