A Study On FDI Policy and Indian Retailing

Globalization leads to economic transformation throughout the world which necessitates structural reforms. Developing countries like India need huge capital, infrastructure, improved technology etc. to compete with other countries and emerge as a developed one. Over the past decade, India is facing chronic financial crisis and to overcome this problem, it needs plenty of foreign exchange. Foreign exchange can be earned either through exports or through Foreign Direct Investment (FDI). After 1990s, the Indian Government recognised the significance of FDI in the development of the economy and designed its FDI policy and economic policies for attracting the foreign investors. Nowadays retailing is the fast growing sector and its contribution towards capital formation is also significant (20 percent of GDP). In 2011, the Government has undertaken various retail reforms for attracting the single-brand and multi-brand global retailers. It adopted a ‘welfare motive’ policy of FDI by protecting the domestic retailers and opened the doors for global investors and retailers. FDI is considered as a major component for the growth of retail sector which ultimately leads to the development of the economy as a whole. On this backdrop, the present study is undertaken to analyze the impact of FDI policy on Indian retail sector.