M PRA

Munich Personal RePEc Archive

FDI in Multi Brand Retail and

Employment Generation in India

Mohammed Nizamuddin

Center for Studies in Economics & Planning, School of Social

Science, Central University of Gujarat

15 April 2013

Online at https://mpra.ub.uni-muenchen.de/46377/
MPRA Paper No. 46377, posted 20 April 2013 01:28 UTC
FDI in Multi Brand Retail and Employment Generation in India

Mohammed Nizamuddin
Research Scholar, Centre for studies in Economics & Planning, School of Social Science, Central University of Gujarat, Sector-
30, Gandhinagar, Gujarat-382030

ABSTRACT
In the present economic scenario, especially after global economic crisis, the condition of
India’s balance of payment and trade deficit is very severe. Investment has made the need of
hour to bridge this gap. An attempt has been made in this paper, to discuss the need of opening
up the route of FDI in multi brand retail sector. The main purpose of this study is to analyse the
role of FDI in employment generation in Indian retail sector. Here we assumed that FDI as an
independent variable whereas employment as dependent variable. By using time series data from
2001-02 to 2009-10 and applying ordinary least square (OLS) method we find that FDI have
negative impact on employment generation in retail sector in India.

Key Words: Foreign Direct Investment, Multi Brand Retail, Employment Generation, India.

INTRODUCTION
Now days, India is facing balance of payment and trade deficit problems continuously. This has
been made to bring about changes in Foreign Direct Investment (FDI) policy by Government of
Indian. Indian retailing is one of the most promising sectors with a lot of growth potential. Despite
the recent developments in retailing and its recognizable contribution to the economy, retailing
continues to be the least evolved industries. The growth of organized retailing in India has been
so slower as compared to rest of the world. Liberalization of trade policies during first reform
period has led India to become an investment friendly country. Foreign direct investment (FDI) in
this country considered critical importance in the context of this liberalization. According to the
Investment Commission of India, the retail sector is expected to grow almost three times its
current levels. It has made India the most attractive investment destination in the world. Indian
Retailindustry with a contribution of 14% to the national GDP and employing 7% of the total
workforce in the country after agriculture sector, the retail industry is one of the main pillars of
the Indian economy. The latest decision of the Government of allowing FDI in Indian retail
sector encourages the retailers and open up barriers to develop and leverage the resources and
capabilities of their supply chain partners to create superior value and competitive
advantages in the marketplace. FDI plays a very significant role for economic growth and
development through its strengthening of domestic capital, productivity and employment creation
and also it would undoubtedly enable India incorporates to integrate its economy with that of the
global economy. But a great debate has appeared against the Government plans for allowing
FDI in Retail sector by the small traders who beliefthat the opening up of foreign-sponsored
departmental outlets will not necessarily absorb them; rather they may try to establish the
monopoly power in the country. Therefore, as a matter of fact FDI in Indian retail sector should not
just be freely allowed but should be significantly encouraged with some restrictions. Thus FDIs will
provide opportunities to host countries to enhance their economic growth and optimize their
earnings by employing their ideal resources.

1. REVIEW OF LITERATURE
Many studies have been found to analyse the impact of FDI on growth of the countries and
employment generation. The flows of FDI have a positive correlation with economic growth but
do not identify the mechanism to growth of economy and employment generation in India.

A study conducted by Mukherjee and Patel (2005) found that foreign retailers are working with
small manufacturers for in-house labels and are providing them technologies like packaging
technologies and bar coding. Sourcing from India has increased with the advent of foreign
retailers and they also bring in an efficient supply-chain management system. Joint ventures with
foreign retailers are helping the Indian industry to get access to finance and global best practices.
Besides, retailing being a non-tradable service there is no possibility of improved efficiency
through import competition and foreign investment is the way forward.

