INTRODUCTION- FDI in retail sector in India After liberalization, changes have been observed in the purchase behavior of consumers with the rise in per capita income and access to multiple brands. Because of the variety of consumers for different brands, all the big global retailers and corporate sectors are ready to invest in the retail sector in India. By the year 2013, the growth rate of the retail industry was expected to be 14%. In order to allow access to foreign brands to Indian customers Government of India in the year, 2006 allowed 100% FDI in single-brand retail. On the other hand, the allowance of multi-brand retail was still in question. There was a time when the parliament had bad arguments on the pros and cons of allowing FDI in the Indian retail sector. The decision of the Central Government of foreign direct investment in multi-brand trading was allowed by the Indian parliament in December 2012. As a result of this, many foreign retailers with 51% ownership opened retail stores where a variety of products may be found under one roof subject to the permission of the particular state government.
Certain amendments in FDI policy for the retail sector in India with respect to single and multi-brand retailing:-
1. Single brand retail – The term single brand has not been defined by the government anywhere neither in any notifications nor in any notices and circulars. FDI up to 100% is allowed in case of single-brand retail in what subject to certain conditions that are:-
• only selling of brand products will be allowed ( even if the same manufacturer produces multi-brand goods it will not be allowed)
• even internationally, the same brand products should be sold.
• when the products are being manufactured, it must be branded.
• if any new product has been added under single brand fresh approval of the government is necessary.
Terms and conditions:-
Even of the goods were produced by the same manufacturer, no other brand different from a single brand would be allowed to be sold. Foreign direct investment policy in single-brand basically means retail store FDI can sell only one brand products. For example, if Reebok have been allowed permission of FDI in stores in India those retail stores shall only be allowed to sell their products of Reebok and not Adidas.
1. Multi-brand retail- Just as single-brand retail multi-brand retailing has also not been defined by the government. In layman’s language basically means that under one roof retail store with FDI in different brands can sell different branded products. Examples of multi-brand retailing would include Tesco, Walmart, etc.
WHAT IS RETAILING?
According to Philip Kotler, retailing is basically selling of products and services to the consumers for their final consumption and not for resale.
THE RETAIL SECTOR IN INDIA
The retail sector in India is one of the most important sectors. It is regarded as the 5th largest retail destination and the second most attractive market for investment globally. Since the Indian retail sector is very popular and growing at a very fast pace so with the growth of the sector the rise in awareness the quality products and brands is also to be taken into consideration. Indian retailers have made life easy, quick, convenient, and affordable. The most popular players in the Indian market are Reliance, Tata’s, ITC etc. FDI in single-brand retail with a 51% opening has led to the entry of companies like Reebok, Nike, etc.
SIZE OF INDIAN RETAIL SECTOR
Due to its unorganized nature, it is very difficult to know the true size of the Indian retail sector. In 2012 the unorganized sector employed 22 million workers, which has decreased from 18 million into 2001. On the other hand or organized sector has employed less than a million workers. Thus the Indian retail sector is the second-largest amongst all. It can be concluded that the toughest challenge for the retailing industry in India to compete with is the competition from the unorganized sector. The tax system of India is also for the benefit of small retail businesses leading to the high cost of business operation in India. Short and external factors affect the retail industry, such as the government’s rules, regulations and policies.
Consumer purchasing power has not consistently been increasing, thus, it becomes difficult for the economy to emerge from the recession. Due to various rules of banks in lending, consumer spending could contract in the future. Thus the absence of FDI policy in Indian retail sector could even worsen the situation of retail sector. FDI policy in Indian retail sector can remove all the limitations such as infrastructure, unemployment, lack of technical know-how, etc.
