Foreign Direct Investment in Indian Retail Sector

Lead driver for the countrys economic growth:

FDI would create a competition among the global investors, which would ultimately ensure better and lower prices thus benefiting people in all sections of the society. There would be an increase in the market growth and expansion. It will increase retail employment and suppress untrained manpower and lack of experience. It will ensure better managerial techniques and success. Higher wages will be paid by the international companies. Urban consumers will be exposed to international lifestyles.

FDI opens new doors for Franchising:

Restrictions on FDI are considered as trade barriers as they deny direct market access to foreign firms. Retail giants who are at their wings, seeking entry into foreign market look for other available alternatives. These restrictions on the global retailers regarding the inflow of Foreign Direct Investment, leads them towards acquiring the market entry through franchises. Thus, countries which offer promising market potentialities for retail growth offers substantial growth in the franchising sector as well.

FDI Success story China:

China is the worlds largest FDI recipient, and has used it deftly to increase its exports. It started off with an FDI investment of $19 billion in 1990, and reached $300 billion in 1999. 40 retailers now have a secured approval in the Chinese market. FDI has created an encouraging effect in both traditional as well as modern formats of retail business in China.

Carrefour from France, Tesco from England, Metro from Germany, and Wal-Mart from US have entered the Chinese retail sector and has uplifted the countrys economy. Initially during 1992, China allowed FDI only in a few selected cities and also restricted the ownership by 26 percent. Later on as the exports of the country progressively increased, by 2002, the Government increased the FDI cap to 49 percent. China continues to hit new records. More than 28 million people and approximately 10 percent of Chinas total population are working in companies funded with FDI.

With the advent of FDI, retail sector is likely to make massive strides, and catalyze the growth of the ountrys economy. As far as developing nations are concerned, it is the life blood of economy.

References:

http://www.going-global.com/

http://www.oecd.org

www.financialexpress.com/

http://www.iie.com

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