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Impact of Foreign Direct Investment on Employment and Growth:
A Brief Study on the Indian Retail Sector
Abstract: Foreign Direct Investment (FDI) plays an important role in the economic growth of the emerging
market economies like India. FDI in the retail sector can expand markets through adoption of advanced supply chain
and benefit consumers and suppliers. This can result in employment at the aggregate level. The present study
analyses the trend of Foreign Direct Investment in India so far, studies the Indian Retail scenario and attempts to
understand the impact of FDI on growth and employment in India.
Keywords: FDI in India, retail sector growth, impact on employment, challenges of the
organized retail sector.
Introduction:
Foreign investment is investment in an enterprise by a Non-Resident irrespective of whether
this involves new equity capital or re-investment of earnings. Foreign investment is of two
kinds – (i) Foreign Direct Investment (FDI) and (ii) Foreign Portfolio Investment.(FPI).
Foreign Direct Investment, or FDI, involves foreign investors taking a controlling and
permanent stake in productive enterprises such as factories, land and organizations. Foreign
direct investments have become the major economic driver of globalization, accounting for
over half of all cross-border investments. It is an investment involving the setting up of new
overseas operation (Greenfield Investment –creation of new production facility abroad ) or
acquisition of controlling interests in an already existing foreign company through the
purchase of shares. It brings private funds from overseas into products or services.
Growth Pattern of FDI in India
Foreign investments provide a great impetus for growth to Indian economy. The
continuous upsurge in foreign direct investments (FDI), allowed across the industries and
sectors, has proven that foreign investors have faith in the resilience of Indian markets. A wise

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policy regime and positive business environment have also played catalytic role to ensure the
continuous inflow of foreign capital in the Indian markets
Table 1:FDI inflows in India(From April 2000 to October 2013)
Financial Year FDI inflows in India (in US $
Million)
%age growth over
previous year
(in US$ terms)
2000-01 4,029 -
2001-02 6,130 + 52 %
2002-03 5,035 -18%
2003-04 4,322 - 14%
2004-05 6,051 + 40%
2005-06 8,961 + 48%
2006-07 22,826 +146%
2007-08 34,843 +53%
2008-09 41,873 +20%
2009-10 37,745 -10%
2010-11 34,847 -8%
2011-12 46,556 +34%
2012-13 36,860 -21%
2013-14 18,934 -
Source: Department of Industrial Policy and Promotion. Government of India. Ministry of
Commerce
Fig 1:FDI inflows in India (April 2000 to October 2013)
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014(April-…
AxisTitle
FDI flows in India (in US $ Million)
FDI flows in India (in US $
Million)

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Table-1: Explains that FDI inflow from the year 2000-01 to 2013-14 in India.The data of
Department of Industrial Policy and Promotion (DIPP) illustrates that FDI was US$ 4029 million
in the year 2000-01 that increased to US$ 6130 million with growth rate of 52 % in the year
2001-02.With the investment amounted to US$ 5035 million and US$ 4322 million with
negative growth rate of 18 % and 14 % respectively as it was noticed the downward trend in
years i.e. 2002-03 and 2003-04. The reason behind the negativity was the unfortunate 9/11 attack
in US leading to effect on almost all the countries worldwide. In most of the economies
including India the stock market went into bearish mode. Then the recovery in stock market
began from 2004-2005 and 2005-2006 with increasing rate of 40% and 48% and investment
amounted to US$ 6051 million and US$ 8961 million respectively. In the year 2006-2007, FDI
registered dynamic growth rate of 146 % with investment amounting to US $ 22826 million.
During that period tremendous growth can be ascertained in Indian economy. This trend in the
rate of growth goes continued with investment amounting to US$ 34843 with growth rate of 53%
in the year 2007-2008. In the succeeding year 2008-2009, the growth rate declined to the level of
20%. That is all because of global financial recession but it is satisfactory for India as compare to
other countries at least it is positive. Very Strong economic fundamentals of Indian economy and
controlled privatization are able to maintain positive growth rate. The impact of financial crises
adversely affect the Indian economy as it is noticed that in the year 2009-2010 and 2010-2011,
the growth rate goes negative at -10% and -08% with investment amount of US $ 37745million
and US $ 34847 million respectively. But in the year 2011-12 it has seen again bounced back
with a growth rate 34% and with investment amount of US $ 46556 million. FDI inflows during
the financial year 2012-13 declined to a two year low, it had a negative growth rate 21% due to

