FDI in Retail

376 views
299 views

Published on

Foreign direct investment (FDI) is a direct investment into production or business in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country.
Retailing in India accounts for 14 to 15 percent of its GDP. The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value. India is one of the fastest growing retail markets in the world, with 1.2 billion people.

Published in: Business, Career
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
376
On SlideShare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
29
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • Foreign direct investment (FDI) is a direct investment into production or business in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country.Methods:
  • Retailing in India accounts for 14 to 15 percent of its GDP. The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value. India is one of the fastest growing retail markets in the world, with 1.2 billion people.
  • The Indian retail sector is highly fragmented and the unorganized sector has around
  • FDI in retail will bring investments in rural India in the form of Cold storages, food processing industries and transportation. This has tremendous potential to transform rural economy. It will create jobs and may reduce migration. It is also an answer to disguised employment in agriculture. 60% of our population that depends on agriculture contributes only 17% to the economyAt least 10 million jobs will be created in the next three years in the retail sector
  • As the business of organized retailing of food matures, it would increase private investment in the area of supply chain infrastructure. This is also going to get a boost from the various schemes of the Government to incentivize rural infrastructure creation (Terminal Markets, Mega Food Parks, Rural Godowns etc.). This will benefit the farmers immensely by creating feasible and competitive marketing alternatives for their produce. 
  • The communist party government in China is intensively going for FDI, then how can it be detrimental to IndiaThe opponents may oppose that these points are valid as Indian retail giants being indigenous companies won’t exploit the country’s resources. Let us just concentrate on the business model these companies, multinational or Indian conglomerates offer and the profit it gives to the Indian economy.
  • Facts which make FDI inevitable not only in retail but other sector as well are:This has tremendous potential to transform rural economy. It will create jobs and may reduce migration
  • One actually sees more shops being opened in spite of the presence of Indian retail chains and the tendency of at least middle class Indians to frequent them.
  • This will provide the scales to encourage domestic value addition and manufacturing, thereby creating a multiplier effect for employment, technology up gradation and income generationThis is also because food, which perishes due to inadequate infrastructure, will not be wasted.
  • FDI in Retail

