Foreign Direct Investment in Retail Industry in India

Abstract

The Government of India was initially very apprehensive of the introduction of the Foreign Direct Investment in the Retail Sector in India. The unorganized retail sector as has been mentioned earlier occupies 98% of the retail sector and the rest 2% is contributed by the organized sector. The unorganized retail sector contributes about 14% to the GDP and absorbs about 7% of our labor force. Retail is the sale of goods to end users, not for resale, but for use and consumption by the purchaser. The retail transaction is at the end of the supply chain. Manufacturers sell large quantities of products to retailers, and retailers sell small quantities of those products to consumers. This study has been undertaken foreign direct investment has affected the Indian retail industry. The inflow of foreign direct investment has boosted growth in the retail industry and increased the gross domestic product of India. Government policy and other determinants have been discussed to study and analyze the impact. The Indian retail market is a developing market and has potential for investments. There had been a restriction in the inflow of foreign direct investment till 2006. But since 2006, there has been a positive change in the government policy thereby allowing foreign companies to invest in India and become an owner. The paper elucidates the growth between different sectors of Indian retail industry, the tax incentives and determinants for inflow of foreign direct investment. This study focuses on foreign direct investment inflows in selected retail sectors