06-09-2012, 01:27 PM
FDI IN THE INDIAN RETAIL SECTOR- PROBLEMS AND PROSPECTS
ABSTRACT
The retail industry in India is of late often being hailed as one of the sunrise sectors in the economy. AT Kearney, the well-known international management consultancy, identified India as one of the most attractive retail destinations globally from among thirty emergent markets in 2010. The government has allowed FDI in the single brand segment upto 51% and has also allowed 100% FDI in the wholesale segment. However, as of now, FDI in the multi brand segment wherein foreign giant retailers like Wal-Mart operate are not allowed to enter India. This is because the government wanted to ensure that the entry of global retail giants does not displace the existing population of millions of people employed in the local retail business. The retail sector in India is largely dominated by the unorganized players (mom and pop stores/ kirana or neighbourhood stores with 100- 500 square feet floor area). Organised sector forms just 5% of the market.
The retail sector in India is under- invested and according to a study by McKinsey, almost Rs 50,000 crores worth of food is wasted because of poor supply chain management. These drawbacks can be removed if the modern foreign retailers are allowed to enter the Indian markets as they shall bring their technical knowhow and help in cutting prices by removing intermediaries from the supply chain. The paper discusses the problems and benefits of allowing FDI in the Indian retail sector and recommends how it may be gradually introduced when inevitably it must. KEYWORDS FDI, Retail, Organised Retail, Wal-Mart