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Abstract
India is ranked as the third most attractive nation for retail investment among emerging markets and many MNCs have been looking for the potential benefits to be taken from it. The development of organized retail has the potential of generating employment, improvement in technology, development of real estate etc. On the other hand critics of the FDI feel that allowing FDI would jeopardize the unorganized retail sector and would not only adversely affect the small retailers and consumers but will give rise to monopolies of large corporate houses also, which can adversely affect the pricing and availability of goods. A case for the prospects for the same is discussed in this paper.
Keywords: FDI, multi-brand retail, Wal-Mart
1. Introduction
The retail industry in India is divided into two sectors: organized and unorganized sectors. Since 1991, when economy was liberalized, organized retail has grown exponentially because of burgeoning purchasing power of Indian middle class and the opening up of the foreign direct investment ("FDI") to it. As per the present regulations 100% FDI is allowed in wholesale trading and 51% is allowed in single-brand retailing. The FDI in multi-brand retailing has been just allowed and so the question, if opening up of FDI in multi-brand retail is a boon or a curse, is opened up.
2. The Foreign Direct vestment
FDI is defined as "investment made to acquire lasting interest in enterprises operating outside of the economy of the investor. It is a long-term relationship between the investor and the recipient entity." (www.unctad.org)
For FDI there is a need of a 10% holding or greater. Most FDI ends up being 100% ownership by a Multi- national Corporation (MNC). In the past twenty years, FDI has increased dramatically and has become the most common type of capital flow across the borders of world economies.
There are two matching ways and concepts of measuring the FDI:
* It is a particular form of the capital flow across international borders giving rise to a particular form of international assets for the home countries. To be specific, the value of holdings in corporations, controlled by a home country resident or in which a home country resident holds a certain share of the voting rights.
* It is a...