Tanay Kumar Nandi and Ritankar Saher (2007) in their work made an attempt to study the
Foreign Direct Investment in India with a special focus on Retail Trade, This paper stresses the
need of FDI in India in retail sector and uses the augment that FDI is allowed in Multiple sectors
and The study also suggests that FDI in retail sector must be allowed. Bose, Jayashree (2007), the
book studied the sectoral analysis of India & China related to FDI Inflows. In his book, he lights
on the emerging issues on FDI inflows in India & China comparatively and also on the
globalization, foreign factors, trends & issues on FDI outflow from India and China.
M. Joseph and N. Soundararajan, (2009) The Indian Council for Research on International
Economic Relations (ICRIER) study has shown that hardly 1.7 per cent of small shops have
closed down due to competition from organized retail. They have competed successfully against
organized retail through adoption of better business practices and technology. FDI has positive
spillover effects on the economy as its ownership advantages get disseminated to locally owned
enterprises, enhancing their productivity. All these benefits of foreign direct investment have
been well proven in India in sectors such as automobiles, telecom and consumer electronics.

Khan A.Q. and Siddiqui Ahmad Taufeeque (2011) studied the impact of FDI on Indian
economy and a comparison with China & USA. The paper has also been ventured into carving
out set of strategies to deal with the issues & problems in attracting FDI for promotion & growth
of international trade. The double log model has been used to find elasticity between different
factors in this paper. They also highlight the impact of FDI on employment. In this research
paper, the discussion between FDI and GDP as to asses that FDI helps in boosting growth of a
country.

Bhanagade D.B, Shah A. Pallavi (2011), they said in their paper that the impact of FDI on
Indian Economy where they also emphasize on the investments, sectors attracting highest FDI
inflows and FDI leads to Generation of Employment opportunities. Therefore the growth of
inflow of FDI would lead to positive growth of Gross capital formation. In India, the growth of
GDP is largely influenced by FDI. As stated that the numerous studies have been conducted
related to FDI in different aspects of areas. But none of the studied reviewed by the researchers is
in context to the FDI in India and shows that how FDI affecting India‟s growth and impact of
FDI inflows on growth of the economy in terms of different variables like GDP and employment
generation in India. Further, in the research paper double log model has been used to find out the
elasticity between the different indicators.

2. OBJECTIVES OF THE STUDY

1. To explain the current status of FDI in Indian retail sector along with others.
2. To study the need of opening up the route of FDI in Multi Brand Retail segment in
India.
3. To analysethe impact of FDI on employment generation in Indian retail sector.
3.1 Hypothesis
Ho- The Null Hypothesis assumes that there is no significant relationship between FDI
inflow in retail sector and employment in Indian retail sector.
Ha- The Alternative Hypothesis accepts that there is significant relationship between
FDI inflow in retail sector and employment in Indian retail sector.

3. METHODOLOGY AND DATA SOURCES

The study is exploratory and quantitative in nature. The secondary information is extensively
used for analysis purpose. Further the secondary data pertaining to the study is originated from
various sources like National Sample Survey Organization (NSSO), SIA reports, newspapers,
and websites of Reserve bank of India (RBI), Department of Industrial Policy and Promotion
(DIPP), Economic Survey 2010-11, 2011-12 and number of leading journals. In order to
compare the FDI inflow over the period under study, the percentage method and simple statistics
is used.

4.1 Statistical Tools Used to Test the Hypothesis

A log linear regression function has been applied to know the impact of FDI on Indian economic
growth in terms of GDP and Employment Generation in India. The degree of significance of
coefficient of regression verify by the application of „T‟ test. The strength of linear relationship
between the dependent variable and independent variable measured by the coefficient of
determination. The data analyzed in this paper has been scrutinized through statistical tools
&techniques.

