Recent declaration of the CoS approving a 51% FDI in multi-brand retail has brought joy among the Indian retail sector. What exactly is brought to the table? Will FDI become the beacon of Indian retail market?
India ranked second in the world, in terms of financial attractiveness during 2010. Regardless of the fact surveys state that 75% of the Indian population earns only around $2 a day, Indian retail sector would be an appealing context to many foreign investors. Huge market potential for many products, untapped market scenario, and the drastic change in the income level, and life style of Indian youth are attracting the eyes of foreign investors. Furthermore, Indias Committee of Secretaries (CoS) has voiced its approval for 51% of FDI in multi-brand retail industry. India has already allowed for 51% FDI in single brand retail, and 100% FDI in cash-and-carry business formats.
CoS has recommended FDI in permitted 36 big cities with more than 1 million population. Global retail giants would be allowed to own 51% of ownership provided they invest USD 100 million. Retailers such as Wal-Mart, Tesco, Carrefour, and Bentonville are likely to open their stores through strategic partnership. The 'Economic Survey of India' presented by the Government to the Parliament states, "Permitting FDI (foreign direct investment) in retail in a phased manner beginning with metros and incentivizing the existing retail shops to modernize could help address the concerns of farmers and consumers. FDI in retail may also help bring in technical know-how to set up efficient supply chains which could act as models of development".
Benefits of Foreign Investments:
Business Monitor International predicts Indian retail sales to leapfrog from USD 395 billion in 2011 to USD 785 billion by 2015. Strong economic development, population growth, increasing level of individual income, and growth of organized retail infrastructure are said to the key factors fuelling the growth. A research report on 'World Investment Prospects Survey 2009-12' forecasts India to be among the top five destinations for foreign investors during 2010-12.
During May 2011 FDI inflows were USD 4.66 billion, the highest in the past 39 months. India's foreign exchange reserves (Forex) have increased by USD2.29 billion for July 2011. India has the potential to come up as the biggest market in US Export-Import Bank (Ex-Im) in the next 1 year. 86 deals were acquired by Indian companies from foreign companies during the first half of 2011.