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recession in India, economic slowdown due to the devaluation of Indian currency and global
economic scenario.
Sector Wise FDI inflow in India
Sector-wise classification of FDI is essential to understand better structure and direction of
foreign investment in the country. Service sector has been the highest contributor of FDI inflow
to India (19%) followed by construction activities housing and real estate (11%),
telecommunications, computer software and hardware and drugs and pharmaceuticals each
contributing (6%).
Table-2: Sector Wise FDI Inflow In India (From April 2000 To October 2013)
Sector FDI inflows in India % share of sectors
Service Sectors 38,595 19%
Construction, Developments,
townships, housing built up,
infrastructure
22,779 11%
Telecommunications 12,889 6%
Computer software and hardware 12,179 6%
Drugs and Pharmaceuticals 11,400 6%
Chemicals(other than Fertilizers) 9,314 5%
Automobile Industries 9,079 4%
Power 8,155 4%
Metallurgical Industries 7,752 4%
Hotel and Tourism 6,800 3%
Other Sectors 65,384 32%
Source: Department of Industrial Policy and Promotion. Government of India. Ministry of
Commerce

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Fig 2: Sector wise FDI inflows in India (April 2000 to October 2013)
Table-2: Explains that the Sector wise Analysis of FDI in India reveals that maximum FDI has
attracted in the service sector followed by the real estate, telecommunications, information
technology, drugs and pharmaceuticals and many others. Chemical other than fertilizers,
Automobile Industry, power and metallurgical industries have average investment in terms of
foreign direct investment. The cumulative FDI inflows reveal that service sector attracts
maximum FDI Inflows followed by the construction development in India. These both sectors
attract more than 30% of the total FDI Inflows in India. The Real Estate, Housing and
Construction industry are among the new attracting large share of FDI in India. Thus the Sector
wise Inflows of FDI in India shows varying trends but act as a catalyst for growth, development
of Indian Industries. In this paper we analyze the growth of retail sector which is one of uprising
industries in India it is one of the largest private industry in India and second largest employer
19%
11%
6%
6%
6%5%4%
4%
4%
3%
32%
Fdi Inflows in India( From April 2000 to October 2013)
Service Sector
Constructions Developments Townships,Housing Built up Infrastructure
Telecomunications
Computer Software and Harware
Drugs and Pharmaceuticals
Chemical( other than Fertilisers)
Automobile Industries
Power
Metallurgical Industries
Hotel and Tourism
Other Sectors

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after agriculture. FDI inflows in single brand retail amounted 97.60(In US $ Million) from April
2000 to November 2013 which is only 0.05% of the total FDI inflows in India.
Objectives
The present study has been undertaken to study the role of FDI in retail sector. Thus, the
objectives of the study are as follows:
a) To review FDI policy in Indian Retail sector.
b) Impact of FDI in the Indian Retail market, its impact in growth and employment.
The paper is divided into following sections; section 2 gives brief review of literature followed
by the data used in the analysis in Section II. Section III gives the details of analysis of FDI in
Indian Retail Sector. Followed by conclusion and recommendations entailed in the Section VI.
I. Literature Review:
FDI and retailing are the current burning issues and several researches were conducted in
this area. It is an interesting subject for research scholars and policy makers. Studies suggests
that India’s success owes largely to the cumulative investments made by the government over the
past five years in building what is now termed as national innovation systems including higher
education and centres of excellence, among other initiatives. In light of all this ,it is of critical
importance for the host governments to preserve policy flexibility to pursue selective policy or
impose performance requirements on FDI if necessary. Some of the performance requirements
have already been outlawed by the World Trade Organization(WTO)’s Trade related Investment
Measures(TRIMs) Agreement as discussed by ,Nagesh Kumar 2010 in his paper.

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According to A T Kearney Global Retail Development Index 2013 India’s growth fell
down from a 10year average of 7.8%.Same stores sales volume growth slowed in 2012 across
retail particularly for lifestyle and value-based formats. India fell nine spots in the GRDI to 14th
its previous low ranking was 6th place in the inaugural index in 2002 and it was 1st as recently as
2009.
Nizamuddin,2013 discusses the need of opening up the route of FDI in multi brand retail
sector, the main aim of his study was to analyse the role of FDI in employment generation in
Indian retail sector he had assumed FDI as an independent variable whereas employment as
dependent variable. By using time series data from 2001-02 to 2009-10 and applying ordinary
least square (OLS) method he found that FDI will have a negative impact on employment
generation in retail sector in India , the result showed that 10% increase in FDI inflow in retail
sector will decrease approximately 1% jobs. His study was subjected to limitations as it could
not be generalised for all developing countries because all countries have their own local
changing aspects.
Sarkar, 2013 has argued both for and against for allowing FDI in retail. He explains the
trade off in the long and the short run. He analysed that in the short run, the net outcome on
aggregate employment is still likely to be negative, or ambiguous. But in the longer run, as
profits are reinvested and organised retail keeps on expanding, and as newer avenues open up for
the underprivileged, the policy would pay off which had happened during the industrial
revolution which had also happened more recently when computers came into our lives in a big
way. He emphasized that government should take up protective measures like the public
distribution system to protect the rural poor from a possible rise in the prices of grains and

