Foreign Direct Investment (FDI) in India’s Retail Sector
Abstract
This article presents an overview of retail trade in India in the wake of the country's new policy that will allow foreign capital in multi-band retailing. It discusses various potential benefits and costs of foreign direct investment (FDI) in the retail sector, particularly in terms of its effects on traditional retailers, employment, consumers, farmers, and local manufacturers. It argues that given somewhat slower growth projection for the Indian economy during the next decade, various structural issues including inadequate infrastructure and a lack of affordable real estate, and the prevalent structure of the agricultural markets, it is unlikely that all the potential benefits and costs will be realised to their fullest extent, at least in the foreseeable future. The economic dynamics and the political process will play an important role in determining the outcomes of this move to allow FDI in the retail sector and will ultimately determine the effects on various stakeholders.Keywords
Foreign direct investment (FDI), multi-brand retailing, supply chain, logistics
Author Biography
Hiranya K Nath
Associate Professor of Economics
References
AT Kearney (2012). Global Retail Expansion: Keeps On Moving. New York: A. T. Kearney LLC.
Basker, E. (2005). Job Creation or Destruction? Labor Market Effects of Wal-Mart Expansion, Review of Economics and Statistics, 87(1), pp. 174-183
Bhattacharyya, R. (2012). The Opportunities and Challenges of FDI in Retail in India, IOSR Journal of Humanities and Social Science, 5(5), pp. 99 – 109
Coe, N. M. and M. Hess (2005). The internationalization of retailing: implications for supply network restructuring in East Asia and Eastern Europe, Journal of Economic Geography, 5, pp. 449 – 473
Department of Industrial Policy and Promotion (2010). Foreign Direct Investment (FDI) in Multi-brand Retail Trading. Discussion Paper.
Duran, C. (2007). Externalities from foreign direct investment in the Mexican retailing sector, Cambridge Journal of economics, 31, pp. 393 – 411
Gupta, R. (2012). FDI in Indian Retail Sector: Analysis of Competition in Agri-Food Sector, Internship Project Report, Competition Commission of India.
Guruswamy, M., K. Sharma, J. P. Mohanty, and T. J. Korah. (2005). FDI in India’s Retail Sector: More Bad than Good? Economic and Political Weekly, 40(7), pp. 619-623
Kalhan, A. (2007). Impact of Malls on Small Shops and Hawkers, Economic and Political Weekly, 42 (22), pp. 2063 – 2066.
Mukherjee, A., D. Satija, T. M. Goyal, M. K. Mantrala, and S. Zou (2011). Impact of the Retail FDI Policy on Indian Consumers and the Way Forward, ICRIER Policy Series No. 5
Patibandla, M. (2012). Foreign Direct Investment in India’s Retail Sector: Some Issues, Working Paper No. 366, Indian Institute of Management Bangalore.
Sarma, E. A. S. (2005). Need for Caution in Retail FDI, Economic and Political Weekly, 40(46), pp. 4795 – 4798.
Technopak. (2012). Foreign Direct Investment (FDI) in Retail: An Objective Assessment of FDI’s Impact on the Indian Retail Sector and the Indian Economy, White Paper. Gurgaon: Technopak Advisors Pvt. Ltd. Downloaded on March 29, 2013 from: http://www.technopak.com/resources/retail/Technopak%20Whitepaper_FDI%20in%20Retail.pdf
The Boston Consulting Group (2012). The Tiger Roars: Capturing India’s Explosive Growth in Consumer Spending. Downloaded on March 29, 2013 from: https://www.bcgperspectives.com/Images/BCG_The_Tiger_Roars_Feb_12_tcm80-97584.pdf