The Retail Sector
What is retailing?
Retailing is the interface between the producer
and the individual consumer, buying for personal
consumption. It is the last link that connects the
consumer with the manufacturing and distribution
• India is the fifth largest retail market globally.
• Retail contributes to 10% of India’s GDP.
• India has highest retail density in the world with 15
India is a land of retail democracy!
ORGANISED RETAIL SECTOR
organized retailing refers to
trading activities undertaken
by licensed retailers, that is
those who are registered for
sales tax, income tax, etc.
these include the corporate
based hypermarkets and retail
chains, and also the privately
owned large retail business.
Only 5% of the total retail
UNORGANISED RETAIL SECTOR
unorganized retailing, on the
other hand, refers to the
traditional formats of low cost
retailing, for example, the local
kirana shops owner manned
general stores, paan/beedi
shops, convenience stores,
hand cart and pavement
95% of the total retail share.
FOREIGN DIRECT INVESTMENT
• An investment made by a company or entity
based in one country, into a company or entity
based in another country. Entities making direct
investments typically have a significant degree
of influence and control over the company into
which the investment is made.
• investment in a foreign country through the
acquisition of a local company or the
establishment there of an operation on a new
site. In short FDI refers to capital inflows from
abroad that is invested in or to enhance the
production capacity of the economy.
• In November 2011, India’s central Government
announced retail reforms for Multi Brand Stores
and Single Brand Stores. The announcement
sparked intense activism. In July 2011 the GOI
has recommended FDI in retail sector as –
a) 100% in Single - Brand Retail.
b) 51% in Multi - Brand Retail.
(a) FDI in “single-brand” retail
Up to 100 percent FDI is permissible in
single-brand retail conditions stipulate
• (i) Only single-brand products are sold
• (ii) Products are sold under the same
(iii) Single-brand products include only those
identified during manufacturing
(iv) Any additional product categories to be sold
under single-brand retail must first receive
additional government approval.
FDI in single-brand retail implies that a retail
store with foreign investment can only sell
SOME SINGLE-BRAND RETAIL
(b) FDI in “multi-brand” retail
• FDI in multi-brand retail generally refers to
selling multiple brands under one roof.
Currently, this sector is limited to a maximum
of 49 percent foreign equity participation.
Multi-Brand Retail FDI Policy in other
FDI Limit Country
(Source: Times of India, 3rd December
1995 World Trade Organization’s General
Agreement on Trade in Services, which
includes both wholesale and retailing services
came into effect.
1977 FDI in cash and carry (wholesale) with 100%
rights allowed under government approval
2006 FDI in cash and carry (wholesale) brought
under the automatic route. Up to 51%
investment in a single brand retail permitted,
subject to Press Note 3 (2006 Series).
2011 100% FDI in single brand retail permitted.
2012 51% FDI in multi-brand retail permitted.
FDI Share of organized sector in
• Country Share of organized Sector (%)
• U. S. A. 85
• U. K. 80
• Japan 66
• Russia 36
• India 04
(Source: Planel Retail & Technopak Adviser Pvt. Ltd.)
Projected Size of the Organized Retail
• Year Increase in size (in crores)
• 2008 965
• 2010 1728
• 2015 5610
• 2022 17368
Source :- Planel Retail & Technopak Adviser
BENEFITS OF FDI
• Fast growing economy.
• Highest shop density in the world. Customers will
have access to greater variety of international
quality branded goods.
• Employment opportunities both direct and indirect
have been increased.
• Farmers get better prices for their products
through improvement of value added food chain.
• High growth rate in retail & wholesale trade.
• Foreign capital inflows.
• Increase in disposal income and customer
aspirations are important factors; increase too
in expenditure for luxury items.
• Large domestic market with an increasing
middle class and potential customers with
• The consumer get a better product at cheaper
price, so consumers get value for their money.
• Big market along with better technology and
• branding with latest managerial skills.
• Indian retail market worth 4 Trillion US$,
that is ₹ 153lakh crore,
•Expected Market share of Foreign Retailers
75% (in 2007 in U.K 93% of market share
was held by multi branded shops)
• Forecasted Profit 15% (please look at the
•15% of ₹ 114.75 lakh crore is ₹ 17.3 lakh
• 51% of 17.3 (8.83 Lakh Crore) will be ripped-
off from Indians by foreigners to their nations.
• By 2014 market worth 9 Trillion US $. So
around ₹17.5Lakh crore will not be circulated
inside India and shared by tens and thousands
of people, if we open this FDI flood gate
• Global giants like WalMart will crush our
unorganized retail sector..
(Which consists of around 12 million kirana
stores in the country )
NEGATIVE ASPECTS OF FDI IN RETAIL
1.Will affect 50 million small merchants in India
2.Profit distribution and investment ratios are not fixed
3.An economically backward class person may suffer from
price raise in future.
4.Retailer faces heavy loss of employment and profit
5.Workers safety and policies are not mentioned clearly
6.Inflation may be increased
7.Small farmers will not benefit by FDI policy
8.The rural India will remain deprived of the services of