MADRAS UNIVERSITY JOURNAL OF BUSINESS AND FINANCE

Refereed, Peer-reviewed and Bi-annual Journal from the Department of Commerce

Vol. 1 No. 2
July 2013
Pp. 34 - 45

ISSN: 2320 - 5857

FDI IN MULTI-BRAND RETAILING A SURVEY OF INDIAN CONSUMERS

Dr. Vanita Tripathi *

Mr. Varun Bhandari**

Ms. Ritika Seth***

Abstract
FDI in retail industry has been one of the most sought after reforms in India. On 14th September 2012
Government of India opened its doors for FDI in multi-brand retail. This has triggered a debate on the
associated threats and opportunities. This paper examines consumers attitudes and perceptions towards FDI
in multi-brand retailing in India. We have used a structured questionnaire having 32 statements on five point
scale basis and conducted a survey of 160 respondents across a wider section of consumers. Responses have
been analyzed using Factor analysis, Likert scale, Chi square test and Structural Equation Modelling (SEM).
Our data is reliable with a Cronbachs Alpha of 0.865. A majority of the respondents believe that FDI in multibrand retailing in India will bring numerous benefits for consumers, farmers and help in generating
employment opportunities. However consumers are also apprehensive about whether the overall economy
would be benefitted after the coming of FDI in multi-brand retail in India.
Loss of business of small vendors is one of the most cited threats by the sample respondents.
Keywords: Foreign Direct Investment (FDI), Multi-Brand Retailing, Factor analysis, Foreign Retail Investors,
Reliability test, Likert scale, Structural Equation Modeling.

Introduction
Over the last two decades, India has emerged as one of
the favorite destinations for foreign direct investment
thanks to conducive economic environment and
government policies. The sectors like
telecommunication, IT, hospitality, education,
pharmaceutical, Real estate, Jewellery and
construction have attracted most of the MNCs for FDI
in India.
Retailing industry is the direct interface between
producers and final consumers of goods and services.
It contributes about 15 percent of GDP in India. The

Indian retail market is estimated to be US$ 450 billion

and is one of the top five retail markets in the world by
economic value. About 40 million Indians are
employed in retail and logistics industry making it
one of the fastest growing Industries in India. As per
the recent revelations by the popular International
Management Consultancy AT Kearney, India has been
considered the second most lucrative destinations of
the world for retail business.
In India, retailing industry is segregated into two
classes- organized retailing (licensed and registered
retailers); and unorganized retailing (primarily
owner manned small shops). Organized retailing, in

* Faculty, Department of Commerce, Delhi School of Economics, University of Delhi, India,

Email: vanitatripathi1@yahoo.co.in, Tel: +91- 9213269951
* * Ph.D. Research Scholar, Department of Commerce, Delhi School of Economics, University of Delhi, India,
E mail: varunbhandari88@gmail.com, Tel: +91-9999157494
* * * Assistant Professor, Motilal Nehru College, University of Delhi, India, E mail: ritika.pisces@yahoo.co.in Tel: +91-9910798482

34

FDI IN MULTI-BRAND RETAILING A SURVEY OF INDIAN CONSUMERS

India, is dominated by large corporate retailers like
Reliance, Spencer, Future group etc.

Opportunities of FDI in Retail Sector in India

The share of organized retailing in Indian retail

industry is very low (just 4% of total) as compared to
other developed countries like USA (80%), Thailand
(40%), or even in China (20%). Hence there is a huge
market potential that is untapped. Although the last
few years have witnessed the entry of a number of
organized retailers opening large stores in metros
and other important cities, there is a long untraveled
road.

Some of the opportunities associated with FDI in

multi brand retail are- increased standard of living,
employment opportunities, improved logistics and
infrastructure, benefits to consumers and farmers,
technological up gradation, global funding, and
increased tax revenue to government and so on.
However the often cited threats include- shut down of
the business of small players thereby creating large
scale unemployment, exploitation of farmers,
dumping of products, customer confusion etc.

