FDI in Retail, “WAL-MART in India”
Foreign Direct Investment (FDI) is a direct investment into production or business in a country by a company in another country either by buying a company in a target country or by expanding operations of an existing business in that country. Foreign Direct Investment can take many forms and so sometimes the term is used to refer to different kind of investment activity. Commonly Foreign Direct Investment includes “mergers and acquisitions, building new facilities and reinvesting profits earned from overseas operation”.
Retailing is one of the largest private industries. Liberalizations in Foreign Direct Investment have caused a massive restructuring in retail industry. The benefit of Foreign Direct Investment in retail industry superimposes its cost factors. Opening the retail industry to Foreign Direct Investment will bring forth benefits in terms of employment, organized retail stores, availability of quality products at a better and cheaper price.
Wal-Mart is one of the biggest American retail corporations that run chains of large discount department stores and warehouse stores. In 2007 Wal-Mart announced an agreement with Bharati Enterprise to establish a joint venture for whole sale cash and carry and back end supply chain management in India.
But very recently the Indian retail market has been hit by a revolutionary Governmental decision which is that, the multi-brand retail chain can invest upto 51% of their investment to open up stores in 10 of the 28 states and union territories of India. Until now these multi-nationals could only sell to small Indian retailers but with bigger outlets they may have the opportunity to sell directly to the enormous Indian consumers. Also the mindset of the Indian consumers is changing with many having a higher income and exposure to the “shopping culture” the investors are counting on gaining an enormous profit. From Indian Government’s point of view, exposure of Indian retail…