Fdi in Indian Retail Industry
Impact of FDI In
The Indian Retail Sector
By: Aditi Mehta
12/PPRA/504 Foreign Direct Investment (FDI) FDI is a mode of entry to international business. It refers to the investment made in a foreign country where the investor retains control over the investments. This can be made by an individual, as well as by business entities. FDI is a venture with long term considerations, as it cannot be easily liquidated. FDI as defined in Dictionary of Economics ( by Graham Bannock) as investment in a foreign country through the acquisition of a local company or the establishment there of an operation on a new (Greenfield) site. FDI may be of 2 types:
• With Alliance – through mergers, joint ventures, acquisitions and strategic alliances.
• Without Alliances – Through the Green field strategy where the company begins its business from scratch in a foreign country. The Indian Retail Sector The Indian Retail industry is rapidly growing sector. The growth can be attributed to the growing Indian economy, increase in consumption expenditure and the change in consumption pattern of the Indian populace. The changing consumption pattern, in turn, primarily remains driven by higher standard of living, growing middle-class population, greater proportion of working women and development of organized retail. Despite the rapid growth, the Indian retail industry remains highly fragmented and unorganized. The organized retailing which is still in its formative stage, it accounts for only 5% of the total Indian retail market.
Current position of the Indian retail sector:
The good
• Contributes about 33-35% of GDP
• High growth rate
• High potential as only 5% is organized
• Provides numerous employment opportunities
The Bad
• Highly unorganized
• Not recognized as an “industry”
• unavailability of skilled and qualified workforce
The government has announced following reforms in Indian Retail Sector:
1. India
The Indian Retail Sector
By: Aditi Mehta
12/PPRA/504 Foreign Direct Investment (FDI) FDI is a mode of entry to international business. It refers to the investment made in a foreign country where the investor retains control over the investments. This can be made by an individual, as well as by business entities. FDI is a venture with long term considerations, as it cannot be easily liquidated. FDI as defined in Dictionary of Economics ( by Graham Bannock) as investment in a foreign country through the acquisition of a local company or the establishment there of an operation on a new (Greenfield) site. FDI may be of 2 types:
• With Alliance – through mergers, joint ventures, acquisitions and strategic alliances.
• Without Alliances – Through the Green field strategy where the company begins its business from scratch in a foreign country. The Indian Retail Sector The Indian Retail industry is rapidly growing sector. The growth can be attributed to the growing Indian economy, increase in consumption expenditure and the change in consumption pattern of the Indian populace. The changing consumption pattern, in turn, primarily remains driven by higher standard of living, growing middle-class population, greater proportion of working women and development of organized retail. Despite the rapid growth, the Indian retail industry remains highly fragmented and unorganized. The organized retailing which is still in its formative stage, it accounts for only 5% of the total Indian retail market.
Current position of the Indian retail sector:
The good
• Contributes about 33-35% of GDP
• High growth rate
• High potential as only 5% is organized
• Provides numerous employment opportunities
The Bad
• Highly unorganized
• Not recognized as an “industry”
• unavailability of skilled and qualified workforce
The government has announced following reforms in Indian Retail Sector:
1. India