4.2 Econometric Model

We use simple Ordinary Least Square (OLS) Method in the form of equation to investigate the
impact of FDI on employment. creation in Indian retail sector.
Ln (EMP) ═ α + β ln (FDI) + εi
Where the employment in retail sector are taken as dependent variable while FDI in retail sector
as an independent variable. Further α is intercept and β is the parameters of the equation that link
together the dependent and independent variables, and ε is error term. In above equation natural
log values of variables are used to transform it into a linear equation and to facilitate the use of
ordinary least square method.
4. RETAIL SECTOR IN INDIA
In 2004, The High Court of Delhi defined the term „retail‟ as a sale for final consumption in
contrast to a sale for further sale or processing (i.e. wholesale), a sale to the ultimate consumer.
Thus, retailing can be said to be the interface between the producer and the individual consumer
buying for personal consumption. This excludes direct interface between the manufacturer and
institutional buyers such as the government and other bulk customers retailing is the last link that
connects the individual consumer with the manufacturing and distribution chain. A retailer is
involved in the act of selling goods to the individual consumer at a margin of profit. Division of
Retail Industry: The retail industry is mainly divided into

(i) Organized and

(ii) Unorganized Retailing.

(i) Organized Retailing

Organized retailing refers to trading activities undertaken by licensed retailers, those who have
registered for sales tax, income tax, etc. These include corporate-backed hypermarkets and retail
chains, and also privately-owned large retail businesses.
Single Brand Retail: Single Brand implies that foreign companies would be allowed to sell
goods sold internationally under a „SingleBrand‟, viz., Reebok, Nokia and Adidas. FDI in
„SingleBrand‟ retail implies that a retail store with foreign investment can only sell one Brand.
For example, if Adidas were to obtain permission to retail its flagship Brand in India, those retail
outlets could only sell products under the Adidas Brand and not the Reebok Brand, for which
separate permission is required. If they get permission, Adidas could sell products under the
Reebok Brand in separate outlets.
Multi Brand Retail: FDI in Multi Brand retail implies that a retail store with a foreign
investment can sell Multiple Brands under one roof. Opening up FDI in Multi-Brand retail will
mean that global retailers including Wal-Mart, Carrefour and Tesco can open stores offering a
range of household items and grocery directly to consumers in the same way as the ubiquitous
‟kirana‟ store.
(ii) Unorganized Retailing
Unorganized retailing refers to the traditional forms of low-cost retailing, for example, local
kirana shops, owner-operated general stores, paan/beedi shops, convenience stores, hand cart and
street vendors, etc.

5. CURRENT SCENARIO OF RETAILING INDUSTRY IN INDIA

In India, FDI scenario has been divided into two important retail segments, “Single Brand
retailing and Multi Brand retailing”. A section on the investment scenario of this market is also
highlighted; including investment and expansion plans, mergers and acquisitions, and partnership
agreements in the retail sector. The competition section provides an overview of the competitive
landscape in the market and includes a detailed profile of the major players. It begins with a
matrix showing the various retail formats under which the players operate in India. A bubble
chart for the public companies, depicting their relative positions in the market with respect to
total income, net profit/loss and market capitalization is included. Similarly, a bubble chart for
the private players is also included with respect to their total income, net profit/loss and total
assets. This section also includes list of products and services, key people, financial snapshot,
key ratios and key recent developments for all companies, along with key business segments and
key geographic segments for public companies. The report concludes with a section on strategic
recommendations which comprises of an analysis of the growth strategies of the retail market in
India.