ADVANTAGES
• INTRODUCTION OF NEW CAPITAL- Since most of the retailing sector of India depends on the supply chain logistics. Therefore, a good mode of transportation communication and infrastructure of the storage area could help provide not only timely and uninterrupted market access to producers but also make sure of good quality and lowest priced products to consumers. For example most of the time it happens that there is no proper storage infrastructure and the farmers do not have anyone in the market that could be the farmers a fair price and cut short the middleman involved in it. Due to this the middleman page the farmer lower prices for their walk and charge higher prices from the retailers. All social there is no proper place of storage and don’t know proper means of transportation most of the producers of farmers are destroyed in the process of transportation and the customers have to ultimate Lee bear and pay higher prices for really low-quality products. Therefore allowing FDI in the retail sector in India in a long way helps to bring out a solution to these problems.
• BETTER TECHNICAL KNOW HOW- By allowing FDI in retail sector that will bring along some advanced technological knowledge that will increase productivity. For example improve the process of grading, handling, packaging of goods, using of cold storage facilities, reduction in wastage,etc. All these will eventually improve the quality and lower the prices for consumers.
• CONSUMER’S WELLBEING- The entry for foreign retailers in the market will allow your customers to get access to a wide variety of products of different brands. In addition, everything will be provided on the man grow such as hygienic environment in the area of shopping, proper space for product displays, large number of products in one place and better customer service for consumer satisfaction.
• EMPLOYMENT GENERATION- FDI in retail sector employment opportunities to young people in the organized sector. Higher wages, better working conditions, the quality of the jobs, standard of living, all will be taken into consideration if FDI is allowed.
• BENEFITS TO FARMERS- In today’s world, the intermediaries have dominated the market. They act as a middleman between manufacturers or producers and consumers as a result of which the farmers and manufacturers have lost their profit margins because most of them have been taken over by the middleman. By the entrance of FDI, this problem will be solved as the farmers will get contract farming where they have to supply to the retailer based upon the demand and will get a fair price in return, and they don’t have to search for the buyers.
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DISADVANTAGES
• HUGE LOSSES OF JOBS- India being a developing economy, the level of development is not up to the mark. With the entry of FDI, there is a huge threat from big companies like Walmart, which will force all the small independent stores to shut, and this will lead to huge losses in their jobs.
• THE LOSS STRATEGY– Being big giants lowering the prices initially will not affect them much. So they will intentionally lower the prices to enter the market and knock out all the competition and become Monopoly and then raise later on the prices in the market, leaving no option for consumers other than buying from them. Examples- Pepsi and Coke.
• UNFAIR COMPETITION- Entry of FDI will lead to an exit of domestic retailers all the small family managed outlets will lead to huge loss of jobs of persons who are employed in the retail sector in India.
• NON UNIFORM TAX SYSTEM
CONCLUSION
In an attempt to try to balance the opportunities and threads which is attached with the entry of FDI in Indian retail sector it can be concluded that the entrance of FDI will surely improve storage system, procurement process, have the farmers benefit from FDI in order to get better prices for their produce, better infrastructure, cutting down intermediaries, etc. But the move of the government to increase the limit and single-brand retail from 51 % to 100% in 2012 and also giving green signal to multi-brand retail in India necessary steps must be taken in order to avoid any Monopoly from the foreign markets. Otherwise, these big companies with huge investment capacities will buy all the products at lower rates and give consumers big discounts initially and will cut all the domestic retailers from the market and will stand as a monopoly market of all the branded products in India. The government must set a discuss all the pros and cons that will ultimately of affecting our domestic retail market by allowing 100% FDI. The main question is, when the all the foreign countries do not allow any import of food products from India, then why should India allow the foreign countries to have a saying in its retail sector? 100% FDI can have a negative impact on the Indian retail market and farmers in the long run. It will undoubtedly create a Monopoly in the market, which is not good for the growth of the Indian economy. Do it is done keeping in view the benefits of farmers to get a good and fair price for the product and improve their storage facilities but all these are just temporary benefits which the foreign market is intentionally putting forward to enter Indian retail sector and cut down the domestic competitors from the Indian market. After all the history says it all that the beginning is always good for example entrance of East India Company, thus, whatever the government decides in lieu of the benefit of Indian retail sector it must look into the pros and cons and put down some terms and conditions for the foreign investors so that the domestic sector of India has opportunity to get benefits out of those foreign markets and also not get swayed away from the foreign investors.

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