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vegetables, tariffs and quantitative restrictions to counterbalance the effects of more easy
international trade through multinational retailers.
Rao and Prashant, 2012 in their paper quarreled that the potential benefits from allowing
large retailers to enter the Indian retail market may balance the costs, they also tried to outline
impact on country and State-wise Number of Workers Engaged in Retail Trade by Type of
Enterprises in India. Studies suggested that FDI in organized retail begin inflation in US,
particularly with wholesale prices. It is also expected that technical know-how from foreign
firms, such as warehousing technologies and distribution systems, for example, will lend itself to
improving the supply chain in India, especially for agricultural produce. India’s experience
between 1990-2010, particularly in the telecommunications and IT industries, reveals the various
benefits of opening the door to large-scale investments in these sectors
Rajib Bhattacharya, 2012 investigates the controversial views of the various stakeholders
through various case studies comparing retail scenario in China, PepsiCo India Helping Farmers
Improve Yield and Income ,Bharti Walmart initiative through Direct Farm Project ,etc and
evaluate the likely challenges and threats of FDI in both single and multi- brand retail in India.
II. Data and Methodology:
The data on FDI in Indian Retail sector is very scarce. The information collected is from
secondary sources like online data bases, research papers and the websites of Department of
Industrial Policy and Promotion(G.O.I). The data for retail in this paper is dependent on the
estimates of secondary data collected from Delloite , IBEF and Dart Consulting. The collected
data has been presented by simple statistical tools i.e tables, bar diagrams and pie charts.

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III. Analytical Framework:
FDI in Retail Sector in India
Retail sector is one of the biggest supports of the Indian economy providing 9 %
employment and accounts for 15 percent of its GDP. The Indian retail industry is estimated to be
worth around US$ 500 billion currently. Home to one of the top five retail markets in the world,
The industry is experiencing exponential growth, with retail development taking place not just
in major cities and metros, but also in Tier-II and Tier-III cities1⁰.India offers immense scope of
growth and opportunities in this arena, it is one of the fastest emerging retail markets in the
world, with 1.2 billion people.
Retailing is making the final product directly available to the final consumers of the
product or a sale to the ultimate consumer. Retail can also be defined as a link or interface
between bulk producers and individual consumers who purchase for final consumption. It is the
last step in the process of distribution of merchandise.
Manufacturer → Agent → Wholesaler → Retailer → Consumer
The retail industry is mainly divided into two parts which are as follows:
1. The Organized retailing - Trading activities which are undertaken by licensed retailers,
i.e, those who are registered for sales tax, income tax, etc. are referred to as organized
retailing. Corporate backed hypermarkets and retail chains, and also the privately owned
large retail businesses are included in this
1
⁰(Tier 1 cities includes Delhi NCR, Mumbai, Bangalore, Chennai & Kolkata ,Tier 2 cities includes
Hyderabad, Pune, Ahmedabad , Chandigarh, Jaipur & Luckhnow, Tier 3 cities includes cities like Agra,
Allahabad, Ludhiana, Kanpur etc. )

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A. FDI in Single Brand Retailing
It implies that foreign companies would be allowed to sell goods internationally
under a single brand, viz., Reebok, Nokia, Adidas etc. Neither any political parties
nor local kiranawala shops raised any voice against it because these are high end
luxury items for rich class people and does not hurt a large population. For e.g. Nike
Company opens outlets in Delhi, Ahmadabad, Bangalore and Mumbai selling nothing
but Nike shoes, Nike wrist watches and T-shirts only.
B. FDI in Multi Brand Retailing
FDI in Multi Brand means allowing a retail store with a foreign investment to sell
multiple brands under one roof. For e.g. Big Bazaar opens malls in Mumbai, Kolkata, New
Delhi and Bangalore: selling t-shirts of multiple brands such Reebok, Nike, Adidas, Allen Solly ,
Peter England etc. as well as unbranded t-shirts (those with discount offers). So, this is multi
brand retail when an outlet sells a product of more than one brand. Opening up FDI in multi-
brand retail will mean that global retailers including Wal-Mart(i), Carrefour(ii) and Tesco(iii)2
can open up stores offering a range of household items and grocery directly to customers.
2. Unorganized Retailing - Traditional formats of low cost retailing, for example the local kirana
shops,general stores, paan/ beedi shops, convenience stores,etc is known as unorganized
retailing.
As of now, almost 90 per cent of the Indian retail sector is controlled by tiny family-run
shops i.e. the unorganized segment. Thus, organized retailers have a lot of room for further
penetration in this flourishing economy. In 2010, larger format convenience stores and
2 (i),(ii),(iii) See Appendix

