Impact of Foreign Direct Investment (Fdi) in India’s Retail Sector.
Impact of Foreign Direct Investment (FDI) in India’s retail sector.
ABSTRACT: Retailing in India is one of the pillars of its economy and accounts for about 15 percent of its GDP. Organized retailing is absent in most rural and small towns of India. Supermarkets and similar organized retail stores account for just 4 percent of the market. The main fear of FDI in retail trade is that it will certainly disrupt the livelihood of the poor people engaged in this trade. The 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. Challenges to the retail trade in general include, geographically dispersed population, complex distribution network, little use of IT systems, limitations of mass media and existence of counterfeit goods. FDI is a major source of external finance which means that countries with limited amounts of capital can receive finance beyond national borders from wealthier countries. Until 2011, Indian government denied foreign direct investment (FDI) in multi-brand retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or any retail outlets. But, single-brand retail was limited to 51 percent ownership with government approval. But now, the government continues the hold on retail reforms for multi-brand stores. There are some, who are in favour of the entry of FDI in multi brand retail in India and some against it. According to International Monetary Fund (IMF), FDI is defined as “ an investment that is made to acquire a lasting interest in an enterprise operating in a economy other than that of the investor” The investor’s purpose is to have an effective voice in the management of the enterprise (IMF,1977).FDI is the process by which the residents of one country (the source country) acquire the ownership of assets for the purpose of controlling the production,
ABSTRACT: Retailing in India is one of the pillars of its economy and accounts for about 15 percent of its GDP. Organized retailing is absent in most rural and small towns of India. Supermarkets and similar organized retail stores account for just 4 percent of the market. The main fear of FDI in retail trade is that it will certainly disrupt the livelihood of the poor people engaged in this trade. The 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. Challenges to the retail trade in general include, geographically dispersed population, complex distribution network, little use of IT systems, limitations of mass media and existence of counterfeit goods. FDI is a major source of external finance which means that countries with limited amounts of capital can receive finance beyond national borders from wealthier countries. Until 2011, Indian government denied foreign direct investment (FDI) in multi-brand retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or any retail outlets. But, single-brand retail was limited to 51 percent ownership with government approval. But now, the government continues the hold on retail reforms for multi-brand stores. There are some, who are in favour of the entry of FDI in multi brand retail in India and some against it. According to International Monetary Fund (IMF), FDI is defined as “ an investment that is made to acquire a lasting interest in an enterprise operating in a economy other than that of the investor” The investor’s purpose is to have an effective voice in the management of the enterprise (IMF,1977).FDI is the process by which the residents of one country (the source country) acquire the ownership of assets for the purpose of controlling the production,