FDI plays an important role in India’s growth dynamics. India is the second fastest growing economy in the world. It is third largest economy in the world in terms of GDP and fourth largest economy in terms of Purchasing Power Parity (PPP). It presents a huge opportunity to the world at large as an economic hub. Standing on the threshold of a retail revolution and witnessing a fast changing retail landscape, we are all set to experience the phenomenon of global village in the country.
Touted as a “promised land” for global brands – the most recent influx including brands such as GAP, H&M and Aeropostale, it tops in the list of emerging markets for global retailers and has a retail economy that is growing. The future looks promising; the market is growing, government policies are becoming more favourable and emerging technologies are facilitating operations. Modern retail has entered India as seen in sprawling shopping centers, multi-storied malls and huge complexes offer shopping, entertainment and food all under one roof. India’s growing retail boom is a success story. India had to open retail sector being a signatory to World Trade Organisation’s General Agreement on Trade in Services, which include wholesale and retailing services. There were many apprehensions towards opening of this sector.
There are several examples of the benefits of FDI in India. FDI in the retail sector can expand markets by reducing transaction and transformation costs of business through adoption of advanced supply chain that benefits consumers, and suppliers.
The government’s move to allow international single-brand retailers to carry out online retailing will bring in more foreign direct investment (FDI) in the country. FDI in the single-brand retail sector till now is limited, with most brands bringing in minuscule investment for the country. So far, the retail policy did not permit eCommerce by single-brand retail players, thereby affecting business plans of companies such as Ikea, H&M, Zara, Gap, Marks & Spencer, among others. With the latest change, not only will those present in India with their physical stores or those with plans to set up outlets benefit from online business, but others will have opportunity in the same platform.
Organised retail is reflected in sprawling shopping centers, multiplex-malls and huge complexes which offer shopping, entertainment and food all under one roof. The last 3-4 years have witnessed the entry of a number of organised retailers. Opening stores in various modern formats in metros and other important cities. Organised retailing has begun to tap the enormous market but its share is small. Traditional markets are making way for new formats such as departmental stores, supermarkets and specialty stores. Westernised malls can be seen fast appearing in metros and tier-II cities, introducing the Indian consumer to an implausible shopping experience. There is an unprecedented growth in organised retailing business in recent years and is expected to grow further at a much faster rate. Major players like large industrial houses and MNCs have entered this area and they have expansion and collaboration plans with big Indian partners, owing to the nature of Indian retail market.
At present the organised retail sector is catching up very fast. The domestic organised retail industry is at a nascent stage. India got started with organised chain retailing just a few years ago. There are just very few categories, the most prominent being apparel, where organised retail chains have had a significant presence for more than 3-4 years. The strength of organised retail lies in resource availability. It can translate into efficient supply chain management, leading to faster inventory turnaround, resulting in improved button lines. It is anticipated that the further belongs to organised sector in India. While the existing players such as Future Group, Bharti, Reliance Retail, Essar, Shopper’s stop and Aditya Birla group are endeavouring to consolidate their markets, others such as Mahindra & Mahindra, Parsavnath, Hero Honda and India bulls have announced plans to enter the retail sector.
Authored by: Munish Baldev, Head - Retail, Unitech Group