No Easy Day for FDI in Multi-Brand Retail

In 2012, the Indian Government threw open the gates to foreign investment in multi-brand retail in a bid to tap the combined mammoth potential of the retail and agriculture sector. This reform was roundly attacked by opponents saying that it would threaten the existence of unorganised retail or the traditional mom and pop stores. There were also speculations that the reform would lead to exploitation of farmers by foreign retail chains since they would pressurise them to sell their produce at cut-throat prices. All this would put a financial strain on the economy. To unravel this dilemma, we studied the impact of recent economic reforms on FDI in multi-brand retail particularly on the unorganised retail outlets and also on the farmers and economy. Primary research amongst consumers revealed that the advent of FDI based multi-brand stores would not have an adverse effect on sales of the mom and pop stores. We also carried out extensive secondary research to study the pros and cons of FDI in multi-brand retail in other countries as well as the relative strengths and weaknesses of foreign retail chains via-a-vis unorganised retail. Findings showed that the weaknesses (and threats) of foreign retailers outnumber the inherent strengths (and opportunities) of mom & pop stores. Moreover there are enough global success stories wherein foreign retail giants have co-existed with the local retail entities and have even taken initiatives to benefit them. The paper thus supports FDI in multi-brand retail in India with arguments from point of view of various stakeholders.