Foreign Direct Investment (FDI) in the Indian Retail Sector*



Case Code : CLSDM040
Publication date : 2005
Subject : Sales and Distribution
Industry : Retailing
Length : 04 Pages
Price : Rs. 100

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Key words:

Retailers, FDI, West Side, Food World, Organized retailing, Cash and Carry, Metro, Loyalty Cards, Federation of Associations of Maharastra (FAM), Kishore Biyani, Shoppers' Stop, Wal-Mart


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The caselet presents an overview of Indian retail market. It discusses the Indian government's policy toward foreign retailers during 1990s and the proposal of the then government, the National Democratic Alliance (NDA) Government led by the Bharatiya Janata Party (BJP), to allow FDI in retailing in the early 2000s. The caselet presents an example of a foreign retail company - Metro - and discusses how the company deviated from its licensing norms during the course of its business. It finally features the views of Indian industry experts on this issue, as of June 2005.


Impact of opening up Indian retail sector on Indian retailers
Government's role in protecting domestic retailers from foreign counterparts


The Indian retail sector was a combination of unorganized retailers such as domestic kirana stores and organized retailers such as WestSide, FoodWorld, etc. By the end of 2004, the Indian retail market was estimated at roughly Rs 9,300 billion with unorganized retail accounting for 97% (Rs 9,020 billion) of the total retail market; organized retailing was worth Rs 280 billion.

Questions for Discussion:

1. Successive Indian governments, the NDA and the UPA, have shown an inclination toward allowing FDI in retailing. Discuss the rationale behind following such a policy. How do you think this policy will benefit the Indian economy?

2. The opening up of the retail sector will see an influx of international retail giants like Wal-Mart and others, which could transform the Indian retail scenario. Elucidate the impact that the foreign retailers could have on the domestic retailers (both organized and unorganized) in India. What are the measures that organized Indian retailers can take to meet the competition?