Besides being dominated by unorganized sector the

peculiar feature of Indian retail industry include large
number of intermediaries, limited cold chain and
related infrastructure, huge pilferage and small scale
of operation. All these restrict the growth of the sector
in the wake of burgeoning middle class in India.
Reforms in FDI in Retail sector of India
Recognizing the benefits of foreign capital in filling up
savings investment gap in India, the opened the
doors of Indian economy for FDI in many sectors in
1991. In 1997 it allowed foreign direct investment
(FDI) in cash and carry wholesale with prior approval.
The approval requirement was relaxed, and
automatic permission was granted in the year 2006
with maximum of 51% foreign ownership. Bharati
enterprises and Walmart stores entered into a joint
venture in August 2007 and started cash and carry
stores with the name Best Price Modern Wholesale
in the year 2009. In January 2012, India approved FDI
reforms for single-brand retailing with 100% foreign
ownership, with the condition that the retailer will
source 30 percent of its goods from India. On 14
September 2012, FDI was allowed in multi brand
retail up to 51%, subject to approvals by individual
states. This decision has been welcomed by one
section of society (economists and corporate) while
criticized by others (particularly small vendors) Such
announcement of FDI in multi-brand retail in India
has not only triggered a series of debates on both
positive and negative notes but has become a political
issue.

This paper examines consumers attitude and

perceptions towards FDI in multi brand retailing in
India. The rest of the paper is arranged as follows in
Section 2 we present a brief review of literature. In
Section 3 we provide research objectives and pose
various research questions which the study seeks to
answer. Section 4 describes the data sources and
research methodology used. Section 5 discusses the
results obtained through the survey and Section 5
provides the conclusion and implications of research
findings.
2. Literature Review
Chauhan (2006) explained that as per AT Kearneys
Global Retail Development Index 2006 India is on top
of emerging retail markets with highest potential
with Rank 1 and GFDI score of 100. India is more
attractive than ever to global retailers. She pointed
out that there are some hurdles that retailing industry
in India needs to cross: automatic approval is not
allowed for FDI in retailing, lack of trained work force,
taxation favouring small retail businesses, low skill
level for retailing management, etc. The main fear is
that the small retailers/ kirana shopkeepers will be
out of business, leading to loss of millions of jobs and
second concern is skewed urban development.
Joseph et al. (2006) also examined the pros and cons
of permitting FDI in the retail sector of India on
various sections of the economy, particularly small
businesses. Government of India has permitted FDI in
35

Dr. Vanita Tripathi , Mr. Varun Bhandari and Ms. Ritika Seth
several sectors but retail sector remained to be an
issue. The decision of the government permitting FDI
in retail has been strongly opposed by the opposition
parties due to its obvious negative effects on small
retailers. However, the MNCs have been permitted to
set a foot in the booming retail business in India and
the consequences will be followed as viewed through
various perspectives.
Durand (2007) analysed the impact of foreign direct
investment on the retailing sectors of developing
economies by specifically focussing on the Mexican
retailing sectors. It was observed that on one hand the
big retailers are benefitted and on the other hand
small retailers are in difficulty. Similarly, other
positive impacts were also counterbalanced by the
negative impacts. Thus, the retailing industry as a
whole remains unaffected in the developing
economies.
Parekh (2010) critically examined the necessity of
conditions put forward by many to allow FDI in Indian
retail market. He argued that conditions such as
mandatory rural employment creation and
mandatory investment in back-end infrastructure,
etc. will only be a burden and lower down the financial
benefits which can be achieved through large scale
investment. Thus, such restrictions should be limited
only to an extent so that investment in retail FDI
remains commercially attractive to start with.
Singh (2010) examined the right way of
implementing FDI policy in context of Indian retail
market. He found that the Indian retail market is
highly fragmented and domestic retailers are coming
together for consolidation. Thus, he said that FDI
regime should be brought in Indian market in a
phased manner over 5 to 10 years time frame so as to
give the domestic retailers enough time to adjust
changes.
Bisaria (2012) analysed the consumers responses on
the government policy on multi brand retail by using
Random sampling. He found a majority of prople to be
in favor of a positive impact of the policy on
36

