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Impact of FDI on Indian Retail Trade: Good, Bad or a Mix

Mr. Kapil Kumar1 and Mr. Sandeep Sheoran2

(e-mail: kapiljangra25@gmail.com)1.

Asst. Professor, SDCM.

(e-mail: sheoran.3593@gmail.com)2.

Asst. Professor, SDCM.

Abstract: - Retailing is the interface between the producer and the individual consumer buying for personal

consumption . AT Kearney, the well-known international management consultancy, recently identified India as the

second most attractive retail destination globally from among thirty emergent markets .It has made India the cause

of a good deal of excitement and the cynosure of many foreign eyes. This sectors contribution is 14% of Indian

GDP.FDI is playing a vital role in the growth of retail sector in India. The main aim of this paper is to highlight the

role of Foreign Direct Investment in retail industry in India. Secondary data from various sources have been

extensively used for the purpose. This paper also tries to develop an insight as to what had been the various issues

relating to FDI in retail sector in India. The results show that India is on the top of emerging retail markets with

highest potential.Indias FDI in retail sector accounts for 22% of its total Fades inflow.

Keywords: Retail Sector, FDI, growth, issues, favourite, labour index, retail index, retail reforms

I. Present Indian Scenario In Retail Market

In Indian retail sector there is a paradigm shift from unorganized to organized sector and Indian retail sectorhas suddenly become active. Some major retail players are trying to move in retail market.

mailto:kapiljangra25@gmail.commailto:kapiljangra25@gmail.commailto:kapiljangra25@gmail.commailto:sheoran.3593@gmail.commailto:sheoran.3593@gmail.commailto:sheoran.3593@gmail.commailto:sheoran.3593@gmail.commailto:kapiljangra25@gmail.com

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Reliance Industries has launched its retail operations branded "Reliance retail" in the country by openingoutlets in Hydra bad that sells fruits vegetables and grocery.

Aditya Birla group is also going to spend Rs.15000 crore to set up 6000 outlets in 3 years. Aditya Birlagroup is expected to open its first store by the middle of next year.

Bharti Enterprises is planning to tie up for his field fresh foods pvt. Ltd. With the U.K based Tesco to setup chain stores in India.

Wal-Mart has initiated talks with Indian companies for franchised or cash and carry transaction. Wal martis also planning to tie up with Bharti Enterprises.

Large FMCG players like HLL, ITC, Dabour and Marico are putting in place systems to service Relianceas the off take of consumer goods from HLL is expected to be large.

World second largest retail chain the 74.5 billion Carrefour is also set to enter India along with Dubai basedLandmark group which operates the lifestyle chain of stores in India. According to Carrefour's plans

include opening 200 hypermarkets throughout India in the next 10 Years.

A recent study by "Real estate services provider Frank Knight India" revealed that the Indian retail sector isworth $210 billion and is expected to grow at between 5 to 7% per year.

II. Impact of FDI in Retail on the domestic retail sector?

The Indian retail sector is the second largest employer in India after agriculture, employing over 4 crore (40

million) persons as per the latest National Sample Survey (NSS) 2009-10. Most of these are small unorganised or

self-employed retailers, who are unable to find gainful employment in other sectors of the economy. The average

size of a Walmart supermarket in the US is 108000 sq.ft employing around 225 persons. In 2010, Walmart sold

$405 billion amount of goods through its 9800 odd outlets 5 located across 28 countries, em ploying around 2.1

million (21 lakh) persons. The Commerce Minister has claimed that FDI in retail will create 10 million (1 crore)

jobs in 3 years with 4 million (40 lakhs) jobs created directly and the rest in the backend logistics. The number of

stores worldwide and employee strength of the top 4 MNC retailers are given below.

As per studies one Walmart supermarket can displace over 1300 Indian small retail stores and thereby

render around 3900 persons jobless. The employment created against this in that supermarket will be 214 (or

maximum 225, which is the average in the US). Clearly, there will be severe job losses if giant MNC supermarkets

are allowed entry into the Indian market.

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III. Why Indian market is so much attractive

The reason why India is attracting the foreigners for business is because of the phenomenal growth and

development of retail industry. This is reflected in the Global Retail Development Index (GRDI); which represents

countrywide yearly growth and development in retail sector. Index includes top 20 countries as per their growth.

Based on the GRDI analysis data, top five countries are analyzed to identify the market potential.

The above table shows that India is ranked among top 10 with the score of 42 among twenty countries in

terms of retail growth in 2011. So we can say that in last three years India attained remarkable growth in retail trade.

Growth in the retail trade is not the only factor to be considered but labor plays important ro le because it is labor

intensive industry. The appropriateness of the country depends upon best combination of Growth Development and

Labor as main resource. Considering this further analysis is done with the help of retail labor index and position of

India is analyzed.