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supermarkets accounted for about 4 per cent of the industry, and these were present only in large
urban centers. Now the trend is changing, and such concepts are mushrooming in smaller cities
and towns as well. Organized retail segment is expanding at 20 per cent a year, driven by the
emergence of shopping centers and malls and growing middle class. India allowed overseas
investment in its supermarket sector in September 2012. Since then, the retail landscape is
witnessing a flurry of foreign investments.
The organized retail market is growing at a higher rate compared to the un-organized
market. The organized retail industry is just 10% of the total retail industry in India currently ,
and it is expected to reach 15% of the total market by 2015. Fig 3 shown below depicts this
scenario.
Fig 3: Growth of Organized and Unorganized Retailing in India
Source: Online survey- Dart Consulting.
0%
50%
100%
2010 2011 2012 2013 2014 2015
5% 6% 8% 10% 12% 15%
95% 94% 92% 90% 88% 85%
Year
Organized Vs Unorganized Retailing
% share of Organized Retailing % share of Unorganized Retailing

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Objective of permitting FDI in Indian Retail Sector
The Government of India ( Central Government ) is opening the retail sector to foreign
direct investment (FDI ) to provide a boost to the retail trade, which has the potential of being a
major growth engine for the country’s economy. FDI in single brand retail trade primarily caters
to the needs of brand conscious consumers with a pre-disposition for high-end products and
focuses on front–end retailing. FDI in multi brand retail trade, on the other hand, will serve the
needs of vast and varied consumers across India and would bring the investment and
international expertise necessary to develop the back-end infrastructure and supply chain
management.
Policy Framework of FDI in Retail
Wholesale Trading : In the year 1997, the Central Government permitted 100% FDI under the
approval route in ‘Cash & Carry Wholesale Trading / Wholesale Trading’ which was
subsequently changed to 100% FDI under the automatic route(31). The policy defined ‘wholesale
trading’ as sales for the purpose of trade, business and profession as opposed to sales for the
purpose of personal consumption (2)
Single Brand Retail Trading (SBRT ): In the year 2006, the Central Government permitted upto
51% FDI under the approval route in SBRT which was subsequently in the year 2012 changed to
51% FDI under the automatic route. Further in the year 2012, the Central Government, permitted
upto 100% FDI under the approval route in SBRT subject to certain conditions(3).
3 (1) Press Note No. 2 (1997 Series); Press Note No. 4 (2006 Series) issued by Department of Industrial Policy and
Promotion (DIPP), Ministry of Commerce and Industry. (2) Carrefour and Wal-Mart commenced operations in India
under the ‘Cash & Carry/Wholesale Trading’. (3) Press Note No. 3 & 4 (2006 Series), Press Note 1 & 4 (2012
Series) issued by DIPP.

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As of September 2013, FDI policy on SBRT was that FDI upto 51% is under automatic route,
beyond 51% and upto 100% requires prior approval of the Central Government(4).Products to be
sold should be of ‘Single Brand’ only and should be branded during manufacturing and must be
under the same brand international. Foreign investor in respect of a specific brand can either be
the owner of the brand or a licensee or franchisee. Entities with FDI beyond 51% need to
mandatorily source at least 30% of the value of goods purchased from India, preferably from
micro small and medium enterprises, village and cottage industries and artisans, craftsmen.
Retail trading by means of e-commerce by companies with FDI is prohibited.
Multi Brand Retail Trading (MBRT ): Keeping up with its international commitments(45),
September 2012, the Central Government permitted upto 51% FDI in MBRT under the approval
route (6). It was expected that billions in dollars and euros would flow into India through this
‘major’ reform’, the Central Government only received requests for clarifications on various
aspects and has recently issued clarifications and amendments(7) .As of September 2013, the
FDI policy on MBRT was that FDI upto 51% requires prior approval of Central Government(8).
Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry,
fishery and meat products, may be unbranded. Minimum amount of foreign investment has to be
US$ 100 million.
(4) A foreign entity desiring to enter SBRT in India with FDI beyond 51% and up to 100% will have to make an
application stating its proposal to the Foreign Investment Promotion Board (FIPB), Ministry of Finance ,(5) India is
a member of the World Trade Organisation and signatory of GATT 1994 and TRIMs. (6) Press Note No. 5 (2012
Series) issued by DIPP.(7) Clarifications issued by DIPP in (June 2013 series); Press Note No. 5 (2013 Series)
issued by DIPP. (8)A foreign entity desiring to enter the MBRT in India with FDI upto 51% will have to make an
application stating its proposal to the FIPB

