Foreign direct investment (FDI) provides capital flows needed to finance current account deficits. It adds investible resources, technology access, production know-how, and export promotion. While once focused on industrialized countries, FDI is now vital for developing countries due to cheap labor, raw materials, lower costs, and market penetration opportunities. India's retail industry, accounting for 14-15% of GDP, is a fast growing sunrise sector that comprises organized and unorganized segments. Recent FDI policy allows 51% investment in multi-brand retail, initially identifying 53 cities over 10 lakh population as eligible, making India an attractive FDI destination.

1. Foreign Direct Investment
ABSTRACT
FDI is generally known to be the most stable component of capital flows needed to
finance the current account deficit. Moreover, it adds to investible resources, provides access to
advanced technologies, assists in gaining production know-how and promotes exports. In the
past decades, FDI was concerned only with highly industrialized countries. US was the world’s
largest recipient of FDI during 2006 with an investment of 184 million. France, Greece, Iceland,
Poland, Slovak Republic, Switzerland and Turkey also have a positive record in FDI
investments. Now, during the course of time, FDI has become a vital part in every country more
particularly with the developing countries. This is because of the following reasons:
Availability of cheap labor, uninterrupted availability of raw material, less production cost
compared with other developed countries, Quick and easy market penetration. Retail industry,
being the fifth largest in the world, is one of the sunrise sectors with huge growth potential and
accounts for 14-15% of the country’s GDP. It consist of individuals, stores, commercial
complexes, agencies, companies, and organizations, etc., involved in the business of selling or
merchandizing diverse finished products or goods to the end-user consumers directly and
indirectly. Comprising of organized and unorganized sectors, Indian retail industry is one of the
fastest growing industries in India, especially over the last few years. The recent issue in FDI in
retail sector is to allow 51% FDI in multi-brand retail. Though at present only 53 cities with
population not less than 10 lakh in the country have been identified for FDI, India is a preferred
destination for FDI. Wal-Mart entered India through a joint venture with New Delhi-based
Bharti, which owns India’s largest mobile service provider, Airtel. The venture will build 15
wholesale outlets and a nationwide supply chain over the next seven years. Multibrand retailers
like Wal-Mart aren’t yet allowed to set up their own stores in India, whereas retailers that sell
only their own brand can own up to 51% of a local company.