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The retail industry is mainly divided into parts

i) Organized Retailing:
Organized retailing refers to trading activities undertaken by licensed retailers, that is,
those who are registered for sales tax, income tax, etc.
ii) Unorganized Retailing
Unorganized retailing, on the other hand, refers to the traditional formats of low-cost
retailing. For example, the local kirana shops, owner manned general stores, paan/beedi
shops, convenience stores, hand cart and pavement vendors, etc. The Indian retail
sector is highly fragmented with 97 per cent of its business being run by the
unorganized retailers.
India's $250 billion retail business is the eighth largest in the world and has the
potential to grow 7% by 2011. So, India has been considered the second most lucrative
destinations of the world for retail business.
The government of India is thinking to allow FDI in retail that means FDI in retailing is
possible up to 51%. Now, this will have some positive as well as negative effect on the
Indian economy. These effects are discussed below:

Positive effect of FDI in retail sector in India


Growth in Economy:
Due to coming of foreign companies new infrastructure will be build, thus real estate
sector will grow consequently banking sector, as money need to be required to build
infrastructure would be provided by banks.
Benefits to Customers:
The larger supermarkets, which tend to become regional and national chains, can
negotiate prices more aggressively with manufacturers of consumer goods and pass on
the benefit to consumers. Customers will have more option available in buying whatever
he wants to buy as more brands will be available at his/her disposal. General Middle
class customers will also benefit due to removal of this middle men in buying and selling
of products.
Increase Employment Opportunity:
Expansion in the retail sector can also generate significant employment potential,
especially among rural and semi-urban youth. Employment will move from unorganized
sector to organized sector. Employment opportunities will be generated in form of sales
man, counter boys etc.
Improving Distribution and Warehousing Technologies:
Technical knowhow from foreign firms like warehousing technologies and distribution
systems will lend itself to improving the supply chain in India, especially for agricultural
produce. An added benefit of improved distribution and warehousing channels may also
come from enhanced exports.

Benefits to Farmers:
In most cases, in the retailing business, the intermediaries have dominated the interface
between the manufacturers or producers and the consumers. Hence the farmers and
manufacturers lose their actual share of profit margin as the lions share is eaten up by
the middle men. This issue can be resolved by FDI, as farmers might get contract
farming where they will supply to a retailer based upon demand and will get good cash
for that, they need not to search for buyers.
Negative effect of FDI in retail sector in India
Affects unorganized players (kirana shops):
Now, opening FDI in retail sector would affect the sales in the unorganized sector. The
overall size of retail market in India at present is estimated at Rs. 5,88,000 crore of
which 97% is unorganized market and organized market is merely 3%. Moreover,
unorganized market provides employment opportunities to 3.95 million people which
are next to agriculture. On other side, reducing the number of intermediaries, organized
retailing will lead to some job displacement.
Kind of Employment:
It is said that FDI would provide employment opportunities like drivers, watchmen etc.
But in India semi-illiterate people are quiet larger in number and it cannot provide
employment to semi-illiterate people.