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  • 1. 28 International Indexed & Refereed Research Journal, ISSN 0974-2832, (Print), E- ISSN- 2320-5474, Aug-Oct, 2013 ( Combind ) VOL –V * ISSUE – 55-57 Research Paper - Commerce Aug- Oct , 2013 Introduction- Foreign direct investment refers to the total of equity capital, reinvestment of earning, long term and short term capital. After being signatory to WorldTrade'sOrganizationgeneralagreementonTrade in Services,which include wholesale and retailing ser- vices, India had to open up the retail trade sectors to foreign investment. In organized retail business size is very small but its scope is extraordinary. Bythe year 2013, it is expected that retail industry in India is expected to go up to us$833 billion. It is moreover believed that to reach us$1.3 trillion by the year 2018 at a CAGR of 10%. RetailSector- In 2004, The High court of Delhi defined the term 'retail' as a sale for final consumption in con- trast to a sale for further sale or processing (i.e. whole- sale), a sale to the ultimate consumers. Thus, retailing can be said to be interface between the producer and the consumer. Retailing excludes the direct interface betweenthe manufacturerand theconsumer. Consum- ers may be government or other bulk customer. A re- tailer earns a margin of profit by selling goods to indi- vidual consumer Reforms- In November 2011, Central Government of India announced a lot of retail reforms for both multi brand retailers such as Carrefour, Tesco and Wal-Mart and as well as single brand major such asApple, Nike etc. A lot of intense activism sparked both in opposi- tion and in support of reforms. In December 2011, In- dianGovernmentplacedtheretailreformsonholdunder pressure from the opposition till it reaches a consen- sus. In January 2012, Indian Government approved reformforasinglebrandstore,whichanyonecancome FDI in Retail Sector * Ms. Deepika * Asst. Prof.incommerce,GMN(PG)College, AmbalaCantt. The goal of this research paper is to examine the changes in market scene in retail sector, an overview of the Indian retail sector, reforms, entry option for foreign prior to FDI policy. It examines the growing awareness in all social classes of people in India and show how the urban and semi- urban retail markets are growing. Government has approved on September 20, 2012, 51% FDI in multibrand and 100 %( revised) in single brand retail sector by government route. It is explained by Prime Minister of India to the nation that the necessity and obligation under WTO agreement to allow FDI in retail sector. India is the profit oriented and attractive market for the investment in developed countries since last two decades. For entering the market of developing countries, FDI is an easy path. A B S T R A C T Keywords- FDI, FDI inflow, reforms, challenges inIndianmarkettoinnovateinIndianretailmarketwith 100% ownership. But it imposed some regulation that single brand retailer source 30% of its goods from India. In multi brand retail store, Indian Government can continue the hold on retail reforms. Due to this announcement IKEA announced in January that it is putting on hold its plan to open stores in India because of the 30% requirement. EntryOptionsForForeignPlayersPriorToFdiPolicy- 1. Cash and Carry wholesale trading In cash and carry trading, 100% FDI is allowed. It involves building of a large distribution infrastructure to assist local manufacturers. In this the wholesaler deals only with small retailers not with customers. Example-MetroAGGermanywasthefirstglobalplayer who enters through this way. 2. Strategic LicensingAgreement- With the help of these rights, Indian compa- nies can use it either by sell it through own stores or they may enter into shops arrangements or they may distributes the brand to Franchisee. 3 Franchise Agreement- It is one of the easiest ways to come in the Indian market. In franchising and commission agents' services, FDI is allowed after taking the approval of Reserve Bankof India (RBI) under the FEMA . This is one ofthemost usual modes for entranceofquick food bondageoppositeaworld.SomeofexamplesarePizza Hut, Mango etc. 4. Manufacturing and wholly owned subsidiaries- Somefamous foreign brands likeReebok,Adidas, Nike, Peter England, and Mentor etc that havewholly- ownedsubsidiariesinthemanufacturingareallowedto do retail with Indian company. These companies can sell theirproducts to Indian consumers byfranchising,