Table-1 Explains that FDI inflow from the year 2000 to 2012 in India. According to the data of
Department of Industrial Policy and Promotion (DIPP) illustrate that FDI was US$ 4029 million
in the year 2000-01 that increased to US$ 6130 million with growth rate of 52 % in the year
2001-02. With the investment amounted to US$ 5035 million and US$ 4322 million with
negative growth rate of 18 % and 14 % respectively as it was noticed the downward trend in
years i.e. 2002-03 and 2003-04. The reason behind the negativity was the unfortunate 9/11 attack
in US leading to effect on almost all the countries worldwide. In most of the economies
including India the stock market went into bearish mode. Then the recovery in stock market
began from2004-2005 and2005-2006 with increasing rate of 40%and 48% and investment
amounted to US$ 6051 million and US$8961 million respectively. In the year 2006-2007, FDI
registered robotic growth rate of 146 % with investment amounting to US $ 22826 million.
Table-1 Foreign Direct Investment (FDI) Inflows Into India (From April 2000 To June 2012)
S. FDI Flows in India % Growth (in US
No. Financial Year $Million)
(in Rs. Crore) (in US $ Million)
1 2000-2001 10733 4029 -
2 2001-2002 18654 6130 (+) 52%
3 2002-2003 12871 5035 (-) 18%
4 2003-2004 10064 4322 (-) 14%
5 2004-2005 14653 6051 (+) 40%
6 2005-2006 24584 8961 (+) 48%
7 2006-2007 56390 22826 (+) 146%
8 2007-2008 98642 34843 (+) 53%
9 2008-2009 142829 41873 (+) 20%
10 2009-2010 123120 37745 (-) 10%
11 2010-2011 88520 34847 (-) 08%
12 2011-2012 173947 46553 (+) 34%
2012-2013 (up to -
13 June) 23820 7698
CUMULATIVE TOTAL
(from April 2000-June 2012) 798827 260913
Source: Department of Industrial Policy & Promotion (DIPP) Fact sheet up dated up to June
2012, Federal Ministry of Commerce and Industry, Government of India.

During that period tremendous growth can be ascertained in Indian economy. This trend in the
rate of growth goes continued with investment amounting to US$ 34835 with growth rate of 53%
in the year2007-2008. In the succeeding year 2008-2009, the growth rate declined to the level of
20%. That is all because of global financial recession but it is satisfactory for India as compare to
other countries at least it is positive. Very Strong economic fundamentalsof Indian economy and
controlled privatization are able to maintain positive growth rate.The impact of financial crises
adversely affect the Indian economy as it is noticed that in the year 2009-2010 and 2010-2011,
the growth rate goes negative at -10% and -08% with investment amount of US $ 37745million
and US $ 34847million respectively. But in the year 2011-12 it has seen again bounced back
with a growth rate 34% and with investment amount of US $ 46553 million.
Table-2 Country Wise FDI Equity Inflow In India(From April 2000 To June 2012)
S. FDI Flows in India % of total inflows
No. COUNTRY (in US$ Million)
(in Rs. Crore) (in US $ Million)
1 MAURITIUS 297189 65608 38%
2 SINGAPORE 79770 17555 10%
3 U.K. 76846 16314 9%
4 JAPAN 59785 12663 7%
5 U.S.A 48682 10710 6%
6 NETHERLAND 35209 7652 4%
7 CYPRUS 30762 6603 4%
8 GERMANY 22234 4880 3%
9 FRANCE 13709 2988 2%
10 U.A.E 10643 2301 1%
TOTAL FDI INFLOWS 798826 174835
Source: Department of Industrial Policy & Promotion (DIPP) Fact sheet up dated up
toJune 2012, FederalMinistry of Commerce and Industry, Government of India.

