LEGAL IMPLICATIONS OF FOREIGN DIRECT IN INDIAN RETAIL SECTOR
AUTHOR – NISHENDRA KUMAR PANDEY* & DR AXITA SHRIVASTAVA**
* STUDENT OF AMITY LAW SCHOOL, LUCKNOW ** PROFESSOR AT AMITY LAW SCHOOL, LUCKNOW
BEST CITATION – NISHENDRA KUMAR PANDEY, LEGAL IMPLICATIONS OF FOREIGN DIRECT IN INDIAN RETAIL SECTOR, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 5 (4) OF 2025, PG. 68-74, APIS – 3920 – 0001 & ISSN – 2583-2344.
Abstract
Foreign Direct Investment (FDI) in India’s retail sector has been a topic of debate due to its significant impact on the economy, local businesses, and market competition. The regulatory framework governing FDI in retail is primarily guided by the Foreign Exchange Management Act (FEMA), 1999, along with policies set by the Department for Promotion of Industry and Internal Trade (DPIIT). The Indian government has implemented structured guidelines to regulate foreign investments based on the category of retail operations, which include Single Brand Retail Trading (SBRT), Multi-Brand Retail Trading (MBRT), and E-commerce.
For single-brand retail, 100% FDI is permitted, but investments beyond 49% require government approval and adherence to local sourcing conditions. Multi-brand retail, however, allows up to 51% FDI through government approval, with additional requirements such as sourcing a minimum percentage of products from domestic suppliers. In the e-commerce sector, 100% FDI is permitted under the marketplace model, but direct foreign ownership in inventory-based e-commerce is restricted to protect small retailers and maintain fair competition.
Foreign investors entering the Indian retail sector must comply with various legal provisions, including the Companies Act, 2013, Consumer Protection Act, 2019, and Goods and Services Tax (GST) laws. Employment laws related to worker rights, wages, and workplace conditions also play a critical role in ensuring legal compliance. Additionally, intellectual property protection is crucial for foreign brands, requiring them to safeguard trademarks and patents under Indian IPR laws.
To prevent market dominance by global retail giants, the Competition Commission of India (CCI) enforces measures against monopolistic practices. Furthermore, data protection laws regulate how foreign companies handle consumer data, ensuring privacy and security. The evolving FDI policies also consider socio-economic concerns, as foreign investments often face resistance from small traders who fear business losses due to the expansion of large international retail chains.
Despite these regulatory complexities, India remains a promising market for global retailers due to its vast consumer base and rapid economic growth. However, navigating the legal framework is essential for foreign investors to establish a successful presence while adhering to India’s compliance requirements. This paper explores the key legal aspects, challenges, and future prospects of FDI in the Indian retail sector.