consumers and farmers and a negative impact on unorganised retail sector and other Indian industries.
Thus, they were supporting the governments policy
of FDI in multi brand retail.
Hariharan and Rajeswari (2012) observed that India
enjoys a strong position as a global investment hub
with the country registering high economic growth
figures even during the peak of financial disaster. As a
result, overseas investors showed their confidence in
the Indian economy which eventually pushed foreign
direct investments (FDI) in India. They claimed that
FDI in telecom, power, computer software, finance or
in single brand retail have not affected the common
man. They have helped even a man on the street.
When FDI in other sectors have not harmed the
common man, it is not likely to harm if permitted in
multi brand retail also.
Jain and Sukhlecha (2012) established the role of the
retail sector to attract FDI in multi brand retailing
using descriptive analysis. They analysed the positive
and negative impacts of the reforms to be undertaken
and also assessed the market situations for the same
changes in other countries. They concluded that the
positive impacts overshadowed the negative ones.
According to them, FDI in retail sector can lower
down the prices, improve the quality standards
whereas the unorganised sector remains unaffected.
It was also observed that such policy action could lead
to improvements in employment and GDP levels.
Popli and Singh (2012) also tried to analyse the
impact of FDI retail policy on Indian retail industry.
According to them, India is at the first position in
providing growth opportunity for investment in retail
sector. They found out that the pros are overpowering
the cons of FDI in retail sector. Thus they also favoured
the foreign players entry in the Indian markets. They
argued that the local retailers will not be affected by
foreign big giants as their geographical boundaries
are different.
Rajput et al. (2012) tried to study the impact of
current retail FDI policy of India on the consumer

FDI IN MULTI-BRAND RETAILING A SURVEY OF INDIAN CONSUMERS

behaviour and economy of India. They have used
SWOT analysis and found that the current policy can
positively affect retail industry and economy by
attracting more foreign investment. Farmers can get
better prices for their produce and consumers will be
paying lesser prices because of elimination of
intermediaries.
Rohilla and Bansal (2012) analysed the consequences
of allowing FDI in the retail sector in Indian economy
through studying the experiences of China, Russia,
Thailand etc. In all the cases, entry of foreign retailers
has proved to be beneficial for the economies as a
whole. But due to some specific considerations of the
Indian economy, they favour the entry of FDI in retail
in Indian economy but in a phased manner and after
resolving the issues related to it.
3. Research Objectives
The primary objective of this research paper is to
analyze individuals attitude and perceptions towards
the opening up of FDI in Multi brand retail in India
with the help of a structured questionnaire. This
primary objective gives rise to the following research
issues:
1.

To identify the critical factors framing

individuals perception toward FDI in multi
brand retailing.

2.

To examine consumers opinion towards

various threats and opportunities associated
with FDI in multi brand retailing.

3.

To analyze the perception of individuals

regarding 4 primary Ps of marketing (product,
price, place and promotion) in the wake of FDI
in multi brand retailing.

4. Data & Research Methodology

Primary data has been used for accomplishing the
objectives of our study. A structured questionnaire
has been prepared containing 32 statements relating
to FDI in Multi brand retail. Convenience sampling has
been used to collect the responses. The questionnaire

has been circulated among a wide number of people

from different age groups (18-23, 24-40 and above
40), gender, occupation (business, service, and
student), family background (nuclear and joint),
educational background (graduate, post graduate,
and doctoral), marital status and income levels (less
than 20000, 20000-50000, and above 50000). We
have obtained 160 valid responses. The following
techniques are used to analyze the responses:
Factor analysis has been used to analyze the
responses of individuals towards FDI in multi brand
retailing. It is a statistical method used to describe
variability among observed, correlated variables in
terms of a potentially lower number of unobserved
variables called factors. It attempts to identify the
underlying structure in a data set by defining a small
number of factors that capture the variation in the
collected data. It can be used to reduce a large number
of variables to a smaller number of factors. It can help
to identify the underlying causal structure in the data
set. It can also help in the further analysis of the data
by reducing the number of variables and simplified
model selection.
Using Likert scale we have also calculated mean
scores of different factors that we have extracted from
Rotated Component Matrix in factor analysis. These
mean scores show which of the factors are more
critical in framing consumers perceptions and that
whether the consumers agree, disagree, or are
indifferent with that specific factor and statements
covered in that factor.
We have applied Chi-Square test to check whether the
demographic factors such as Age, Gender, Occupation
and Income level affect the peoples perception
towards the various factors obtained through Factor
analysis. Chi-Square test enables us to test whether
more than two populations proportions can be
considered equal. Chi-Square as a test of
independence is used when we want to determine
whether the two variables under consideration are
dependent or independent of each other.
Finally, we have also used Structural Equation
37

