The Indian retail industry is the worlds fifth-largest and the country’s largest private sector, accounting for 14 percent of GDP. Our retail sector is highly fragmented, with unorganized retailers controlling 96 percent of the market and organized retailers accounting for the remaining 4%. To sum, they contribute to 8% of the overall employment. India is the second-largest country globally in population and registered high economic growth even during the global recession. Increasing trends in terms of expenditure on consumer goods, most global retail organizations deem India as a promising investment (FDI) destination. After allowing FDI in single and multi-brand retailing, which creates a host of debates from different corners, including opposition political parties. In this background, the present study aims to unearth why the International giant retailers are interested in investing capital in the Indian retail sector, and the study finds out the Need for FDI in the Retail Sector: Prospects and Challenges in Indian Economy and also explore the challenges in FDI at the cost of farmers, retailers, and ultimate consumers.