Fdi in retail
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FDI in retail explained in clear and simple terms. A simple way to understand this complex topic.

FDI in retail explained in clear and simple terms. A simple way to understand this complex topic.

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Fdi in retail Presentation Transcript

  • 1. FDI INRETAILwww.wordpandit.com
  • 2. What is FDI ?FDI can be defined as a cross border investment,where foreign assets are invested into theorganizations of the domestic market excluding theinvestment in stock. www.wordpandit.com
  • 3. What is FDI ?FDI can be defined as a cross border investment,where foreign assets are invested into theorganizations of the domestic market excluding theinvestment in stock.•For instance: An American company taking amajority stake in a company in China. www.wordpandit.com
  • 4. What is FDI ?Foreign investment – Investment done by citizens andgovernment of one country (home country) invest inindustries of another country (host country). www.wordpandit.com
  • 5. What is FDI ?Foreign investment – Investment done by citizens andgovernment of one country (home country) invest inindustries of another country (host country). Foreign Foreign investment institutional through investmentForeign Direct investment www.wordpandit.com
  • 6. What is FDI ?Foreign investment – Investment done by citizens andgovernment of one country (home country) invest inindustries of another country (host country). Foreign Foreign investment institutional through investment Automatic Route – No permission requiredForeign Direct investment Government Route – Approval/ license required www.wordpandit.com
  • 7. MODES OF FDIBY TARGETBY MOTIVE www.wordpandit.com
  • 8. MODES OF FDI Mergers and Acquisitions Horizontal FDIBY TARGET Vertical FDI. *Backward Vertical FDI *Forward Vertical FDI Resource-Seeking Market-SeekingBY MOTIVE Efficiency-Seeking Strategic-Asset-Seeking www.wordpandit.com
  • 9. FDI IN RETAILIN INDIA www.wordpandit.com
  • 10. The Broad Retail Sector In IndiaOrganized Retail Unorganized Retail www.wordpandit.com
  • 11. The Broad Retail Sector In India Organized Retail Unorganized RetailOrganised retailing refers to Unorganised retailing, on the othertrading activities undertaken by hand, refers to the traditional formats oflicensed retailers, that is, those the retail industry involving example, thewho are registered for sales tax, local kirana shops the corner stores,income tax, etc basically involving owner manned general stores,the corporate-backed paan/beedi shops, convenience stores,hypermarkets and retail chains, hand cart and pavement vendors, etc.and also the privately owned The latter involves a large majority oflarge retail businesses. the indian populace that is involved in the retail industry www.wordpandit.com
  • 12. FDI policy in Indian Retail SectorSingle brand retailing 51 % Allowed www.wordpandit.com
  • 13. FDI policy in Indian Retail SectorSingle brand retailing 51 % AllowedCash and carry model 100 % Allowed www.wordpandit.com
  • 14. FDI policy in Indian Retail SectorSingle brand retailing 51 % Allowed But what exactlyCash and carry model 100 % Allowed does this mean? Multi-Brand Retail Not Allowed www.wordpandit.com
  • 15. Single Brand RetailConditions for Single Brand Retail:Should be a single brandShould be sold under the same brandinternationallyIt would only cover products branded duringmanufacture www.wordpandit.com
  • 16. Cash & Carry ModelConditions for Single Brand Retail:Cash and carry businesses accept only cash fortheir product or services (provide the optimum pricebut with minimal conveniences.)Likewise, once products have been purchased, thecustomer is responsible for carrying their productsaway from the place of purchase. No cart assistanceservices are offered, nor are credit cards or creditaccounts of any kind acceptedCash and carry businesses often exist in awarehouse, as is the nature of many wholesalers. www.wordpandit.com
  • 17. Multi-Brand RetailConditions for Single Brand Retail:Sale of multiple brands under one brandMulti-brand retail comes in different formats likesupermarket, hypermarket, compact hyper and theubiquitous mall.Proposal to allow foreign investments upto the tuneof 51% in this sector. www.wordpandit.com
  • 18. What are global retailers say about their prospective markets??? www.wordpandit.com
