FDI in Multi-brand Retailing in India: Comparative study with China

Dr Anuradha Jain

doi:10.24297/ijmit.v3i1.4640

Abstract

Retailing is the interface between the producer and the individual consumer buying for personal consumption. As such, retailing is the last link that connects the individual consumer with the manufacturing and distribution chain. Indian retail industry is one of the sunrise sectors with huge growth potential. However, in spite of the recent developments in retailing and its immense contribution to the economy, retailing continues to be the least evolved industries and the growth of organised retailing in India has been much slower as compared to rest of the world. This paper captures the existing retail scenario in India with regard to organized and un-organized retail and presents the limitations of the current set-up along with the experiences of domestic players. The paper discusses about opening up of the multibrand retail sector to foreign direct investment by the government. The rationale for retail reforms and challenges to be addressed by the retail sector are discussed. FDI in Retail is like an allopathic medicine It would deliver quick results & would not work as hit & trial like Homeopath. Government must go for Policy Mix to avoid its side effects. It will require various changes in internal policies also. The whole process must be made socially & economically useful.It will be better to follow the Chinese model of caution and hurrying slowly. China took over 12years to liberalise its FDI regime and in stages with reversals as well. The Chinese retail environment is 20years ahead of us. Looking at their market today can give us a rough idea of how FDI in multi brand retail in India might pan out in the medium term and long term period.

Highlights

The problem of foreign investments in India has been an issue of outstanding importance ever since the days of the East India Company
As part of integrating Indian economy to world market due to WTO obligation and for encouraging foreign direct investment (FDI) in the country, Government of India proposed a policy of 100 per cent FDI in single brand retail, and 51 per cent FDI in multi-brand retail[8]
It is presumed that the foreign investors would invest lavishly to make their shops attractive- the way potato chips in packets have become both costly and attractive. It would take time for Indian retailer to come to this position

Summary

INTRODUCTION

With high GDP growth, increased consumerism and liberalization of the manufacturing sector, India is being portrayed as an attractive destination for FDI in multi-brand retailing. As part of integrating Indian economy to world market due to WTO obligation and for encouraging foreign direct investment (FDI) in the country, Government of India proposed a policy of 100 per cent FDI in single brand retail, and 51 per cent FDI in multi-brand retail[8]. Starting from virtually no foreign-owned firms on Chinese soil before 1979, China has become one of the largest developing host countries for foreign investment with the flow of foreign direct investment (FDI) reaching $26 billion (U.S.) in 1993 13 This dramatic change is part of the overall Chinese effort that began about 20 years ago to reform the economic system and open up to the outside world. For one, it is unclear if India can pose the barriers that challenged foreign retailers in China, starting right from land — foreign retailers here have complained of not being given land by local governments, who control all land transactions in prime locations

Certainly consolidation of the retail sector in

No of stores in No of stores in Traditional

Findings

CONCLUSION