The Indian retail market is said to be worth USD 600 billion. It is also one of the fastest-growing markets with a surging population of more than a billion people. This market is expected to grow tremendously. The retail sector is one of the pillars of Indian economy, contributing to 10% of the total GDP.
Multi-brand retail: selling products of different brands under the same roof, for example: Reliance Tends, Big Bazar, Myntra, etc. With regards to multi brand retail trading, the central government has just framed an enabling policy specifying the maximum FDI which is allowed- 51% is allowed and for that the permission is required from the government.
FDI in multi-brand retail is limited by various aspects.
• the particular State/UT has allowed the FDI in multi-brand retail trading
• Only 51% FDI is allowed that too only after the approval of the government.
• There is a requirement of the investment of minimum US $100 million where 30% of the products has to be sourced from India. They are not permitted to enter into e-commerce space.
Advantages of FDI in Multi-retail branding
1. Provides accentuated growth in the economy- Whenever a foreign company comes in India, new infrastructure is to be built; banking and real estate are to be benefitted. Also, they pay a lot of revenue to the Indian government
2. Employment generation – FDI in retail will create a lot of jobs in the organized retail sector.
3. Benefits for consumers – FDI in retail implies low prices and better and more variety of products for consumers to choose from. They will also get access to international brands.
4. Rise in productivity for Indian companies- The domestic companies are pushed to perform better because of the competition with foreign firms. They will produce better technology and infrastructure.
Disadvantages of FDI in Multi-retail branding
1. The competition- domestic companies will be forced to face the competition which may also prove to be unhealthy at some point of time for them. They may not be able to stand the competition and get absorbed by the foreign companies.
2. It may drain out government’s revenue share to foreign countries which can harm the nation’s overall economy.
3. Initially there might be a price drop but later on, the foreign company can cause price rise and may also form cartels harming the consumers.