chapter  2
34 Pages

FDI in Sensitive Sectors: The Case of the Retail Sector in India

ByTanu M. Goyal, Arpita Mukherjee

The Indian economy is on a high growth trajectory. The gross domestic product (GDP) has grown at an average annual rate of 7 per cent over the past decade and in 2010 India was ranked as the fourth-largest economy in terms of its purchasing power parity (PPP).1 With economic growth, the retail sector has modernised. Traditionally, the Indian retail sector was characterised by a large number of small mom-and-pop outlets (known as unorganised retailers), run on family labour. The economic reforms of the 1990s propelled the entry of Indian corporates and foreign retailers into this segment and since 1995 the sector has witnessed a consistent double-digit growth. In fact, with the growing GDP, higher purchasing power and rising consumerism, the sector is expected to grow further. The growing market has made India an attractive destination for foreign investment. In 2010, India was ranked the third most attractive destination among 30 emerging markets for foreign retailers (A. T. Kearney, 2010).