Dr. Vanita Tripathi , Mr. Varun Bhandari and Ms. Ritika Seth
Modeling (SEM) to determine whether a certain
model is valid or not rather than to find a suitable
model. SEM is a statistical technique for testing and
estimating causal relation using a combination of
statistical data and qualitative causal assumptions.
SEM allows both confirmative and exploratory
modeling, meaning they are suited to both theory
testing and theory development. However, it is largely
confirmatory rather than exploratory technique. One
of the major strengths of SEM is the ability to
construct latent variables, the variables which cannot
be measured directly but are estimated in the model
using several measured variables, each of which is
predicted to tap into the latent variables.
5. Empirical results
Factor Analysis Results
First of all, the internal reliability of all the statements
was tested and for this we have calculated Cronbachs
Alpha. It is commonly used as a measure of the
internal consistency or reliability of a psychometric
test score for a sample of examinees. Cronbach's alpha
will generally increase as the inter-correlations
among test items increase, and is thus known as an
internal consistency estimate of reliability of test
scores. Because inter-correlations among test items
are maximized when all items measure the same
construct, Cronbach's alpha is widely believed to
indirectly indicate the degree to which a set of items
measures a single uni-dimensional latent construct. It
has come out to be as 0.865 which shows the internal
reliability of the statements and it shows good
internal consistency.

32 statements relating to FDI in multi brand retailing

were analyzed using principal component analysis
with Varimax (orthogonal) rotation with factor
loading based on Eigen values greater than one. The
analysis yielded eight factors explaining a total of
61.527% of the variance for the entire set of variables.
On closer perusal of the factor loadings we could not
justify the face validity. So instead of conducting
principal component analysis on the basis of Eigen
value, we did it on fixed number of factors. By
extracting on the basis of fixed number of factors five
and cut off point kept at 0.5, we could justify the logic
and thus it confirmed the face validity. There is only
one statement loaded on the last factor, so we have not
considered it for our driver identification. The KaiserMeyer- Olkin Statistic for measuring sampling
adequacy came out to be 0.852. The Kaiser-MeyerOlkin measure of sampling adequacy is an index for
comparing the magnitudes of the observed
correlation coefficients to the magnitudes of partial
correlation coefficients. Large values for the KMO
measure indicate that a factor analysis of the
variables is a good idea. Another indicator of the
strength of the relationship among variables is
Bartletts test of sphericity. It tests whether the
correlation matrix is an identity matrix, which would
indicate that the factor model is inappropriate.
Bartletts test of sphericity was significant in our data
(c2 = 1965.131, df = 496, p <0 .01) showing the
appropriateness of factor analysis. Total variance
explained by all these four factors came out to be
51.049%. These four factors with their meanings and
their corresponding factor loadings are reported in
Table 1 to 4.

Table 1: Factor 1 -Improved Product Quality along with Innovation and Novelty in Retail
S.No.

STATEMENTS

FACTOR
LOADING

1.

Capital investment would substantially increase.

0.660

2.

It will push Indian manufacturers to improve their quality.

0.649

3.

Distribution system would improve.

0.627

4.

Competitive environment will be created which will put pressure on domestic firms
to improve their quality to survive.

0.609

38

FDI IN MULTI-BRAND RETAILING A SURVEY OF INDIAN CONSUMERS

5.

The role of management colleges will increase for giving retail education to the youth.

0.608

6.

It will make way for inflow of knowledge from international experts.

0.553

7.

Persistence of political inconclusiveness on this issue of FDI in multi-brand retailing.

0.529

8.

Indian retailers will have a partnership opportunity.

