The retailing sector has become one of the emerging sectors and also known as the backbone of the Indian economy. The retailing sector contributes about 10 percent to the GDP and is estimated to be around 500 billion US dollar. Retailing market in India has become the fastest growing market in the world and ranked in top five retail markets in the world. According to 2013 report retailing sector was essentially managed by SME’s. Retailing sector of India has observed major growth in recent years only. FDI has been showered to the Indian industry
After seeing the boom in Indian retail market many foreign companies want to enter in Indian retail market. Foreign Investment is considered as an important part of a domestic investment and at the same time, it will help to create growth in business, trade, employment, demand, consumption, income, and manufacturing. Before moving to FDI in retail we should know about the single brand and multiple brand retail.
Single Brand Retail
There will be on only one brand in a single retail store is known as single brand retail. Rebook and Nike is the best example for single brand retail.
Multi-Brand Retail
There will be multiple brands in the single store is known as multi-brand retail. Big Bazaar and Walmart come under the Multi Brand Retail.
Till Nov2011, the Indian government has allowed only 51 percent of foreign direct investment in single-brand retail and there has to be 100 percent cash and carry only and there was no place for multiple brand retail. Now it has come to 51 percent to multiple brand retail and 100 percent to single brand retail.
So, let us find out the impact of government decision about foreign direct investment in retail on SME’s (Small and Medium enterprises) sector. Till now there is only one company which has received permission to open a store under multiple brand retail categories. The foreign direct investment has created many regulations for foreign companies like sourcing of goods is mandatory from MSMEs and there will be the certain percentage of investment in the infrastructure. There are many conditions which act as a bar to foreign companies. And if they allowed doing the retail of made in India products then there will be no condition on them. Last year, the government of India has permitted the rate of FDI will be 100 percent in trading of domestic goods.
IMPACT OF FDI ON SALES
As per the survey, the majority said that with the opening of FDI in retail sector create substantial growth in sales of their goods. Out of the survey of 100 people, only 6 people feel that the FDI has a negative impact on the growth of sales in the economy
IMPACT ON THE SIZE OF THE INDUSTRY
As per the survey, the impact of FDI on the size and growth of the companies is positive with the opening of 51 percent in the multiple brands retailing and 100 percent to the single brand retailing and only two percent people feel that FDI has a negative impact on the size or growth of the industry.
IMPACT ON CONTRACTS
There will be lots and lots of new contracts and order to the company with the opening of FDI to single retail market and multiple retail markets.
IMPACT ON BRANDING AND OVERALL IMPROVEMENT OF THE PRODUCT
FDI also has a favorable impact on the improvement and the overall branding of the product or goods of the company and the quality of the product will also increase with this FDI Rate. Foreign companies will invest in our country and our country will serve as a host country and lots of ideas and technology will be imported from parent company thus it will help to an overall improvement of goods.
IMPACT ON SUPPLY CHAIN
The supply chain is a way of delivering the product or services to the consumer from suppliers.AS per survey, 70 percent of people feel that FDI in retail sector will improve the supply chain efficiencies of the small and medium enterprises sector.
IMPACT ON THE EMPLOYMENT
There will be a lot of employment opportunities after the change of FDI in the retail sector.After this change, there will be a lot of foreign companies who will invest in the Indian market and will hire a lot of people for work and as per the survey, this has a positive impact on SME’s sector.
Domestic investment will be complemented with the fixed direct investment. The small and medium enterprises will receive benefits from FDI and will provide global exposure and create great opportunities in the global market. FDI helps to create a link between different economies. Different types of new technologies will be promoted. It also helps to promote its product and act as a host of the economy in the international market. FDI with the help of right policy act as an extra source of investment and thus acting as an important way to the development of SME’s.
There will be the positive effect on the economy with the increased flow of FDI. Capital and labor market will be affected by FDI in the retail market. There will be a lot of technology transfer from the parent company to the host company.
The Government of India is also expected to announce the relaxation of FDI in many sectors and it includes single brand retailing too. The relaxation of FDI policy was there in the announcement made by the finance minister of India in the 2017-18 budgets. FDI will help to maintain the balance of payment and it will also help to strengthen the value of our currency against others. The inflow of FDI in the year 2016 is around 36 billion dollar approx…
Thus we can simply say that FDI in the retail sector has a positive impact on small and medium enterprises sector and very important to the overall growth of the country in the global market.