FDI in retail: Expansion of Pie or shrinkage of opportunities

Abstract

Indian retail sector is expected to grow at a rate of 15 per cent from Rs 23 trillion in2011-12 to Rs 47 trillion in 2016-17. The major driving forces behind this growth arethe increasing income levels of Indian population, favourable demographics andmodernization of Indian families. Supply chain is considered the backbone of anorganized retail chain. With India requiring huge investments and technologicalexpertise for various retail projects, the foreign investments could bring in theirfinancial resources and technical knowledge from their countries through FDI. Theseinvestments create economies of scale both in terms of size and technicalproficiency. This can lead to operations and supply chain efficiencies which caneventually benefit the small kirana store owners to procure items at lower cost. Thiscan lead to expansion of pie which benefits both the big foreign brands as well aslocal shops.But at the same time there is also a danger of small retailers getting wiped out of thebusiness because of these major retailer giants conquering the market. The reasonfor this could be that when big retail players entered the market with highefficiencies, small stores will be pressurized to sell at lower price which can lead tolow profit and closure of business. So there is a need to find out the impact of FDI inretail on kirana stores. The objective of this CCS is to:* Study the impact of FDI in retail sector in India.* Benefits of FDI in terms of improving efficiency in supply chain in India.* Study of potential threat to the small kirana owners because of FDI.* Study of Wal-Mart supply chain and its success and failure reasons in variouscountries.* Study of possibility of mutually beneficial coexistence of traditional andmodern retail stores in India.* Assessing whether FDI will expand the pie or shrink the opportunities fortraditional stores.This study will consist of: 1) Analysing the impact of foreign investments (FDI/FII) in various segments inIndia.2) Creating hypothesis of whether FDI in retail in India leads to expansion ofoverall pie of Indian Retail Sector or it will lead to lose of job opportunities fortraditional kirana stores in rural India.3) Conducting secondary research analysis to test the hypothesis.4) Comparison of Wal-Mart supply chain and its strategy in various developedand developing countries.5) Formulating strategy to find the synergy of coexistence of modern retail andkirana stores in India.