Last Updated on May 13, 2023 by

IMPACT OF FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH IN INDIA

The retail industry in India is one of the “sunrise sectors” that has enormous potential for expansion. However, in spite of the recent developments in retailing and its immense contribution to the economy, retailing countries to be the least evolved industries, and the growth of organized retailing in India has been much slower as compared to the growth of organized retailing in the rest of the world. In this paper, a study on effect and impact of FDI in Indian economy with reference to retail has been done.

The Investment Commission of India expects retail to triple. Indian retail is approximately 450 billion dollars and increasing. The increasing middle class has more money to spend. Cities have most modern retailers, including supermarkets, hypermarkets, contemporary retail shops, malls, special brand stores, and others. Even if reform and globalization are occurring all the time, it is apparent that the sorry situation of the retail business in India is attributable to the absence of an FDI policy that stimulates foreign investment.

This article addresses the strategic issue of foreign direct investment in Indian retail. The government’s recent decision to allow FDI in multi-brand retailing’s effects on farmers, agrifood, and the economy are also examined. The study indicated that retail effect of FDI would help India join the global economy.

Keywords: Foreign Direct Investment, the Retail Industry, Globalization, and the Multi-Brand Retail Sector.

Introduction

Unorganized retail such as mom-and-pop shops and kiranas is considered to be the traditional method of selling products directly to end users. They maintain relationships with local customers that give the impression of being kin. In most cases, they live in close proximity to their respective customers.

Consumer purchasing power and preferences vary as the economy improves. A research on the effect of FDI on the Indian economy found that retail tastes and preferences are changing the unorganized sector into the organized sector, beginning in urban regions. Retail may increase most.

Domestic players, who lack finance, cannot compete in a healthy competition with foreign players. Thus, the industry needs more funding. The Ministry of Finance has been delaying the retail FDI notice for a long time. In a timely announcement, the governing government allowed 51% foreign direct investment (FDI) in multi-brand retail and other businesses.

This article examines effect of FDI influence on India’s retail industry. According to Chari and Raghavan (2011), enabling foreign direct investment in India’s retail industry will drive out many local shops. Local shops may struggle to compete with industry giants due to India’s young, organized retail sector.

The research found that a study on impact of FDI will boost distribution and storage networks and prevent inflation by strengthening linkages. FDI is preferred above FII since it is seen to benefit an economy the most.

Objectives

1. To investigate the current state of the retail industry in India.
2. To investigate the driving forces behind the current retail growth in India.
3. To investigate the effects that foreign direct investment has had on the retail industry in India.
4. To address the potential risks and benefits of foreign direct investment in the retail sector in India.

Literature review

The most prominent business management and IT journal worldwide. This article examines what drives a study on impact of FDI in Indian economy with reference to retail and how it affects the economy. This essay also examines India’s FDI factors. The author also found little improvement on resource, equity, political, and federal government issues.

This article uses SWOT analysis to examine how the Indian government’s retail FDI policy impacts consumers and the economy. Improved policies will be the priority. More competition, benefits for farmers and consumers, and new employment are positives, but a lack of infrastructure, complicated tax and fiscal rules, and an unstable government are negatives. Quality standards, modern distribution and storage systems, and rural retail expansion were possible. However, unfair competition, job losses, and profit exports were possible.

According to the data, the benefits significantly outweigh any potential drawbacks. The government must implement new, minority-inclusive ways to remove dangers. If single-brand retail regulations were relaxed, shop construction would rise, according to the data. Retailers who specialize in a brand and are struggling in their main areas may suddenly be eager to establish in India.

Conclusion

The retail business in India is one of the fastest-growing in the world, and a “consumption boom” is one of the drivers. India’s retail growth is driven by a rising per capita GDP, a youthful and digitally connected population, increased disposable income, urbanization, and changing customer tastes. Urbanization contributed. FDI policy revisions by the Indian government have enhanced retail FDI inflows. Positively, the changes have made starting and running a company in India easier.

Effect of FDI with reference to retail worry about job losses, unhealthy competition that might drive local unorganized retailers out of the market, and urban cultural practices being distorted. However, the idea that FDI and large MNCs would close many family-owned kirana may not be true in the long term.

Kirana stores, which operate over most of the nation, may benefit from a natural barrier against supermarket rivalry since supermarkets are only located in metropolitan areas. Kirana businesses, or mom-and-pop shops, will prosper while a big section of Indian customers are still unserved by supermarkets.

Advantages

Consumers benefit from a wider selection of locally made items, convenience of access, a more personal interaction with clients, the option to issue credit to frequent customers, and a smaller shop area than supermarkets. Kirana stores may buy the same items from supermarkets and resale them in rural regions since supermarkets can negotiate price and quality requirements with producers. Thus, even faraway clients may buy high-quality items at cheap prices, lowering the bar for corporate entrance in India.

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