Role of FDI in multi-brand retail trade in India and its implications

Abstract

The Indian food supply chains are changing fast due to many policy and practice changes. There has been presence of domestic food supermarkets in the sector for many years now and their performance varies across states and chains. But, for the past few years, there has been plenty of debate and discussion about the potential role of foreign direct investment (FDI) in multi-brand retail, including food. This article tries to understand the role of FDI in multi-brand retail in improving the efficiency of food supply chains in India and its implications for various stakeholders in the chain. It uses empirical evidence from the experience of Indian domestic retail supermarkets and wholesale cash ‘n’ carry supermarkets and from other developing countries to examine the role FDI can play. The article also examines various mechanisms which could be used to leverage the presence of FDI in supermarkets and explores the role of policy and regulation to promote the small farmer and the traditional retail interests in such chains. It examines the role and implications of FDI supermarkets for food inflation, farmer income enhancement and employment generation.