Article Entitled
"FDI in Indian Retail"
- Theoretical Study

Dr.M.K Purushothama
Vivekananda Degree College
Santhosh Kumar.N.
Nagesh B.N.
Koshys Institute of Management Studies


The modern retail sector is encompassing through difficult times in the face of insufficient money backing and funds, lack of enough space for expansion and requirement of necessary talent, and growth is not as it was predicted. Also on top of that, contrary to expectations, consumer moods to modern retail has not increased at an accelerated pace. This is also a challenge posed from the consumer's point of view.There is a lot of talks and negotiations for big retail to come to India, but it cannot simply be taken for granted and mimic something which is being pushed down our throats because investors and the government which collectively make the policy appear to be landed in No man's land, to be more precise "Alice in the Wonderland"who do not have the Blur Picture on how retail really works in India. If there was a clear picture then heated arguments and debates were not held based on these grounds.

Definition of Retail

is referred as the sale of goods and services from individuals or businesses to the end-user or consumers. Retailers are part  and parcel of an integrated system called the supply chain. A retailer purchases goods or products in large quantities from manufacturers or directly through a wholesaler, and then sells smaller quantities to the consumer for a profit. Retailing was done in either fixed locations traditionally or online in modern days.

Shops may be on residential streets, streets with few or no houses or in a shopping mall. Shopping in streets may be for pedestrians only. Sometimes a shopping street has a partial or full roof to protect customers from precipitation. Online retailing, a type of electronic commerce used for business-to-consumer (B2C) transactions and mail order, are forms of non-shop retailing. Online Retailing is an Emerging trend in the LPG Era. LPG era is Liberalization, Globalization and Privatization Trend.

Retails Means in Simple Terms "A sale to the ultimate consumer".

Classification  of Retail Industry

The retail industry is classified into

  • OrganizedRetailing.
  • Unorganized Retailing.

Selling activities done by licensed retailers, those who are registered for sales tax, income tax, who has the License to do Trading etc. These include the corporate-backed business company's, and also the privately owned large retail businesses and also some of the retailers whose investment is more.

Selling activities done byNon- licensed retailers, those who are not registered for sales tax, income tax, who do not have the License to do Trading etc. These are traditional formats of low-cost retailing in India, for example, the local shops i.e., Provision stores Etc., owner manned general stores, hand cart and Vegetable vendors, etc.

The Indian retail sector is highly dominated by business being run by the unorganized retailers. The organized retail however is at a very Minimal and most of the Organized Retailers are in urban sector of India, whereas unorganized sector is the largest source of employment after agriculture, and has huge domination into rural India.

Advantages and Disadvantages of FDI in India

FDI: - Foreign Direct Investment

  • Capital inflows from abroad that is invested in or to enhance the production capacity of the economy.
  • Development Industrial Policy and Promotion activities.
  • Increase in Export and Import.
  • Multi Brand options for Indian Customers.
  • More Franchise's to Indians
  • Cash and Carry Wholesale Trading.
  • Employment Opportunities to Indians.
  • Farmers will get good price of their agricultural goods.
  • Upgradation of Technology.

Disadvantages of FDI

  • Merchants in India Rural Sector will be affected.
  • Distributions of Profit and investment ratios are not fixed.
  • Economically backward class Population suffers from price rise.
  • Local Retailer faces tuff competition and suffer loss in business.
  • Travelling and Transportation Expenses will be increased.
  • Safety and Health concerns will Increase.
  • Inflation may be increased
  • India may become slaves because of FDI in retail sector.
  • Heritage Culture of India may be jeopardized.


India needs investments to sustain high-quality economic growth, particularly in the urban Part of India. Government Policymakers are looking at FDI as the primary source of funds. It is important to keep in mind that FDI on its own is not a catalyst for rapid growth and development. At the same time,FDI is a big threat to sovereignty of host and domestic business houses. Faster exploitation of natural resources for profit may deprive host from such resources in long run.

Dr.M.K Purushothama
Vivekananda Degree College
Santhosh Kumar.N.
Nagesh B.N.
Koshys Institute of Management Studies

Source: E-mail August 10, 2012


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