Foreign direct investment in Indian retailing sector prospects and retrospect

India is a growing economy and considered as an attractive country for investment in various sectors in general and particularly in retail sector as it is changing and growing rapidly. In India still, Foreign Direct Investment is restricted in the retail Sector, and in spite of many decades of arguments, the regulations on FDI in retailing is very slowly changing and yet there are lots of uncertainties. According to the Indian media discussions on the issues of FDI “In organized retail retailing at present accounts for only 4% in India of the total market as against 20% in china and 40% in Thailand”. Moreover there is a growing demand for modern retailing outlets that offer clean and hygienic environment to shop in. AT Kearney (2009), the well-established international management consultancy, in their Annual Global Retail Index, ranked India as No. 1 out of 30 of the top emerging markets, and has done for some years. Foreign Investors are watching India, ready for a piece of the action in the retail market, but there are still plenty of uncertainties, restrictions and potential socio economic risks. This has created significant debate for allowing FDI regulations to open up, although little has changed for multi-brand retailing restrictions to date. The main objective of the study is to understand the impact of FDI in retail sector in the past and its prospects in future. The recent changes brought about through a series of Press Notes in 2009 have caused confusion over the policy, as the changes allow Joint Ventures to effectively create sub companies (cascading). We believe this may encourage foreign investors to use this ‘loop hole’ to create sub-companies so that they can exceed FDI caps, and potentially enter areas such as multi-brand retailing through the ‘back-door’ without technically breaking the rules. There needs to be more clarity in this area of policy. The literature review revealed that although there are hurdles to be overcome in the policy and regulatory environment, the government seems to be working on various solutions.