Table-2 Explains that country wise FDI inflows in India during the period of study. The table
shows that Mauritius is the most attractive country to invest in India. It only invest US $ 65608
million with 38% of total FDI inflow in India, followed by Singapore amounted US $ 17555
million with 10% of total FDI inflows. U.K and Japan have rank three and four respectively with
9% and 7% respectively followed by USA amounted US $ 10710 million with 6% of total FDI
inflows. Netherland, Cyprus, Germany and France occupied six, seven, eight and nine place in
terms of FDI inflows with 4%, 4%, 3% and 2% respectively and UAE participate as a foreign
investor in India having 10th place in ten countries table amounted US $ 2301 million with 1%
respectively. From the table it is also revealed that about 50% of total FDI inflows are invested
by Mauritius and Singapore. They play a very significant role in the overall development of
Indian economy.
 Table-3 Sector Attracting Highest FDI Equity Inflow In India (From April 2000 To June
2012)
S. FDI Flows in India % to Total Inflows
No. SECTOR (in Rs. (in US$ (in US $ Million)
Crore) Million)
1 SERVICE SECTOR 151560 33428 19%
CONSTRUCTION
2 DEVELOPMENT 95624 21088 12%
3 TELECOMMUNICATIONS 57120 12560 7%
COMPUTER SOFTWARE &
4 HARDWARE 50557 11286 6%
DRUGS AND
5 PHARMACEUTICALS 45313 9659 6%
CHEMICALS OTHER THAN
6 FERTILIZERS 39236 8116 5%
7 POWER 33994 7444 4%
8 AUTOMOBILE INDUSTRY 31929 6965 4%
9 METALLURGICAL INDUSTRIES 28692 6374 4%
10 PETROLEUM & NATURAL GAS 23676 5139 3%
Source: DIPP (Department of Industrial Policy & Promotion) Fact sheet up dated up to June
2012,Federal Ministry of Commerce and Industry, Government of India.

Table-3 Explains that the Sector wise Analysis of FDI in India reveals that maximum FDI has
attracted in the service sector including the telecommunication, information technology, travel
and many others with 19%. The service sector is followed by the construction development
sector with 12% in terms of FDI. The telecom industry is of the fastest growing industries in
India with 7% FDI inflows as it has the highest growth rate in the world, with a growth rate of
45%. The IT sector is one of the growing sectors in India. The FDI in computer software and
hardware is of 6% along with drugs and pharmaceuticals. Chemical other than fertilizers,
Automobile Industry, power and metallurgical industries have average investment in terms of
foreign direct investment. They have moderate rate of attraction of FDI with 5%, 4%, 4%, and
4% respectively. The petroleum and natural gas industry has helped in the development of the
sector in India as ranks 10th with FDI Inflows of 3%. The cumulative FDI inflows reveal that
service sector attracts maximum FDI Inflows amounting to Rs. 151560 crores that followed by
the construction development amounting Rs. 95624 crores in India. These both sectors attract
more than 30% of the total FDI Inflows in India. As the Real Estate and Housing and the
Construction industry are among the new attracting large share of FDI in India. Thus the Sector
wise Inflows of FDI in India shows varying trends but act as a catalyst for growth, development
and quality maintenance of Indian Industries to the huge and greater extend. Though the sectors
are the major sources of mobilizing FDI in India, plenty of scope exists.

6. NEED FOR FOREIGN DIRECT INVESTMENT IN MULTI BRAND RETAIL IN

INDIA
As India is a developing country, capital has been one of the scare resources that are usually
required for economic development. Capital is limited and there are many issues such as Health,
poverty, employment, education, research and development, technology obsolesce, global
competition. The flow of FDI in India from across the world will help in acquiring the funds at
cheaper cost, better technology, employment generation, and upgraded technology transfer,
scope for more trade, linkages and spillovers to domestic firms. The following arguments are
advanced in favor of foreign direct investment.
 Sustaining a High Level of Investment: As all the under-developed and the developing
countries want to industrialize and develop themselves, therefore it becomes necessary to raise
the level to investment substantially. Due to poverty and low GDP the saving are low.
Therefore there is a need to fill the gap between income and savings through foreign direct
investments.
 Technological Gap: In Indian scenario we need technical assistance from foreign source for
provision if expert services, training of Indian personnel and educational, research and training
institutions in the industry. It only comes through private foreign investment or foreign
collaborations.
 Exploitation of Natural Resources: In India we have abundant natural resources such as coal,
iron and steel but to extract the resources we require foreign collaboration.
 Understanding the Initial Risk: In developing countries as capital is a scare resource, the risk
of investments in new ventures or projects for industrialization is high. Therefore foreign
capital helps in these investments which require high risk.
 Development of Basic Economic Infrastructure: In the recent years foreign financial
institutions and Government of advanced countries have made substantial capital available to
the under developed countries. FDI will help in developing the infrastructure by establishing
firm‟s different parts of the country. There are special economic zones which have been
developed by Government for improvising the industrial growth.
 Improvement in the Balance Of Payments Position: The inflow FDI will help in improving
the balance of payment. Firms which feel that the goods produced in India will have a low cost,
will produce the goods and export the same to other country. This helps in increasing the
exports.
 Foreign Firm’s Helps in increasing The Competition: Foreign firms have always come up
with better technology, process, and innovations comparing with the domestic firms. They
develop a completion in which the domestic firms will perform better it survive in the market.

