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4. Regulations in Retail Industry

The policy environment is currently seen to be unfavourable to organised retailing. Some of the impediments to growth of retail include the following: -

4.1 Restrictions on FDI

Recent indications that the government is considering foreign direct investment in retail trade have sparked off a debate on the advisability and consequence of this policy. At present, foreign direct investment (FDI) in pure retailing is not permitted under Indian law.

Some of the areas in retailing that will be affected by FDI are as follows: -

• Creating Additional Jobs
• Diminution of Kirana Shops and Retail Stores
• Access to Larger Financial Resources
• Benefit to Consumers
• Supplier Quality Enhancements
• Enhanced Supply Chain
• Increased Exports
• WTOs Cross Retaliation

Verdict on FDI
Market is an important asset. It needs to be protected the way other assets are protected. However, it is clear that FDI in retail trade will lead to incremental economic benefits and not substitute on-going activities. Any strategy in the direction of FDI should ensure that domestic players are not unduly displaced and sufficient opportunities are available for the growth of domestic players. Therefore, the strategy should be controlled release of restrictions on FDI. Percentage of FDI allowed should be increased in small amounts and for specific commodities at every step. Constructive suggestions and inputs from all stakeholders should be taken in shaping the policy.

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* Contributed by -
Harmesh Mehrotra & Manu Arora,
MBA (IB) 2004-2006,
School of International Business,
Indian Institute of Foreign Trade, New Delhi.