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At least 50% of the total foreign investment brought in the first tranche of US$ 100 million is to
be invested in back-end infrastructure(95) within 3 years excluding that on front-end unit.
Mandatory sourcing of at least 30% of manufactured/processed product from micro small and
medium enterprises (MSME).(10),farmers co-operative and agricultural cooperatives. Retail
stores may be set up only in cities with a population more than 10 lakhs and cover an area of
10km around cities it should be set up in those States/Union Territories which have agreed in
future to allow FDI in MBRT under this policy .The list of States/Union Territories which have
conveyed their agreement are given below in the note.(11)
Many international European and American brands like Marks & Spencer’s, Zara, Canali ,
Massimo Dutti , Louis Vuitton , Damiani , Promod , Brooks Brother have entered Indian retail
‘single brand product’ market through the joint venture route.Post the amended policy permitting
upto 100% FDI in SBRT, brands like Celio International, Fossil, Le Crueset have set up
operations in India through wholly owned subsidiaries after obtaining Central Government
approval. Brands like IKEA are expected to foray soon into the Indian single brand retail
market.The government managed to get the approval of multi-brand retail in the parliament
despite intense opposition. Some states will allow foreign supermarkets like Wal-Mart, Tesco
and Carrefour to open while other states will not.
5 .(9) Press Note no 5(2013 Series) issued by DIPP. (10) MSME are enterprises which have a total investment in
plant and machinery not exceeding US $ 2 million.(11) DIPP Consolidated FDI policy effective from April 2013
[1.Andhra Pradesh 2. Assam 3. Delhi 4. Haryana 5. Jammu & Kashmir 6. Maharashtra 7. Manipur 8. Rajasthan 9.
Uttarakhand 10. Daman & Diu and Dadra and Nagar Haveli (Union Territories)]

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The Indian Scenario of the Retail sector
Growth in the Retail Market:-
The recent wave of reforms by the Government to liberalise FDI in various sectors is
bringing a new zeal to the investment climate in India. One of the most debated reforms is the
policy for allowing 51 per cent FDI in multi-brand retail.
India ranked fourth in Global Retail Development Index and ranked sixth in Global
Apparel Index in 2011. This robust growth picture also is painted by AT Kearney, whose 2012
Global Retail Development Index (GRDI) puts India as the fifth most favourable destination for
global retailers. In 2011, India’s retail industry accounted for 22% of India’s GDP and employed
close to 9.4% of the labour force .Rapid emergence of organised retail outlets like mega malls
and hypermarkets are augmenting the growth of organised retail in the country.
The retail sector in India is emerging as one of the largest sectors in the economy
marking a compound annual growth rate (CAGR) of 5.9 per cent since 1998 as depicted in the
following table.
Table 3: Growth of the Retail Market Size over the past few years
Year FDI inflows (in USD billion)
1998 201
2000 204
2002 238
2004 278
2006 321
2008 368
2010 425
2012 450
Source: Indian Brand Equity Foundation (March 2013).

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Fig 4: Growth of the Retail Market over the past few years
The total market size of the sector was expected to grow from US$ 450 billion in
2012.The Indian retail industry has expanded by 10.6 per cent between 2010 and 2012 and is
expected to increase to US$ 750-850 billion by 2015, according to a report by Deloitte. The
following table(Table 4) shows that Food and Grocery is the largest category within the retail
sector with 60 per cent share followed by Apparel and Mobile segment.
Table 4: Retail Market in India
Retail Segments % share in the total sector
Food and Grocery 60%
Apparel 8%
Mobile and Telecom 6%
Food Service 5%
Jewellery 4%
Consumer Electronics 3%
Pharmacy 3%
Others 11%
Source: Delloite(January 2013).
201 204
238
278
321
368
425 450
0
50
100
150
200
250
300
350
400
450
500
1998 2000 2002 2004 2006 2008 2010 2012
Marketsize over the lastfew years
FDI inflows (in USD billion)