  • 19. FDI in Retail: Challenges faced by Industry SKILLED WORKERS INFLATION COMPETITION TAXATION REAL ESTATE POLICIES PROBLEM MARKET PROBLEM IN RAISING FUNDS POWER SUPPLY CHAIN MANAGEMENT www.wordpandit.com
  • 20. ‘FDI In Retail- A Policy Perspective’, - Opinion of FICCI and ICICIFDI can be a powerful catalyst to spur competition in the retail industry.* It can bring about:* Supply Chain Improvement* Investment in Technology* Manpower and Skill development* Efficient Small and Medium Scale Industries* Increase in exports www.wordpandit.com
  • 21. Pros for Allowing FDI in RetailIndia’s local enterprises will potentially receive an upgradation with the importof advanced technological and logistics management expertise from the foreignentities.The government has an opportunity to utilize the liberalization for achievingcertain of its own targets:I. improve its infrastructureII. access sophisticated technologiesIII. generate employment for those keen to work in this sectorFDI would lead to a more comprehensive integration of India into theworldwide market and, as such, it is imperative for the government to promotethis sector for the overall economic development and social welfare of thecountry. www.wordpandit.com
  • 22. Pros for Allowing FDI in RetailEmployment opportunities in agro-processing, sorting, marketing, logisticsmanagement and front-end retail. 10 million jobs to be created in the next three years in the retail sector. Policy mandates a minimum investment of $100 million with half the amountbeing invested in back-end infrastructure, including cold chains, refrigeration,transportation, packing, sorting and processing. Salutary impact on food inflation from efficiencies in supply chain. www.wordpandit.com
  • 23. Benefits for Indian Agriculture from FDI in RetailInvestment into warehouse and cold storage chain will result in significantefficiency on supply chain.Farmers benefited through direct marketing and contract farmingprogramme.Improves farm production through modern techniques. Increasing availability of low interest credit for farmers. Helps farmers secure remunerative prices by eliminating exploitativemiddlemen. www.wordpandit.com
  • 24. Cons of FDI in IndiaMove will lead to large-scale job losses.Global retail giants will resort to predatory pricing to create monopolyJobs in the manufacturing sector will be lost because structured internationalretail makes purchases internationally and not from domestic sources.Opponents of the FDI feel that liberalization would jeopardize the unorganizedretail sector and would adversely affect the small retailers, farmers andconsumers and give rise to monopolies of large corporate houses which canadversely affect the pricing and availability of goods.They also contend that the retail sector in India is one of the 2 the chain of foodsupply, from the farm where it is produced to the consumer major employmentproviders and permitting FDI in this sector can displace the unorganizedretailers leading to loss of livelihood. www.wordpandit.com
  • 25. What Lies Ahead? www.wordpandit.com
  • 26. FDI Success story China www.wordpandit.com
  • 27. How FDI is projected to effect the Indian economy? www.wordpandit.com
  • 28. GRDI Position : 3rdSize : $ 400 billionGrowth Rate : 13%GDP contribution : 12%Major sector : Food and GroceryEmployment : 2nd largest industry (35.06 million) www.wordpandit.com
  • 29. Major Retail Players Entering Into India www.wordpandit.com
  • 30. Future Predictions Expected Growth • In the last four year, the1.4 CAGR 1.3 consumer spending in India1.2 10% climbed up to 75%. 1 • By the year 2013, the 0.83 organized sector is also0.8 0.59 expected to grow at a CAGR of0.6 40%. 0.350.4 • The total number of shopping0.2 malls is expected to expand at 0 a CAGR of over 18.9 per cent 2008 2011 2013 2018 by 2015. www.wordpandit.com
  • 31. The Politics of FDI www.wordpandit.com
  • 32. Recommendations And Suggestions To ponder over???? •Should the initial cap on investment could be pegged at 49%? •Should FDI should be leveraged to create back-end infrastructure? •Can FDI curb inflation? •To develop our rural sector ,should conditionality’s be put on the FDI funded chains relating to employment? • For example, should we stipulate that at least 35% of the jobs in the retail outlets should be reserved for the rural youth?Some Difficult questions for which our policy makers Need to find the answers. www.wordpandit.com
  • 33. Thank You!Hope you had a pleasant learning experience. Feel free to contact us:mentor@wordpandit.com www.wordpandit.com