0.502

According to the proponents of FDI in multi brand

retailing, the product quality will be significantly
improved with the incoming of FDI in multi-brand
retail as it will lead to the creation of a competitive
environment which will put pressure on the domestic
firms to improve their quality in order to survive in
the market place. Further, Indian retailers will have a
partnership opportunity which will help to expand
their business, penetrate more deeply in the market

and reap economies of scale. They will also be able to

get the benefit of international knowledge and
expertise. Since, everything has to be perfect and
professional under organized retailing, the role of
management colleges is also likely to increase to
provide quality education and stimulate young minds
towards the retailing sector. This factor explained
total variation of 25.831%.

Table 2: Factor 2 -Consumer Convenience in Accessing the Products

S.No.

STATEMENTS

FACTOR
LOADING

1.

Products would be widely available.

0.749

2.

Consumers will get all the products under one roof.

0.733

3.

Access to international brands would be easier.

0.679

4.

It will provide more choices for consumers.

0.663

5.

Improvement in the shopping experience of consumers.

0.547

6.

Consumer convenience would increase.

0.512

According to the second factor, consumers are

expected to be the biggest beneficiary of FDI in multibrand retail. They will be able to get a wide variety of
good quality products of different brands (national
and international) under one roof at competitive
prices. So, there will be significant increase in

consumer convenience and their shopping

experience would also be appreciably improved as
these international stores will be better than the
national stores of India. This factor explained a total
variation of 9.466%.

Table 3: Factor 3 -Threat to Domestic Economy

S.No.

STATEMENTS

FACTOR
LOADING

1.

FDI in multi-brand retailing will reduce profit margin for domestic companies.

0.732

2.

Money will go out of India.

0.593

3.

Bargaining power of consumers would be negligible.

0.557

4.

Loss of cultural or ethical values due to more foreign influence.

0.545

39

Dr. Vanita Tripathi , Mr. Varun Bhandari and Ms. Ritika Seth
The critics of FDI in multi-brand retail are of the view
that such a reform will do more bad to the overall
economy rather good. First and foremost, it will drain
out the countrys share of revenue to foreign
countries which will negatively impact Indias
economic prospects. Further, small domestic retailers
would not be able to tackle the international

competition because of resources constraints ever as

lack of updated technology and presence of scarce
capital. So, there is going to be massive
unemployment for millions of small scale retailers.
Also, foreign culture is likely to takeover our
traditional cultural and ethical values. This factor
explained total variation of 5.812%.

Table 4: Factor 4- Nations Economic Well-being

S.No.

STATEMENTS

FACTOR
LOADING

1.

Consumers will get the product at low prices.

0.649

2.

It will help in curbing inflation.

0.592

3.

It will create more employment opportunities in the Indian market.

0.539

4.

Elimination of Middleman.

0.539

5.

It will stimulate economic growth of the country.

0.504

We have named the fourth factor as Nations

Economic Well-being. FDI in multi-brand retail is
likely to create more employment opportunities
which will increase the purchasing power and
standard of living of people. This will also lead to
improve infrastructure and logistics which will
prevent the large amount of farms produce from
getting spoiled due to lack of proper cold storage
facility. Availability of products at reduced prices will
also help in curbing the double digit inflation
prevailing in India. Further, there will be inflow of
funds from foreign countries to build Indias
infrastructure, hospitals, housing and schools for its

growing population. The foreign firms will also be

taxed in India which will increase in the governments
tax revenue and thus, helps in reducing the budget
deficit. This factor explained a total variation of
5.187%.
As per the rotated component matrix that we have got
from our factor analysis, one single statement (more
sales promotion techniques would be used for
increasing the sale of products) loaded on a one
specific factor but we are not considering it for our
driver identification. This specific factor explained a
total variation of 4.774%.

Likert Scale Results

Table 5: Mean Scores of Different Factors
S.No.

FACTOR

MEAN
SCORES

1.

Improved Product Quality along with Innovation and Novelty in Retail.

3.818

2.

Consumer Convenience in Accessing the Products.

4.079

3.

Threat to Domestic Economy.

3.608

4.

Nations Economic Well-being.