17. Page | 17
Fig 5: Composition of Retail Market in India
Employment in the Retail Market:
It was expected that opening up FDI in the Retail sector would use labour
intensive production methods would absorb many of the youths, through either direct
employments or indirect employments. The relationship between FDI and employment
creation of host country are mixed.(Table 5) attempts to create a better understanding of
the relationship between foreign direct investment inflows and their effects on
employment creation in India. Through FDI in Multi Brand retail sector, the Government
wants to create 10 million new jobs opportunities.
60%
8%
6%
5%
4%
3% 3%
11%
% share in the retail sector
Food and Grocery Apparel
Mobile and Telecom Food Service
Jewellery Consumer Electronics
Pharmacy Others

18. Page | 18
Table 5: percentage growth of total employment generation in organized retail sector in
India.
Year Total employment in Public
and Private Sector
Total employment in Retail
Sector
% of total employment
in Retail sector
2000-01 2,79,60,000 4,93,000 -
2001-02 2,77,90,000 5,02,000 +2%
2002-03 2,72,05,000 4,92,000 -2%%
2003-04 2,70,01,000 5,42,000 +10%
2004-05 2,64,43,000 5,32,000 -2%
2005-06 2,64,59,000 5,59,000 +5%
2006-07 2,69,59,000 5,69,000 +2%
2007-08 2,72,42,000 5,88,000 +3%
2008-09 2,75,12,000 4,37,000 -26%
2009-10 2,80,86,000 6,46,000 +48%
Source: MRPA. Mohammad Nizamuddin.20 April 2013.(Original Source: Ministry of
Labour & Employment, Director General of Employment and Training, Economic
Survey 2011-2012)
Fig 6: Comparitive analysis of growth of total employment in Public and Private Sector
and Retail Sector in India
25000000
25500000
26000000
26500000
27000000
27500000
28000000
28500000
29000000
TotalemploymentinPublic,privateand
RetailSector
Year
Percentage growth of total employment generation in retail sector in
India
Total employment in
Retail Sector
Total employment in
Public and Private
Sector

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Table 6: Reveals that the overall employment generation in retail sector in India with
respect to total employment generation in India. The total employment in retail sector in
India increased except in the year 2002-03, 2004-05 it decline with 2% each respectively.
Further it increases in the year 2005-06, 2006-07 and 2007-08 with overall 5%, 2% and
3% respectively. It has been clearly shown by the table, here we also found the recession
and financial crises effect in year 2008-09 with a decline of 26% in the total generation of
employment opportunities in India. In the succeeding year 2009-10 it is also clear from
the above data that the employment in retail sector grow with recognizable rate of 48
percent. Growth of employment in the retail sector has a little impact in the total
employment i.e there is still a lot of scope for employment to grow in the retail sector.
Advantages of FDI in Retailing in India:-
It helps in inflow of investment and funds, improves the quality of products,
lifestyle and employment opportunities, generates more employment, increases local
sourcing, provides better value to end consumers, improves the supply chains and
warehousing, reduces food inflation, welcomes franchising opportunities for local
entrepreneurs, enhances growth of infrastructure, increases efficiency, reduces cost,
implements IT in retail, stimulates infant industries and other supporting industries,
contributes to government revenue

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Disadvantages of FDI in Retailing in India:-
It would give rise to cut-throat competition rather than promoting incremental business,
would promote cartels and create monopoly, increases the real estate prices, marginalizes
domestic entrepreneurs , the financial strength of foreign players would displace the
unorganized players, absence of proper regulatory guidelines would induce unfair trade
practices like predatory pricing, would distort culture.
Challenges faced by the Organized Retailing:-
The advent of FDI policy of September 2012 can pave the way for modernization
of the Indian retail sector, however, the journey ahead is challenging. Even well- heeled
MNC retailers will have to pay heed to the Indian political, social and competitive
landscape, if they want to succeed in the Indian retail sector, there is unavailability of
Retail Space, the rental cost and real estate prices in India are high, the government
should clarify certain policy features. The policy note does not specify whether
investment in back end infrastructure needs to be a fresh investment or if foreign
companies can buy stakes in already established backend infrastructure, entry of a multi-
brand MNC retailer in the retail sector would fall under the approval route. This implies
that the MNC retailer would have to go through different layers of Government
departments before getting the go ahead, there is high political risk in investing in India.
The largest opposition party in India has opposed FDI in retail and some of its leaders
have indicated that they will scrap the policy if their party comes to power, one of the
major challenges faced by the existing players is the availability of skilled manpower, the
poor infrastructure increases the operational cost of the retail chain, the ongoing currency

