Study of Impact of Proposed "51 % FDI in Multi Brand Retailing" by Government of India on the Unorganized Retail Market

Abstract

According to AT Kearney's Global Retail Development Index (2011), India has been ranked as the 4th most emerging market for retail (after Brazil, Uruguay and Chile). India has been ranked as the 4th most emerging market for retail (after Brazil, Uruguay and Chile). The organized retail market in India is approximately 6 % of the total retail market but growing at a significant rate of 35 - 40 % (Indian Retail Report, 2011). India being a signatory to World Trade Organization's General Agreement on Trade in services, which includes wholesale and retailing services, had to open up the retail trade sector to foreign investment. There were initial reservations towards opening up of retail sector arising from the fear of job losses, procurement from international market, competition and loss of entrepreneurial opportunities. However, In 1997 FDI in cash and carry (Wholesale) with 100 percent ownership was allowed under the government approval route. It was brought under the automatic route in 2006. 51 percent investment in a single brand retail outlet was permitted in 2006. The paper studies the impact of proposed "51 % FDI in multi brand retailing" by Government of India on the unorganized retail market by discussing the pros and cons of the proposed FDI policy. The paper is based on secondary data and analysis is done by taking into account the views expressed by government and findings of surveys done by various market research agencies.