7. EMPLOYMENT GENERETION IN RETAIL SECTOR OF INDIA

The Indian Government‟s goal of attracting FDI was particularly motivated by low domestic
savings rates accompanied by inefficient financial intermediation, which hampered their
strategies to finance growth. The other motivation behind FDI was the opportunity to benefit
from the direct and indirect effects of FDI on increasing demand for labour. This is especially
important given a chronic unemployment that the India suffers from. The level of unemployment
in any country has economic and social implications. From the economic point of view, the
overall unemployment rate remains one of the key measures of an economy‟s performance.
However, unemployment rate is not only of economic significance but also of social significance
as well since it is also a key variable in alleviating poverty. For instance, the India‟s
National Bureau of Statistics (2007) indicates that the overall unemployment rate in India
was 11.0 for the population aged 10 years and above. The current problem of youth
unemployment in India has been addressed by establishing foreign production facilities, which
engage youths in the values creation. It was expected that foreign firms that use labour intensive
production methods would absorb many of the youths, through either direct employments or
indirect employments. Prior studies have used cross-country data; however, none of the past studies
have focused solely on India. The results of prior studies on the relationship between FDI and
employment creation of host country are mixed. Considering the importance of the unemployment
problem in India and the potential impact that FDI can have on employment generation on one
hand, and the scarcity of studies covering the subject in India on the other hand, the present study
has utilized data-set from India to examine the impact of FDI on employment
generation/creation.
Table-4 Occupational Condition in India
WANT WANT
UNDER % OF DAYS
GENDER ADDITIONAL ALTERNATIVE
EMPLOYED UNEMPLOYED
WORK WORK
URBAN
MALE 1.4 3.9 5.8 4.9
FEMALE 1.4 15.4 1.2 0.9
RURAL
MALE 7.4 8.4 26 23.2
FEMALE 16 30.8 6.6 5.8
TOTAL 26 NA 40 35
Sources: NSSO SURVEY: Employment and unemployment situation in India 2009-10

POPULATION LABOUR FORCE % OF NOT

EMPLOYED
INDIA 1177 430 28.3
MALE 609 329 20.1
FEMALE 568 102 8.3
URBAN 351 123 7.1
MALE 184 101 5.2
FEMALE 166 21 1.9
RURAL 828 306 20.8
MALE 425 228 18.2
FEMALE 401 79 5.1
Sources: NSSO Survey all figures are in million
Thus, the present study attempts to create a better understanding of the relationship between
foreign direct investment inflows and their effects on employment creation in India. In 11th and 12th
plans, the planning commission is targeting the creation of about 116 million jobs, which would
absorb the 85 million rises in the labour force and cover some of the existing gab between jobs and
job seekers. Through FDI in Multi Brand retail sector, the Government wants to create 10 million
new jobs opportunities addressed the nation by the Prime Minister of India. But it can be happened
only if the projected number of new jobs materialized. Equally the benefits of these new jobs can
accrue only if the people with the relevant skills are available.

Table-5 percentage growth of total employment generation in organised retail sector in India.

