In the current economic scenario, especially after global economic crisis, the condition of India’s balance of payment and trade deficit is very crucial. Investment has made the need of hour to bridge this gap and most prominent tool to overcome this crisis is Foreign Direct Investment. It is quite evident that FDI has been the focal point for Indian economic growth in the post liberalization era. There has been a considerable contribution of retail sector in the GDP of the country in the past few years which was the outcome of constant flow of FDI in the retail sector. In times to come retail sector would be considered as a major contributor in the economic growth of India. An attempt has been made through this paper to discuss the need of opening up the route of Foreign Direct Investment in retail sector of India. By using the time series secondary data and applying the simple linear regression method, this study is an attempt to investigate the relationship of FDI in retail vis-à-vis GDP of the economy on one hand and analyze the contribution of retail sector in the Indian economic growth.