FOREIGN DIRECT INVESTMENT IN INDIAN RETAIL – ISSUES AND CHALLENGES

Abstract

India has become an investment friendly country during the last one and half decade by liberalizing trade policies. Even though around 70% population in India is engaged in agriculture, India is the tenth most industrialized country in the world. The success story of FDI in manufacturing sector is known to us because of infrastructure, labour availability, flexible taxation mechanism etc. India is expected to contribute 7.5 percent of the world’s GDP and 10 percent of incremental income growth which is driven by rising incomes,
the growing number of people of working age, urbanization, growing consumer aspirations, nuclear families, working women, and so on. As the rules of retailing are changing, FDI in retailing is looking to expand into newer geographies that offer better opportunities and currently employs over 4 crores of people. In most cases FDI in manufacturing basically enhances the productive employment; but FDI in retail trade may create job losses and displacement of traditional supply chain. The main fear of FDI in retail trade is that, it will certainly turn traditional retailers sluggish. Opening of big markets or foreign-sponsored departmental outlets will not necessarily absorb them; rather they may try to establish the monopoly power in the country. However, so many positive factors are also there in favour of FDI in Indian retail service.