International Journal of Management and Social Sciences Research (IJMSSR) ISSN: 2319-4421 Volume 2, No. 8, August 2013 i-Xplore International Research Journal Consortium www.irjcjournals.org 183 A Study on Critical Review of Foreign Direct Investment AND Indian Retail Sector Satbir Singh, Research Scholar, Department of Commerce, Kurukshetra University, Kurukshetra Mamta Sharma, Research Scholar, Department of Commerce, Kurukshetra University, Kurukshetra ABSTRACT Widespread liberalization and deregulation of financial markets, cross border mergers and acquisition, increased role of investors willing to invest abroad, rapid advances in modern technology and internet – have all resulted in remarkable increase of international capital flows in India. Foreign direct investment acts as a major medium in the development of a country through up-gradation of technical know how, managerial skills and financial resources. Rise in purchasing power, growing consumption and brand flare-up has led to transformation in retail sector. FDI in retail can enlarge market by reducing operation and transformation cost of business through implementation of advanced supply chain and benefit consumers and suppliers. As well as raised concerns about employment losses, increase in competition for domestic retailers resulting in closing of small domestic retailers from the market and distortion of urban culture development. The present paper focuses on the Indian retail sector in context of opportunities of expansion of FDI in Indian retail sector and the challenges come forward that retail sector faces. Keywords: Foreign Direct Investment (FDI), Organized Retail, Unorganized Retail, Single Brand Retail, Multi-brand Retail. INTRODUCTION Foreign direct investment is the process whereby residents of one country acquire the ownership of assets for the purpose of controlling the production, distribution and other activities of a firm in another country. According to IMF, foreign direct investment is the category of international investment that reflects the objective of obtaining a lasting interest by a resident entity in one economy in an enterprise resident in one economy. Foreign direct investment is growing rapidly in India. Foreign direct investment is an essential part of an international economic system and a major medium to development. FDI generate technological spillovers, support human capital formation, contributes to international trade integration, helps create a more competitive business environment and enhance enterprise development. All these factors contribute to higher economic growth and consequently aid in alleviating poverty. India has a relatively younger population in the age of 15-64 years with a median age of 26.2 years, lowest among the BRICS countries; moreover, 29.7% population is in between the age of group of 0-14 which is the highest among the BRICS. India is ninth largest in the world by nominal GDP and the fourth largest by purchasing power parity (PPP). (Source: International Monitory Fund). India‟s per capita income has tripled from 423 US$ in 2003-03 to 1219 US$ in 2010-11. Dependency on agriculture has reduced and the share of services and industry sector has increased. FLOWS OF FDI IN INDIA Flows of FDI comprise capital provided by a foreign direct investor to an FDI enterprise, or vice versa by a foreign direct investor. FDI has three components, viz., equity capital, reinvested earnings, and intra company loans:-  Equity capital is the foreign director investor‟s purchase of share of an enterprise in a country other than its own.  Reinvested earning compromise the direct investor‟s share of earning not distributed as dividends by affiliates, or earning not remitted to the direct investor. Such retained profits by affiliates are reinvested.  Intra company loans or intra company debts transactions refer to short or long term borrowing and lending of funds between direct investor and affiliate enterprise. OBJECTIVES OF THE STUDY The objectives of this study are:  To have an overview of Indian Retail Sector.  To explain the legal framework of FDI in Indian retail sector.  To show the current scenario of FDI in Indian retail sector.  To discuss the challenges and opportunities of FDI in both single and multi brand retailing. RESEARCH METHODOLOGY The present study is descriptive in nature. The data used for the study is secondary in nature and has been collected