FDI in Retailing - Long Overdue - Free Resources - Articles

FDI in Retailing: Long Overdue

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Retailing in India, in spite of industry majors entering, is still at its nascent stage. According to India's Ministry of Commerce and Industry, only 2% of the retail sector is organized, leaving a huge margin for other players to enter the market. Moreover, the volume of retail turnover in the country is estimated at Rs. 4 lakh crore, which is about 10% of our Gross Domestic Product (GDP). The retail industry is the second largest sector after agriculture in terms of turnover and employment.

The growth rate of the retail sector is estimated at about 5% per annum. It is also interesting to note that retailing in India by 2010 will be a $300 bn industry, provided our economy continues to register a growth of 6% of the GDP annually. Such overwhelming statistics is forcing the government to take firm and positive steps towards allowing FDI in the retail sector. The government is gradually preparing the base for allowing FDI in this sector.

It recently allowed 100% FDI in the real estate sector. The opening up of the real estate sector for FDI will greatly help the organized retailing industry in developing world-class infrastructure. Providing concessions on import of capital goods for certain retailers and implementation of Value Added Tax (VAT) are certain other steps towards this direction.

However, certain political parties like the Left are strongly opposing any such moves. One of their main contentions is that it will destroy employment opportunities in this sector. But the fact is, allowing FDI in this sector offers a host of benefits. Primarily, it enhances the standard of living of the people by providing high quality products at cheaper rates. It will also increase employment opportunities in the entire value chain of organized retailing, right from procuring materials to packing and selling them.

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