Study of Foreign Direct Investment with Special Reference to Retail Sector in India

Indian retail sector is one of the most sought after sectors that carry great potential for attracting FDI. Foreign Direct Investment refers to capital inflows from abroad that is invested in or to enhance the production capacity of the economy. Foreign Investment in India is governed by the FDI policy announced by the Government of India and the provision of the Foreign Exchange Management Act (FEMA) 1999. The foreign investors are free to invest in India, except few sectors/activities, where prior approval from the RBI or Foreign Investment Promotion Board (FIPB) would be required. Many foreign retailers have also entered the market through different routes such as wholesale cash-and-carry, local manufacturing, franchising, test marketing etc. With the growth in organized retailing, unorganized retailers are fast changing their business models and implementing new technologies and modern accounting practices to face competition. The growing market has attracted foreign investors and India has been portrayed as an important investment destination for the global retail chains.