21. Page | 21
fluctuation may put currency risk on any foreign investment in India, the fragmented
supply chain leads to high wastage and high product cost, multiple legislative laws hinder
fast expansion and increases overall cost, cumbersome labor laws limits organized retail
business.
IV Conclusion and Policy Recommendations:
FDI in Retail in India is a prickly issue. There have being several policies for liberalizing
FDI in retail investment in India. Despite the relaxation in the rules, foreign retailers still haven’t
made a beeline for what is one of the biggest consumer markets in the world. FDI in retail has
not proceeded the way it was projected. Main reasons for the same are ambiguity in policy
framework, lack of any retail model, unpopularity of organized retail, low purchasing power and
slowing economic growth in India. Loss of jobs in retail trade which is the main argument
against FDI in MBRT is unlikely to express itself in the next 4-5 years because the investors
have become cautious and are following the policy of wait and watch. The purpose of the study
was discussing the role of FDI in Indian Retail . But the main aim of this study was to analyse
the policy of FDI in Retail and its role in growth and employment and the various challenges
faced by the industry. In the Indian aspect we see the market size is continuously expanding in
the recent years but it has a little impact on employment so far. FDI is advantageous and
disadvantageous both but it depends only on the way we implement it in our country so that FDI
does not have a bad impact on India's Business. Government must make some rules so that it is
beneficial for Indian markets.
Governments should not prevent anybody, Indian or foreign, from setting up any business,
unless it can be shown that FDI in retail will do more harm than good for the economy, it should
be allowed.

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 A major argument given by opponents of FDI in retail is that there will be major job
losses. The reality is that any kind of innovation is going to replace traditional industry,
and the kiranas are no different. The question is how long does it take. And the longer it
takes, the more time the kiranas will have to readjust themselves into new better
performing occupations. In a growing economy, there are many jobs getting lost and
created.
 The organized sector gives better lifestyle and better pays. In the short-run if everybody
has to shut down the kiranas , it leads to a huge social unrest.So, in the short run, there
will be joblessness. Eventually, there's likely to be a redistribution of jobs with some
drying up (like that of middlemen) and some new ones sprouting up.
 Fears of small shopkeepers getting displaced are vastly exaggerated. Recently
government in its economic survey 2013 has announced that “Traditional retailers are
giving a strong competition to organised retailers and the decision to permit foreign
retailers to open stores in the country will not affect small players in India”. This proves
that both organized retailers can coexist with unorganized retailers it is thus not a zero
sum game.
 It is argued that, the entry of foreign investors is likely to hot up competition, giving
consumers a better deal, both in prices and choices. If the Mega retail chains keep price
points low and attractive by smart procurement and inventory management then Indian
retail can also learn from these good practices.
 The only one way to go is expecting it will grow. The pace of growth may be slow but it
will grow. Considering the changing tastes and patterns of the consumers the growing
population will tend to prefer to the more organized format. A strong retail sector which

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makes it easy and accessible for people to consume goods is good for the country. There
is no reason to prevent people from being able to consume it. Ultimately in the interests
of the efficiency of the country, modern retail has to grow. So the speed is an issue.
The future of foreign retail depends a little bit on policy. Government must make some
rules so that it is beneficial for Indian market, retailers and the customers get the required benefit
from this. May be by this Indian economy may rise which is helpful in the employment field.
The experience of successful countries (like China) amply demonstrates how FDI can play a
leading role in bringing about rapid, export-led growth. In the retail sector changes are very
frequent therefore survival in retail will depend upon the ability to adapt to change. The Indian
retailers need to develop proper systems and processes keeping the unique nature of the country
in mind. FDI would lead to a more comprehensive integration of India into the worldwide market
and thus, it is imperative for the government to promote this sector for the overall economic
development and social welfare of the country. So FDI should be implemented in a limited and a
phased way so that it releases a good impact on India market. If done in the right manner, it can
prove to be a boon and not a curse. If our domestic retailers became very successful, that would
be a good outcome. But there is value in having foreign retailers in India because having them in
the competitive space in India accelerates the diffusion of those technologies into our country,
which really helps everyone. Because once those technologies are available with one retailer, it
will diffuse through other retailers through shared employees and employees switching and so
on. It is shortsighted to think that shutting down foreign retailers is good for our country , it is
actually bad in the long-term.
V. References