  • 2. 29SHODH, SAMIKSHA AUR MULYANKAN International Indexed & Refereed Research Journal, ISSN 0974-2832, (Print), E- ISSN- 2320-5474, Aug-Oct, 2013 ( Combind ) VOL –V * ISSUE – 55-57 own outlet, existent Indian retailers etc. Forexample-Nikeenteredthroughanexclusiveagree- mentwithSierraenterprisesbutnowhaswhollyowned subsidiaries, Nike India Private. FDIInSingleBrandRetailing- There no clear cut definition of single brand in any of its circulars and any notifications. In single brand retail, the limit of FDI is 51%, but now as per recentdevelopmentanddeclarationofthegovernment ofIndia,thislimitisextendedupto100%ownershipby foreign retailers and investors. Therefore a lot of op- portunity is generously offered to all foreign compa- nies, retailers and investors of the world for entering into Indian market. The foreign direct investment is hopedtoreachthelevelofUS$2.5-3billioninnextfive yearsinbothmultibrandand singlebrand.Theforeign single brand retailer will have to procure at least 30% of their products and goods from the local or domestic industries and companies to do business in India. FDI In MultiBrandRetailing- The government of India also does not define multibrand retailing in anycircular nor its noti- fication.Multibrandretailingimpliesthataretailstore withaforeigninvestmentcansellmultiplebrandsunder oneroof.InJuly2010,Departmentofindustrialpolicy andpromotion(DIPP),adiscussionpaperiscirculated amongministryofcommercewhichallowsFDIinmulti brand retail. But this paper does not suggest any kind ofupperlimitonFDIinmultibrandretail.Itwouldopen the doors for global retail giants to enter and establish their footprints on the retail landscape of India, if it is fullyimplemented.Ifthereisopeningupofmultibrand retailing, it would mean that global retailers including Carrefour,Wal-MartandTescocanopenastores.These storesworkinasamemanneras'kirana'storesoffering a range of household item and grocery directly to con- sumers. as per an estimate by mellow and expert economist. India contributes almost 15% in national GDP. Today India is regarded as one of the top five largest retail market in the whole world as India is estimated to be worth US $450 billion. The retail market of India can reachthelevelofaround$650 billionbytheyear2015, as per an estimate by mellow and expert economist .India contribute almost 15% in national GDP. ChallengesofRetailingInIndia- 1. Threat of product obsolescence low margin and dissimilarity in consumer groups. 2. Mainly status of the retailer industry will depend on external factors like government government regulation and policies. 3. Slowly emerging from recession face a lot of diffi culties from bank. 4. Difficultiesinattractingcustomersfromtraditional kirana stores. 5. Strict restriction on retail sector by government. 6. Entry of large global retailers such as Wal- Mart would kill local shops and millions of jobs. 7. Retailerwouldexercisemonopolisticpowertoraise and reduce the price received by the supplier. 8. It will cause dissatisfaction and social tense else where. 9. Profitmarginofsuchretailchainwouldgoupwhile both consumer and supplied would get loss. 10. FDI in retailing can also upset the import balance RemovalOfLimitation- i) Development of infrastructure should take place. ii) RemovalofIntermediaries monopoly iii) Properpublicdistributionsystemshouldbemade. iv) Giving chance to micro, small and medium enter prises. Conclusion- There are a lot of innovation comes out in Indianmarketwhichstrengthenmarketposition.There willbeinitialandadvantageousdisplacementofmiddle man which is involved in the supply chain of farm produce, but theyare likelyto be absorbed by increase in the food processing sector induced by organized retailing. Due a lot of efforts made by government, there are adverse effects on smallretailers and traders. Farmers are able to earn more with the help of direct marketing window. Due to global competition, con- sumers are able to get better quality, cash memos and assured weights products. There will rise in govern- mentrevenuedue to largebusinessand recorded sales. 1 www.rbi.org.in 2 www.ask.com 3 www.economywatch.com 4 Research paper of K.R. Kaushik, research scholar, modinagar, SRM University 5 Research paper of Rupali gupta , Christ University, Bangalore 6 Press Note 4 of 2006 issued by DIPP 7 Consolidated FDI policy issued in October 2010 8 Revised FDI policy issued in 2011 and 2012 vide press note 1of 2011 R E F E R E N C E Today India is regarded as one of the top five largest retailmarketinthewholeworld asIndiaisestimated to beworthUS$450billion.TheretailmarketofIndiacan reachthelevelofaround$650 billionbytheyear2015,