Total Employment in Total Employment % of Total Retail

S.No. Year Public & Private Sector in Retail Sector Employment
1 2000-01 27960000 493000 -
2 2001-02 27790000 502000 (+) 02%
3 2002-03 27205000 492000 (-) 02%
4 2003-04 27001000 542000 (+) 10%
5 2004-05 26443000 532000 (-) 02%
6 2005-06 26459000 559000 (+) 05%
7 2006-07 26959000 569000 (+) 02%
8 2007-08 27242000 588000 (+) 03%
9 2008-09 27512000 437000 (-) 26%
10 2009-10 28086000 646000 (+) 48%
Sources: Ministry of Labour& Employment, Director General of Employment and Training,
Economic Survey 2011-2012

TABLE 5 Reveal that the overall employment generation in retail sector in India with respect to
total employment generation in India. The total employment in retail sector in India increased
except in the year 2002-03, 2004-05 it decline with 2% each respectively. Further it increases in
the year 2005-06, 2006-07 and 2007-08 with overall 5%, 2% and 3% respectively.It has been
clearly shown by the table, here we also found the recession and financial crises effect in year
2008-09 with a decline of 26% in the total generation of employment opportunities in India. In
the succeeding year 2009-10 it is also clear from the above data that the employment in retail
sector grow with recognizable rate of 48 percent.

8. ANALYSIS AND INTERPRETATION

Hypothesis
Ho-The Null Hypothesis assumes that there is no significant relationship between
FDI inflow in retail sector and employment in Indian retail sector.
Ha-The Alternative Hypothesis accepts that there is significant relationship between
FDI inflow in retail sector and employment in Indian retail sector.

Model Summary
Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .410a .168 .049 .3250771
a. Predictors: (Constant), LNFDI

TABLE-6.2 Impact of FDI inflow onEmployment

Coefficientsa
Model Unstandardized Coefficients Standardized Coefficients T Sig.

B Std. Error Beta

1 (Constant) 3.178 1.091 2.914 .023
Ln (FDI) -.096 .081 -.410 -1.118 .274
a. Dependent Variable: Ln (EMP);
b. Source: Through SPSS, Based on Appendix-1

In order to test the hypothesis, the variables have been converted into natural log where FDI has
been taken as independent variable and natural log of employment (EMP) as a dependent
variable. Regression result shows that overall model is significant at 2% level of significance
with T value of 2.914 and on the other hand constant i.e. dependent variable is significant at 27%
level of significance with T value of -1.118. The value of R and adjusted R square are somewhat
high (0.410) which suggest that the 59% variation in this model is unexplained and remaining
variables are explained by FDI in this model. It is stated that there is a negative impact of FDI on
employment and some other unknown factors also plays significant role. In above table, the „B‟
value is 0.226% which indicates that the elasticity between FDI and GDP is 0.226%. It resulted
that 1 % increase in FDI leads to -0.096 % decrease in employment. If FDI increases 10 % then
it may increase the GDP growth rate by -0.96%. Therefore the null hypothesis is accepted and
alternative hypothesis is rejected as there is not significant impact of FDI on employment in
Indian retail sector.

9. LIMITATIONS OF THE STUDY

The study suffers from the following limitations:
The study is limited to India. Hence the result arrived from the study may or may not be applied
to other countries. This study covers only the limited cap of the FDI inflow which is time
bounding study. The study is based on time series data covering the period 2001-02 to 2009-10
and valid for only that period of time. Although India has open its hand for FDI from first
economic reform period. Therefore the result can‟t be generalised for FDI flow in other
challenging sectors. This study does not cover more than 90 percent employment in India. The
generalisation of the findings of the study is subject to limitations of FDI is not only responsible
for economic growth. The study also ignores other variables which play a vital role in the
economic growth and development.

