Impact of Foreign Direct Investment on Retail Business in India

Lankesh M. Gajbhiye

Impact of Foreign Direct Investment on Retail Business in India

Author(s)	Prof. Lankesh M. Gajbhiye
Country	India
Abstract	Indian retail market, which is the fifth largest retail destination globally, has been ranked as the most attractive emerging market for investment in the retail sector by AT Kearney’s eighth annual Global Retail Development Index (GRDI), in 2009. As per a study conducted by the Indian Council for Research on International Economic Relations (ICRIER), the retail sector is expected to contribute to 21 per cent of India’s GDP by 2025. India is first largest populated country in the world seconded by China and is acknowledge that the biggest market in the world next to China. Any customer would develop brand loyalty based on the personal experience and satisfaction. Brands help the customers to identify specific products from among identical commodities. Brands have significant impact on developing customer perception and expectations. Single brand retail involves selling products under one brand, which are also sold internationally. Examples are Nike, Gucci, Lotto, Levis etc. Multi-branding is basically the process of marketing of two or more widely similar and competing products by the same firm under different brands. Multi-brand retail comes in different formats like supermarket, hypermarket, and the shopping malls. As part of integrating Indian economy to world market due to WTO obligation and also for encouraging foreign direct investment (FDI) in the country, Government of India proposed a policy of 100 per cent FDI in single brand retail, and 51 per cent FDI in multi-brand retail. According to the proposed provisions, the minimum foreign investment shall be $100 million, of which atleast half shall be for back end infrastructure creation. It is argued that with this single stroke, multi-billion dollar enterprises may set up their stores in India, which may ‘revolutionize’ the retail sector. The kirana shops, on the other hand also picked up one or two lessons from the corporate retailers. They became more professional and customer friendly, with better packaging and display systems. Similarly, the global retail chains do not have sufficient consumer knowledge in India. So, the initial conflicting position may turn into strategic alliances with regional players for long term mutual benefits. That is why marketers believe that every market has a self corrective mechanism in the long run.
Published In	Conference / Special Issue (Volume 7 \| Issue 3) - Two Day International Conference on Commerce & Economics (ICCE-2025) (May 2025)
Published On	2025-05-10

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Impact of Foreign Direct Investment on Retail Business in India

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