Impact of the Retail FDI Policy on Indian Consumers and the Way Forward

Abstract

In the post-reforms period, there has been a change in the purchase behaviour of Indian consumers. The large consumer base has attracted many global retailers and domestic corporates to invest in modern retail. The government has partially allowed foreign direct investment (FDI) in retail. At present, there is an ongoing debate on the impact of allowing FDI in retail. This chapter analyses the impact of the retail FDI policy on Indian consumers and offer policy recommendations at the national level. A primary survey of Indian consumers, aimed at examining their shopping behaviour across branded and non-branded products, knowledge of foreign brands and attitude towards liberalisation of FDI in retail brings out interesting results, including identifying factors determining the choice of modern retail outlets. It is observed that the purchase of brands varies across different product categories and for some consumers show distinct preference for non-branded products, which are purchased from traditional outlets. Hence, both traditional and modern retail coexist in India. While knowledge and use of foreign brands, especially luxury brands, is low, majority of the respondents is in favour of allowing FDI in retail. It is held that FDI in multi-brand retail would enhance brand knowledge, choices available to consumers and help promote branding even as the FDI policy should ensure consumer welfare.KeywordsForeign direct investmentRetailBrand consciousnessConsumer behaviourIndian retail policyBilateral trade agreements