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India announces new Foreign Direct Investment in Retail

By Madhura Yale 13th January 2018

The world has seen a tremendous shift to economic power since 1950.The corporations are bigger than GDP of so many smaller countries. Wal-Mart’s Revenue was equivalent to Norway’s GDP in 2010. With the sheer size of large corporations and their ability to influence policy formulation, it has given immense opportunities for businesses to expand overseas. FDI is significant for developed countries to keep their factories running and their capital rich corporate houses to get more returns on their investments. It also provides business opportunities for developing countries to kick-start economic activities and tap the resources which they have in terms of natural, human, technology and geographic resources. The ideal situation for FDI is to reap benefits to both the investors and the ultimate consumers.

The introduction of globalization into Indian economy has made a path for foreign direct investment into India. According to a survey by Business Line, it was observed that Foreign direct investment has created one crore job opportunities in India.  As per Financial Times, the Indian economy is the most preferred economy even over China. Statistics say that India has obtained an investment of USD 31 Billion as against USD 28 Billion for China and USD 27 Billion for the United States of America in 2016-2017.

The government’s move to allow 100 per cent FDI in single-brand retail through the automatic route is expected to encourage more international brands to set up base in India and help Indian consumers get better access to international products, say analysts. At the same time, analysts believe that the tweaks in sourcing norms will give international retailers the much-needed flexibility and more time to develop vendors in the country and establish a supply chain for their Indian operations.

With the new policies of the current government, the graph of foreign direct investment into the economy is anticipated to reach a new height. This positive change will foster ease of doing business in India. It will encourage international brands to look at India seriously as they will now find it easier to set up operations in the country. Foreign direct investment has a great impact on our economy and such investment process has a great future prospectus on long-term standing with our economy.

To conclude, the announcement in favor of 100 percent FDI through direct route will open up India as a global retail market. Favourable macro indicators such as improving consumer sentiment, rising disposable income, urbanization and lower penetration of organized retail are expected to boost the Indian retail sector. The Indian market will continue to remain attractive for retail companies around the world because of its huge (expected) consumption growth. Moreover, this step is likely to improve India’s ranking in ease of doing business by allowing growth in the overall commerce of the country.

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