The impact of Foreign Direct Investment on the retail industry in India

Retailing is the largest private industry in India and second largest employer after agriculture. Retailers not only provide consumers with a wide variety of products, but also a wide range of complementary services such as assurance of products delivery which can lead to more informed choice and greater convenience in shopping. They also provide products with much needed and information on consumer demand pattern. Productivity and efficiency in retail operations lower price levels and reduce distortions in the price structure. Through backward and forward linkages, performance of retailing service affects the performance of interlinked sectors such as tourism, recreational and culture services, manufacturing of consumer goods, agro food processing industries etc.

Retailing sector in India has undergone significant transformation in the past 10 years. The sector contributes to around 10 percent of GDP and 6-7 percent of employment. With over 15 million retail outlets, India has the highest retail outlet density in the world. This sector witnessed significant developments in the past 10 years from small unorganized family-owned retail formats to organized retailing. Traditionally Indian retail sector has been characterized by the presence of a large no of small-unorganized retailers. However, in the past decade there has been development of organization retailing, which has encouraged large private sector players to invest in this sector. Liberalization of the economy, rise in per capita income and growing consumerism have encouraged large business houses and manufactures to setup retail formats, real estate companies and venture capitalist are investing in retail infrastructure. Many foreign retailers have also entered the market through different routes such as wholesale, cash-and carry, local manufacturing, franchising, test marketing etc. with the growth in organized retailing, unorganized retailers are fast changing their business models and implementing new technologies and modern accounting practice to face competition.

[...] India has surpassed South Korea to become the fourth-largest recipient of foreign direct investment (FDI) in South and Southeast Asian region, according to UNCTAD's first estimate for the year. Globally, the FDI inflows grew in 2006 for the third consecutive year to reach $ 1.2 trillion. India's total FDI inflows in 2004 stood at $ 5.5 billion and grew to $ 6.6 billion in 2005.and the figure stood at $ 9.5 billion in 2006. Thus, the overall growth rate during the period was a phenomenal 44.4 per cent. [...]

[...] [ 4.4 ] [ 4.5 ] [ 4.6 ] Sectoral Break Down Of Cross-border M & A Sales (1987-2005) Percent CURRENT TRENDS OF FOREIGN DIRECT INVESTMENT (FDI) IN INDIA FDI inflows which had declined from US$ 4.7 billion in 2001-02 to US$ 2.4 billion in 2003-04, continued its growth for the second consecutive year in 2005-06 to climb back to US$ 4.7 billion again. The overall FDI reported is inward FDI netted for outward FDI. FDI on a comparative net basis, year-on-year, exhibited a growth of 27.4 per cent in 2005-06 reflecting the improved investment climate. [...]

[...] FDI or No FDI, India needs more retailers Government's favorable talks on Foreign Direct Investment (FDI) has ignited ambitions in many of the global players to be among the first movers into a virgin retail territory i.e. India. So far India allows 51 per cent foreign investment in single-brand retail with prior government permission. FDI is also allowed in the wholesale business. Single-brand retailers such as Louis Vuitton, Fendi, LLadro, Nike and Toyota can operate now on their own. Metro is already operating through the cash-and-carry wholesale mode. [...]