Productivity is generally defined as the amount of output realised for a given level of inputs. The neo-classical growth theory considers productivity as a function of technology and capital accumulation. In this paper, I argue that apart from technology and capital, productivity depends on institutional factors such as property rights, incentives, transaction, and information costs. Foreign direct investment in India’s retail sector can bring in the best practices of supply-chain management and reduce transaction and information costs of input and output markets and thereby contributes to farmers’ productivity. I bring forth a few conceptual issues and qualitative empirics on this topic.