3.443

40

FDI IN MULTI-BRAND RETAILING A SURVEY OF INDIAN CONSUMERS

As per the mean scores revealed by Table 5, factor 1
has a mean score of 3.818, which means that most of
the respondents agree with the fact that FDI in multibrand retail will lead to wider availability of
innovative and improved quality products at
affordable prices. The mean score of factor 2 is 4.079,
which signifies the assent of most of the people
towards increased consumer convenience in
accessing the products. Regarding factor 1 and 2,
there is consensus among the respondents that FDI in
multi-brand retailing will improve the product
quality along with innovation and novelty and
consumer convenience in accessing the products.
Further, since the mean score of factor 3 is 3.608, that
means respondents agree with the fact that it will lead
to some threats and are skeptical about whether FDI
would really bring only benefits without any harm to
the economy. Regarding last factor nations economic

S.No.

well being, we did not get any convincing opinion

from the respondents, as the result indicates their
neutral response towards this factor because it has a
mean score of 3.443. It also signifies that our
respondents dont really have any firm opinion about
the link between FDI in multi brand retailing and
Nations economic well being. They are not very sure
of the benefits which the government claims that FDI
is going to bring in India.
Chi-Square Test Results
We have applied Chi-Square test to check whether the
demographic factors such as Age, Gender, Occupation
and Income level affect the peoples perception
towards the various factors obtained through Factor
analysis. Accordingly, we have formulated the
following sixteen Null Hypotheses given in Table 6
along with their results.

NULL HYPOTHESES

PROB. VALUE

REMARKS

1.

There is no significant difference among the different Age groups

based on Factor 1.

0.085**

REJECT

2.

There is no significant difference between Males and Females

based on Factor 1.

0.019*

REJECT

3.

There is no significant difference among the different occupations

groups based on Factor 1.

0.019*

REJECT

4.

There is no significant difference between different income groups

based on Factor 1.

0.700

ACCEPT

5.

There is no significant difference among the different Age groups

based on Factor 2.

0.381

ACCEPT

6.

There is no significant difference between Males and Females

based on Factor 2.

0.432

ACCEPT

7.

There is no significant difference among the different occupations

groups based on Factor 2.

0.416

ACCEPT

8.

There is no significant difference between different income groups

based on Factor 2.

0.502

ACCEPT

9.

There is no significant difference among the different Age groups

based on Factor 3.

0.803

ACCEPT

10.

There is no significant difference between Males and Females

based on Factor 3.

0.168

ACCEPT

41

Dr. Vanita Tripathi , Mr. Varun Bhandari and Ms. Ritika Seth
11.

There is no significant difference among the different occupations

groups based on Factor 3.

0.296

ACCEPT

12.

There is no significant difference between different income groups

based on Factor 3.

0.424

ACCEPT

13.

There is no significant difference among the different Age groups

based on Factor 4.

0.067**

REJECT

14.

There is no significant difference between Males and Females

based on Factor 4.

0.052**

REJECT

15.

There is no significant difference among the different occupations

groups based on Factor 4.

0.002*

REJECT

16.

There is no significant difference between different income groups

based on Factor 4.

0.138

ACCEPT

*Significant at 5% **Significant at 10%

As per the results of chi-square test we can say that

<

<

Age: There is no significant difference among

different age groups who prefers factor 2 and 3
but there is a significant difference on the basis
of factor 1 and 4 and both the factors are being
largely favoured by 18-23 years of age group.
Gender: There is no significant difference
among male and female who prefers factor 2
and 3 but there is a significant difference on the
basis of factor 1 and it is being largely favoured
by female respondents and factor 4 is largely
preferred by male respondents.

<

Occupation: There is no significant difference

among different occupations that prefers factor
2 and 3 but there is a significant difference on
the basis of factor 1 and 4 and both are largely
favoured by students.

<

Income class: There is no significant difference

among different income groups who prefers all
the four factors and all the four factors are
being equally preferred by lower, middle, and
upper class people.

Structural Equation Modeling (SEM) Results

The results of SEM are depicted in Figures 1 and 2.