24. Page | 24
Bhattacharyya, Rajib. “The Opportunities and Challenges of FDI in Retail in India”. IOSR
Journal Of Humanities And Social Science (JHSS) ISSN: 2279-0837, ISBN: 2279-0845. Volume
5, Issue 5 (Nov. - Dec. 2012), PP 99-109 from www.Iosrjournals.Org
Kumar, Nagesh “Foreign Direct Investment” in K Basu & A Maertens (ed),The Concise Oxford
Companion to Economics in India , Oxford University Press, New Delhi, 2010, pp 305-307
Nizamuddin, Mohammad.“FDI in Multi Brand Retail and Employment Generation in India.”.20
April 2013.MPRA Paper No. 47622,posted on 16. June 2013 04:22
Rao, G.Shashidhar and CH.Prashant. “Foreign Direct Investment in Indian Retail Industry”.
IRACST – International Journal of Commerce, Business and Management (IJCBM),Vol. 1, No.1,
2012
Sarkar, Abhirup. “Understanding FDI in Retail What Can Economic Principles Teach Us?”
Economic & Political Weekly posted on January 5, 2013 VOl XLVIII No 1
Websites :
Benefits of FDI in Indian Retail Industry – Foreign Direct Investment in India’s Single and
Multi-Brand Retail Sector, an Analysis by DART Consulting DART Blogs accessed on
27/11/2013 10 59 pm
Clarification on queries of Prospective Investors/Stakeholders on FDI Policy on TRADING -
6.2.16.1 -Cash & Carry Wholesale Trading/ Wholesale Trading (including sourcing from MSEs),
6.2.16.2 E-commerce activities , 6.2.16.4 Single Brand product retail trading , 6.2.16.5 Multi
Brand Retail Trading of Circular 1 of 2013-Consolidated FDI Policy on dipp.nic.in/English / pdf
accessed on December 7 , 2013 12:13:57 p.m
FDI in retail, small shops giving competition to big retailers - Financial Express accessed on,
December 7,2013 12:53:50 a.m
FDI in multi-brand retail. Hope In Abeyance, India Infoline News Service. JLL. accessed on
January 13, 2014, 12:44:54 p.m.
http://www.ibef.org/industry/retail-india.aspx accessed on, December 6, 2013, 6:36:41 p.m,
January 24, 2014, 12:40:45 p.m
http://www.deloitte.com/assets accessed on January 22, 2014, 7:29:09 PM
http://en.wikipedia.org/wiki/Retailing_in_India accessed on November 27, 2013, 9:51:25 p.m
www.ibef.org.Retail March 2013 pdf accessed on January 24, 2014, 11:36:59 a.m
2013 Global Retail Development Index-Full Report AT Kearney
http://www.atkearney.com/images/global/2013_Global_Retail_Development_Index.accessed on
January 31, 2014, 12.04.52 p.m
2013 FDI Statistics, Ministry of Commerce & Industry, Department of Industrial Policy and
Promotion, Government of India (GOI) accessed on January 31,2014,10.20.19 p.m

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Appendix:
Wal-Mart: Wal-Mart is an American multi retail corporation that runs chains of large discount
department stores and warehouse stores. The company is the world’s third largest public
corporation according to the FORTUNE GLOBAL 500 list in 2012. It is also the world’s biggest
private employer with over two million employees and is the largest retailer in the world.
Wall-mart In India
Bharti Enterprises is one of India’s leading business groups with interests in telecom, agri-
business, insurance and retail and Wal-Mart, world’s leading retailer, renowned for its expertise
and efficiency in logistics, supply chain management and sourcing formed a joint venture known
as Bharti Wal-Mart Private Limited. Bharti and Wal-Mart hold 50:50 stakes in Bharti and Wal-
Mart Private Limited.
Carrefour: International hypermarket chain headquartered in Boulogne Billancourt, France in
greater Paris. It is one of the largest hypermarket chains in the world (with 1,395 hypermarkets at
the end of 2009, the second largest retail group in the world in terms of revenue and third largest
in profit after Wal-Mart and Tesco).
Carrefour in India
The Carrefour Group announces the opening of its first cash and carry store in India in New
Delhi under the name “Carrefour Wholesale Cash & carry.” With a sales area of 5200 m2, this
store located east of New Delhi in the Shahadra neighbourhood will offer food and non-food to
professional businesses, institutions, restaurants and local retailers. This opening is in line with

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the Group’s strategy to be present in major emerging markets that offer significant expansion and
medium and long term growth opportunities.
TESCO: It is a British multi grocery and general merchandise retailer headquartered in Cheshunt
UK. It is the third largest retailer in the world in terms of revenue and third largest in terms of
profits earned. It has stores in 14 countries across Asia, Europe and North America and is the
grocery market leader in UK, Malaysia, the republic of Ireland and Thailand.
TESCO in India
Tesco has a limited presence in India with a service E-centre in Bangalore and outsourcing. In
2008 Tesco announced their intension to invest an initial $115 to open a wholesale cash and
carry business based in Mumbai with the assistance of the Tata Group. the privately owned large
retail businesses are included in this.