Continuing its policies for economic reforms, the Indian government has been gradually opening up the booming retail sector of the country, for foreign companies.

It was until 2004, Foreign Direct Investment (FDI) norms in retail industry were highly restricted. Only the sectors of hi-tech industry, and medical equipments were open for foreign investments due to their highly-specialized nature of service.

But now the scenario is changing briskly. Cent percent FDI has been allowed in cash and carry segment of retail trading while single brand retailers are also allowed to set up their stores in India with 51 per cent shareholding from abroad.

Nevertheless, the FDI Confidence Index Survey by global consultancy firm AT Kearney observes retail markets of India as one of the most attractive sectors for investments.

As we know that Indian retail industry is undergoing a massive restructuring with more and more corporates from within the country and abroad foraying into the sector, FDI will definitely catalyze the growth engine.

At present, the size of the Indian retail market is close to $350 billion. The industry contributes 11 per cent to the Gross Domestic Product (GDP) of the country.

Organized Retail Markets: At present the organized retail markets in India contribute about $7.5 billion to the total market. Though, the trends are going bullish.

Indian corporate mammoths like Reliance, ITC and Bharti have already started to set a strong foothold in the markets and many more like Marks and Spencer, Pantaloon, Big Bazar, Bata, and Archies are creating waves in the consumer markets.

Favorable Policies: Now that the government policies encourage foreign investments in the sector, the share of organized retailing is projected to improve significantly.

According to the FICCI Retail Report 2007, the organized retail industry will increase its share from current 4-per cent to 20 per cent by 2010, posting a staggering CAGR of 50 per cent to $430 billion.

While the markets in the western countries saturate, global retail giants like Walmart, Tesco, Sears and JC Penny are ambitiously looking towards India.

The new FDI policy enables single product brands like Versace, Fendi, Nike, Louis Vuitton, Rolex etc. to directly invest as much as 51 per cent of the total capital as foreign shareholding.

Earlier, many of the international brands had entered in the Indian markets through franchise route with regard to the policy constraints.

With respect to the high-growth potential retail market of India, not just private companies but foreign government bodies have also expressed intentions to invest in Indian retail industry.

The 150 member British delegation recently committed investments in the genres of agri-retail, food processing, and manufacturing.

National Food Industry Strategy and Austrade of Australian government has also been running test marketing for its food products in India. About 12 food processing companies from Australia have joined hands with India-based distributor AB Mauri to sell its products in Indian markets.

With this, the future prospects of Indian retail markets are looking pretty bright and investments in the sector bear all the reasons to bring impressive returns.