Figure 1: SEM Results on the basis of four factors

42

FDI IN MULTI-BRAND RETAILING A SURVEY OF INDIAN CONSUMERS

Figure 2: SEM Results on the basis of three factors

For conducting SEM we have taken four factors

generated through factor analysis (Improved product
quality, consumer convenience, threat to domestic
economy, nations economic well being) as
explanatory variables and the dependent variable is
taken to be the Receptiveness of people towards FDI
in Multi-Brand Retail.
If we look at the first figure, we can see that the overall
explanatory power of the model is 0.74 or 74%.
However, one of the statements under the third factor
F33 shows a standardized beta of 0.32 and as a result
it does not fulfill the criteria of convergent validity. For
further analysis, we have removed this third factor i.e.
threat to domestic economy because removal of that
statement left us with just two statements which did
not meet the criteria of SEM.
When we look at the second figure, the overall
explanatory power of the model is again 0.74. For

model fit we are reporting here several variables like

CMIN/DF, GFI, AGFI, CFI, and RMSEA.
CMIN/DF is the minimum discrepancy divided by its
degrees of freedom. Several writers have suggested
the use of this ratio as a measure of fit. As per Kline
2004, it has been suggested that a model
demonstrates reasonable fit if the statistic adjusted
by its degrees of freedom does not exceed 3.0 (2 / df
3) and it came out to be 1.424. Thus, our model has a
reasonable fit as per Kline 2004.
GFI (Goodness of Fit Index) should be less than or
equal to one and it came out to be as 0.907 (Joreskog
and Sorbom, 1984) which indicates a good model fit.
AGFI (Adjusted Goodness of Fit Index) came out to be
0.872 which also indicates a perfect fit. CFI
(Comparative Fit Index) came out to be 0.958, which
is close to one and thus, it also indicates a very good fit
(Bentler, 1990). RMSEA (Root Mean Square Error of
43

Dr. Vanita Tripathi , Mr. Varun Bhandari and Ms. Ritika Seth
Approximation) of about 0.05 indicates a close fit of
the model and it is coming out as 0.052 (Cudeck and
Browne, 1983 and Steiger, 2000).
Thus on the basis of SEM results we can conclude that
our model with three factors, namely: Improved
product quality, Consumer convenience and Nations
economic well-being explains a significant 74% of
receptiveness of consumers towards FDI in multibrand retailing in India.
6. Conclusion and Policy Implications
The recent major reform taken by the Government of
India to allow FDI in Multi brand retail up to 51% has
created a lot of upheaval in the entire country.
Government has tried to justify the same by bringing a
number of arguments in favour of the same but at the
same time, there are critics who find a lot of threats
attached with such reform measure. So, we have made
an attempt in this research paper to collect the
responses of consumers who are going to be affected
the most by such a development. A structured
questionnaire has been developed containing 32
statements covering various pros and cons of the
incoming of FDI in multi brand retail in India. The
respondents were asked to mark their responses on a
scale of one to five i.e. one for strongly disagree, two
for disagree, three for indifferent, four for agree, and
five for strongly agree. Factor analysis has been used
to test the reliability and face validity of the
questionnaire and to arrive at meaningful conclusion.
We found that our data is reliable with a Cronbachs
Alpha of 0.865. Further, through factor analysis, we
have categorized our statements into four broad
factors namely: Improved product quality along with
innovation and novelty in retail; Consumer
convenience in accessing products; Threat to
domestic economy and Nations economic well being.

innovative and improved quality products at

affordable prices. The mean score of factor 2 is 4.079,
which signifies the assent of most of the people
towards increased consumer convenience in
accessing the products. Further, since the mean score
of factor 3 is 3.608, that means people are also
skeptical about whether FDI would really bring only
benefits without any harm to the economy. The last
factor has a mean score of 3.443 which signifies that
our respondents dont really have any firm opinion
about the link between FDI in multi brand retailing
and Nations economic well being. They are not very
sure of the benefits which the government claims that
FDI is going to bring in India.
The results of Chi-Square test indicate that for factor 2
and 3, there is no significant difference among
respondents from different age groups, gender,
occupation and income levels. However, the
respondents opinion varies for factor 1 and 4 based
on different demographic classifications. Further, the
SEM results indicate the overall explanatory power of
the model based on three factors is 0.74 or 74%.
These research findings have important implications
for policy makers as well as foreign retailers. Policy
makers need to understand the enthusiasm as well as
apprehensions framing individuals perceptions
towards FDI in multi brand retailing in India. Timely
resolution of the apprehensions of the individuals
will help in generating wider acceptance of this policy
reform.
Foreign investors must acknowledge the fact that
individuals in India expect improved product quality
along with innovations and novelty as well as easy
accessibility. They need to meet these expectations of
consumers in India in order to perform well.
References