10. SUGGESTIONS
The national commission must be established to study the problems of the retail sector and to
evolve policies that will enable it to cope with FDI as and when it comes. To provide greater
benefits to economy there should be stiff local sourcing requirements and investments in
backend infrastructure should be compulsory. Opening up of FDI should be done in a calibrated
manner. So that domestic retail both organised and unorganised get breathing space and are able
to upgrade their practices. FDI in Multi Brand Retail should not limited in big cities, to provide
rural youths opportunities to get fruitful employment in retail sector. The condition must be
aimed at encouraging the purchase of goods in the domestic market size and specify details like
constructions and standard storage etc. Entry of foreign players must be slow and with special
safeguard so that the effect of the labour displacement can be analysed and policy fine turned.
After completion of detail study on FDI in Multi Brand Retail and employment generation in
India. I have reach at the point of discussion that FDI should be allowed in various sectors in
India to resolve many problems related to retail sector. My suggestion is that FDI should be
allowed in a restrictive manner in India like china. FDI has to fulfill certain terms and conditions
for getting permission there to start business in retail sector. These term and conditions are as-
 If FDI allowed carrying on it business in Multi Brand Retail sector then 80% of the total
staff should be from India.
 Profit can‟t be transferred to trading companies‟ country for at least first five year. That
should be fully utilized in building up infrastructure, transportation, increasing
productivity and other facilities related to the retail sector.
 Monetary transactions should be done through Indian Banks only so as to increase the
credit facility to Indian farmers..
 First priority should be given to the Indian goods and products produced by Indian
incorporate for consumption purpose. Thus FDIs the best solution to bridge the current
account deficit, will help in curbing inflation, driving the development, inclusive and
equitable growth and create employment opportunities.

11. CONCLUSION
To summarise the debate on opening up FDI in Multi Brand Retail, there is sincere expectation
that government has opened the boundaries to overseas investment in the retail sector. At present
it is also not desirable to increase FDI ceiling to more than 51 percent for single brand retail. The
government has already increased 100 percent in single brand retail and 51 percent in multi
brand retail. The sector should opened gradual and phased manner. It will help us to ensure
check and control on business operations of global retails and look after the interest of the
domestic players. Foreign players should not allow trading in certain sensitive products like arms
and ammunition, defence equipment etc. and the list of excluded goods should be clearly stated
in the FDI policy. Once India get integrated into global economy with FDI in multi brand retail
sector it will be placed an advantage if it is made mandatory for foreign retailers to bring with
them technology and management know how. Human resources will be developed as these
investments provide education and training to the people employed by them there is a great
scope of employment generation. As these retail outlets will need manpower to run them. The
purpose of the study is discussing the need of opening up the route of FDI in multi brand retail
sector. But the main aim of this study is to analyse the role of FDI in employment generation in
Indian retail sector. Here we assumed that FDI as an independent variable whereas employment
as dependent variable. By using time series data from 2001-02 to 2009-10 and applying ordinary
least square (OLS) method we find that FDI will have negative impact on employment
generation in retail sector in India because the result shows that 10% increase in FDI inflow in
retail sector it will decrease the approximately 1% in jobs. Thus these results are not according to
our expectation. The results of the study can‟t be generalised to all developing countries because
all countries have their own local changing aspects. Furthermore the researcher can modify the
model in various contests as per their research requirements.

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APPENDICES
APPENDIX-1 FDI inflow in retail sector and employment in retail sector in India during the
period from 2001-02 to 2009-10
S. No. YEARS FDI EMP LNFDI LNEMP
1 2001-02 155100 4.93 11.9518 1.5953
2 2002-03 123500 5.42 11.724 1.6901
3 2003-04 198600 5.32 12.199 1.6715
4 2004-05 239900 5.59 12.388 1.721
5 2005-06 2104700 5.69 14.5597 1.7387
6 2006-07 1031300 5.88 13.8463 1.7716
7 2007-08 2851600 4.37 14.8634 1.4748
8 2008-09 2077600 6.46 14.5467 1.8656
9 2009-10 1553900 6.77 14.2563 1.9125
Source: Compiled by the Authors from Economic Survey of 2010-2011 & CSO and FDI fact sheet of
DIPP from September, 2005 to April, 2011. LNFDI = Natural Log of FDI Inflow of retail sector, and
LNEMP = Natural Log of Employment generation in retail sector.