Foreign Direct Investment in India Retail Industry

In recent years the destination sectors in FDI have became more varied. FDI inflows have shifted from infrastructure, natural resources and export driven manufacturing to other areas such as retailing, tourism, construction and off shore services.

In spite of the recent developments in retailing and its immense contribution to the economy, retailing continues to be are the least evolved industries and the growth of organised retailing in India has been much slower as compared to rest of the world. Within the country, there have been protests by trading associations and other stakeholders against allowing FDI in retailing. On the other hand, the growing market has attracted foreign investors and India has been portrayed as an important investment destination for the global retail chains. The present paper attempts to analyze the reason why foreign retailers are interested in India, the strategies they are adopting to enter India and there prospects in India

After the waves of globalisation, liberalisation and privatisation marketing scenario particularly retailing has changed radically. These changes have resulted in emergence of new environment for buyers’ behaviour and purchasing habits. The upper and upper middle strata of the society now prefers to purchase well established branded goods from standard showrooms and it has transformed the entire picture and perception not only in the metro cities but almost in all big cities of our country. It is worth mentioning that retailing in India has been hailed as one of the sun-rise sectors in the economy.

The strategy of opening up should be backed by appropriate reform measures. India can learn from the experiences of other developed and developing countries and develop its own strategies, laws and regulations that would be in the best interest of the country. As of now, there is no proper definition of retailing or retail formats in India. International players are exploiting the situation and are often entering the market and expanding their businesses through multiple routes and are operating in the country with more than one format of retailing. The regulatory regime should address these issues. The entry norms should clearly state the approval requirements, conditions / restrictions if any imposed, etc. The government should also strictly enforce the quality standards for local production and imports.

FDI - Rising Up the Ranks

Foreign direct investment (FDI) into India has shown signs of recovery in the wake of the global financial crisis, with investors looking to take advantage of the country's attractive long-term growth potential. Going forward, we expect inward FDI to continue gathering pace, particularly into consumer- and infrastructure-orientated sectors. Increasing capital inflows bode well for our medium-term constructive view of the Indian rupee.Improved global sentiment and strong industrial output numbers in India are increasingly attracting foreign investors in the country. Other factors being attributed to the revival in foreign direct investment (FDI) in recent times include increasing consumer confidence.

Being the 10th largest economy in the world and the 4th in terms of People's Propensity to Purchase(PPP)India has emerged as a potential player for FDI and NRI investment. India has a large reservoir of skilled laborer at internationally competitive cost and a large entrepreneurial base and a diversified manufacturing structure makes it easy to find partners for collaborations .The country has a vast scientific and technical manpower of over 20 million whose size exceeds the population of Taiwan .The number of literates in India is more than the combined population of France and Japan.

India has been ranked at the third place in global foreign direct investments this year, following the economic meltdown, and will continue to remain among the top five attractive destinations for international investors during the next two years, according to United Nations Conference on Trade and Development (UNCTAD) in a new report on world investment prospects titled, ‘World Investment Prospects Survey 2009-2011'.

India attracted FDI inflows of US$ 1.74 billion during November 2009, a 60 per cent increase over the US$ 1.08 billion achieved in same month last year. The cumulative amount of FDI inflows from August 1991 to December 2009 stood at US$ 127.46 billion, according to the latest data released by the Department of Industrial Policy and Promotion (DIPP). India attracted FDI equity inflows of US$ 1.54 billion during December 2009. On a cumulative basis, FDI equity inflows of US$ 20.92 billion were recorded during April-December 2009.