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More Foreign Direct Investment in Retail for India?

Bingjie Hu's picture

Recently, India has seen a heated debate on the entry of foreign direct investment (FDI) in the country’s $400 billion retail market. In November 2011, the government proposed a policy change to open up the country’s multi-brand retail segment -- for retailers such as Wal-Mart and Carrefour. Foreign investors were to be allowed to own up to 51 percent of a multi-brand retailer if they invested at least $100 mn, with half spent on infrastructure development in India. Within weeks of the announcement, the government suspended the decision amid protests from opposition parties and small shopkeepers citing concerns over large scale job losses, especially in the small, unorganized retail sector.

What is FDI?

Foreign direct investment (FDI) refers to the net inflows of foreign investment to acquire a lasting management interest (more than 10 percent of voting stock) in a domestic company. In 1997, the government permitted 100 percent FDI in the wholesale cash and carry trade, in which customers arranged the transport of goods from wholesalers and paid for goods in cash (not credit), on a case-by-case basis.