    1. 1. What is FDI?
    2. 2. Merger & Acquisition Subsidiary
    3. 3. FDI Inflow worldwide
    4. 4. Growth of investment in retail 500 450 400 350 300 250 $436bn 200 150 100 $ 218bn 50 0 2005 1 Source: Deloitte 2012 2
    5. 5. Indian Retail Market Segment(2011) Food Fashion 4 Leisure & entertainment 3 21 4 Fashion Accessories 6 Consumer Durables 8 Health, Beauty & Pharma 10 62 Furniture Telecom Source: Deloitte Books & Music
    6. 6. Present Scenario
    7. 7. Increase of retail outlets in India(2002-2007) 14000 13500 13448.5 13122.1 13000 12770.8 12500 12408.8 12049.8 12000 11689 11500 11000 10500 1 2 Source: Deloitte 3 4 5 6 7
    8. 8. The lacuna in retail sector: Where are we lacking behind?
    9. 9. Farmers Middlemen Consumers • 50% Of Production of food and vegetables is wasted at this level Reasons for this loss:  Rigid regulations  Real estate costs  High personnel costs  Lack of basic infrastructure  Shrinkage  Highly competitive domestic retailer groups
    10. 10. What Impact FDI will make? Food processing Cold Storages Transpor tation “It is estimated that FDI in retail can create approximately 4 million direct jobs and almost 5 to 6 million indirect jobs including contractual employment within a span of 10 years, making it the largest sector in organized employment.”
    11. 11. What Impact FDI will make?
    12. 12. Benefits Cut down intermediaries Give better prices to farmers Provide stability Economies of scale which will benefit, both the farmers and consumers
    13. 13. Benefits More focus will lie on cold chain infrastructure warehouse distribution in order to strengthen the supply chain. Provision of adequate and quality infrastructure is necessary for increasing the productivity and efficiency of agri value chain. A 1% increase in infrastructure is associated with a 1% increase in GDP across all countries. The entry of modern retail formats in India will undoubtedly bring with it an intensive infrastructure creation. Healthy Competition will be boosted and there will be a check on the prices (inflation).
    14. 14. Benefits: Building an Efficient Supply Chain Private Players Government Increase private investment in the area of supply chain infrastructure A boost from the various schemes of the Government to incentivize rural infrastructure creation
    15. 15. COMPARATIVE ANALYSIS OF FARMERS’ SHARE IN FINAL PRODUCE India Developed countries 100% 30 90% 80% 70 70% Series3 60% Series2 50% 70 40% 30% 30 20% 10% 0% 1 2 100 90 80 53 70 60 80 72 Series2 50 Series1 40 30 47 20 10 20 28 0 Source: ASSOCHAM 1 2 3
    16. 16. The other side of the coin
    17. 17. The Indian example of retailing:     ITC’s ABD program AMUL Future Group Hypercity ITC-ABD covers 10 states and 4 million farmers. The company’s e-Choupal and ‘Choupal Pradarshan Khet’ are initiatives that have been empowering farmers to improve productivity and deriving better returns.
    18. 18. Some other facts Though India has a very healthy savings to GDP ratio, the investments are not sufficient to tackle the issue of a large population. The opponents should realize that no foreign company can come to India on its own and will need a local partner to bring in 49% investment in the venture. Will bring investments in rural India in the form of cold storages, food processing industries and transportation.
    19. 19. FDI in retail will help farmers’ secure remunerative prices by eliminating exploitative middlemen. At least 10 million jobs will be created in the next three years in the retail sector. Today there is no restriction on how many Kirana shops can be opened in a locality and number of shops per say 1000 people. All Kirana shops are doing business and making money.
    20. 20. Huge investments in the retail sector will see gainful employment opportunities in agroprocessing, sorting, marketing, logistics management and frontend retail. Sourcing of a minimum of 30% from Indian micro and small industry is mandatory. Policy mandates a minimum investment of $100 million with at least half the amount to be invested in back-end infrastructure, including cold chains, refrigeration, transportation, packing, sorting and processing.
    21. 21. A strong legal framework in the form of the Competition Commission is available to deal with any anti-competitive practices, including predatory pricing. In any case, organized retail through Indian corporate is permissible. Experience of the last decade shows small retailers have flourished in harmony with large outlets. This will have a salutary impact on food inflation from efficiencies in supply chain.
    22. 22. Thailand has experienced tremendous growth in the agroprocessing industry. There has been impressive growth in retail and wholesale trade after China approved 100% FDI in retail. In Indonesia, even after several years of emergence of supermarkets, 90% of fresh food and 70% of all food is still controlled by traditional retailers.
    23. 23. Conclusion If anything, the entry of retail giants is likely to hot up competition, giving consumers a better deal, both in prices and choices. Mega retail chains need to keep price points low and attractive - that's the USP of their business. This is done by smart procurement and inventory management: Good practices from which Indian retail can also learn. In addition, the fear of major job losses is also highly exaggerated. There will not be job losses, but job redistribution along with a spurt in jobs. So we can easily sit back and be assured that FDI in retail is going to help Indian economy and Indian Peasantry grow. FDI in retail is a BOON for India.
    24. 24. References: http://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD http://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD/countries?display=map http://www.euromoneycountryrisk.com/Home/Return/Analysis/Country-Risk-Asiatrading-places-with-the-west http://en.wikipedia.org/wiki/Retailing_in_India FDI in Retail - Advantage Farmers report by Food & Agribusiness Strategic Advisory and Research (FASAR) Team - YES BANK and ASSOCHAM (Oct 2012) Research paper on Foreign Direct Investment : The Big Bang in Indian Retail by Arun Kr. Singh and P.K. Agarwal http://www.timesjobs.com/jobskill/FDI-Jobs http://www.anilagashe.com/2011/12/fdi-in-retail.html The Role of the Multilateral Trading System in the Recent Economic Crisis Pascal Lamy. BRIC spotlight report 2011.
    25. 25. Thank You

    ×