FDI in retail sector

FDI has always been a significant contributor in the economic growth of any country. A foreign company invests where production can take place at a lower cost and where it is able to avail some investment privileges like tax exemption. FDI was introduced in India in 1991 under the Foreign Exchange Management Act (FEMA). FDI also enables customers to choose from a wide array of products.

The retail sector in India which accounts for 14-15 % of GDP is being served as a marketplace where many foreign investors are seeking to invest so that global retail chains can enter into the Indian market. Now the question arises whether FDI in retail services will be good for the Indian economy or not.

This is so sure that FDI in retail sector will boost employment and will create new opportunities for the people. It will also generate competition in the retail market and may bring out efficiency. Moreover, it can also help the farmers to get a good price for their products as middlemen will be eliminated and they can directly sell their productions and so, in this way it may help improve standard of living.

New technologies will be introduced and goods will be available at lower costs but this will provide a threat to the local Indian retailers as they will not be able to compete with the global retail chains. Being rational individuals, Indian people will be induced to buy foreign goods as they will be available here at cheaper cost and moreover, people have tendency to accept modernization no matter in what terms.

Aggregate spending on foreign goods will increase and so again a risk to Indian currency in terms of its value and ultimately a fall in GDP. As we know that it will help create employment opportunities but will also bring unemployment to some extent to the existing local Indian retailers as they might fail to survive.

There are both pros and cons of having FDI in retail sector.

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