Indian retail industry is one of the growing sectors having huge growth potential. According to the Investment Commission of India, the retail sector is expected to grow almost three times its current levels to $660 billion by 2015. However, in spite of the recent developments in retailing and its immense contribution to the economy, Retailing continues to be the least evolved industries and the growth of organized retailing in India has been much slower as compared to rest of the world. Undoubtedly, this miserable situation of the retail sector, despite the on-going wave of nonstop liberalization and globalization stems from the absence of an FDI encouraging policy in the Indian retail sector. Hence this paper attempts to analyze the strategic issues of foreign direct investment in the Indian retail industry. Moreover, with the latest move of the government to allow FDI in both single and multiband retailing sector, the paper analyses the effects of these changes on farmers and agro-food sector. The findings of the study point out that FDI in retail would undoubtedly enable India Inc. to integrate its economy with that of the global economy. Thus, as a matter of fact FDI in the buzzing Indian retail sector should not just be freely allowed but should be significantly encouraged. The paper ends with a review of policy options that can be adopted by Competition Commission of India.