Using Likert scale we have also calculated the mean

score of all the four factors separately. We found that
factor 1 has a mean score of 3.818, which means that
most the respondents agree with the fact that FDI in
multi-brand retail will lead to wider availability of
44

Bentler, P. M. (1990). Comparative fit indexes in

structural models. Psychological Bulletin, 107(2),
238246.
Bisaria, G. (2012). Forign Direct Investment in Retail

FDI IN MULTI-BRAND RETAILING A SURVEY OF INDIAN CONSUMERS

in India. International Journal of Engineering and
Management Research , 2 (1), 31-36.
Chauhan, S. (2006). Foreign Direct Investment in
Retail: Bane or Boon. Working paper series. Available
at http://papers.ssrn.com/sol3/results.cfm?
Request Timeout=50000000 retrieved on October 8,
2013.
Cudeck, R., & Browne, M. W. (1983). Cross-validation
of covariance structures. Multivariate Behavioral
Research, 18, 147-167.

Lacobucci, D. (2010). Structural equation modeling:

Fit indices, Sample size, and advanced topics. Journal
of Consumer Psychology, 20, 90 98.
Levin, R., & Rubin, D. (2004). Statistics for
Management, Prentice Hall India, Seventh Edition.
Parekh, P. (July 2010). Foreign direct investment in
multi-brand retail: Time to expand the horizons.
Mumbai: DNA.

Durand, C. (2007). Externalities from Foreign Direct

Investment in the Mexican Retailing Sector.
Cambridge Journal of Economics, 31, 393-411.

Popli, G., & Kumari, S. (2012). Impact of Multi Brand

Foreign Direct Investment in Retail Sector in India.
Available at http://papers.ssrn.com/sol3/
results.cfm? Request Timeout = 50000000 retrieved
on October 8, 2013.

Hariharan, N., & Rajeswari, G. (2012). FDI in Retailing.

ZENITH International Journal of Business Economics
and Management Research, 2(12).

Rajput, N., Kesharwani, S., & Khanna, A. (2012). FDI

and Indian Retail Sector: An Analysis. Journal of
Business Administeration Research , 1 (1), 53-64.

Indian Express (2006) R-day reforms: Single brand

retail opened to foreign funds
.
Jain, M., & Sukhlecha, M. L. (2012). FDI In Multi-Brand
Retail: Is It The Need of The Hour?? ZENITH
International Journal of Multidisciplinary Research , 2
(6), 108 - 131.

Rohilla, A., & Bansal, M. (2012). Foreign Direct

Investment in Retail: Good or Bad? Available in
proceedings of National Conference on FOREIGN
DIRECT INVESTMENT IN INDIA: RESPONSE AND
CHALLENGE Shaheed Bhagat Singh College, Delhi
Uinversity. Available at http://papers.ssrn.com/
sol3/results.cfm?RequestTimeout=50000000
retrieved on October 8, 2013.

Joreskog, K. G., & Sorbom, D. (1984). LISREL VI:

Analysis of linear structural relationships by the
method of maximum likelihood. Chicago: National
Educational Resources.
Kline, R. B. (2004). Principles and practice of
structural equation modelling 2nd ed. New York:
Guildford.

Singh, M. (2010). Foreign Direct Investment in

Retailing in India Its Emergence & Prospects.
Available at http://www.articlesbase.com/investingarticles/foreign-direct-investment-in-retailing-inindia-its-emergence-prospects-1354932.html
retrieved on October 8, 2013.

Koshys Joseph Partner, Joseph and Joseph Law Offices

(2006) - FDI in Retail Sector. The decision of
permitting foreign direct investment (FDI) in the
retail sector.

Steiger, J. H. (2000). Point estimation, hypothesis

testing, and interval estimation using the RMSEA:
Some comments and a reply to Hayduk and Glaser.
Structural Equation Modeling, 7(2), 149162.

45