Foreign Direct Investment in Retail Sector

The Indian Economy has continuously recorded high growth rates over the past decades. As per the Indian Prime Minister, Dr. Manmohan Singh, the Indian economy is expected to grow at 7.5 % over the coming years. One of the major contributors to the growth shall be the Foreign Direct Investment (F. D. I) and it is predicted that over the last next two years, India could attract F. D. I. worth U. S $ 80 billion. The latest available data from the Reserve Bank of India shows 77 % jump in the F. D. I in the first half of current financial year, compared to what was U. S $ 19.5 billion during the same period a year ago. F. D. I refers to an investment made to acquire lasting or long term interest in enterprise operating outside the economy of the investor. It is a major source of external finance which means that countries with limited amounts of capital can receive finance beyond the national borders from wealthier countries. In case of India, countries such as Singapore, U. S and U. K are amongst the leading sources of F. D. I. The sectors which attract higher inflows are services, telecommunications, construction activities and computer software and hardware. Another sector which is looking at benefiting from F. D. I. is the retail sector. There has been a discussion about F. D. I being opened up in retail which has drawn a lot of support from international retailers like Wal-Mart and Tesco. It is also being seen as the means to put a structure in place to the highly unorganized retail structure prevalent in the country. The additional benefits in the form of lower cost and enhance technologies make it an attractive proportion. However, the policy decision is faced with some resistance from internal organized retailers as well as some representatives of the unorganized sector. The entry of new competitors in the retail sector is being viewed as a threat by current players in the market. With Union Cabinet deciding to allow 51 % F. D. I in multi-brand retail on N November 24, 2011 the way has been clear for entry of global supermarket giants in India. T here are doubts and fears amid hopes for long term gains. Though some retailers would suffer, yet it would prove to be a boon for the Indian retail sector due to new technology, cultural exchange, quality goods and others.