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Impact of FDI on retail sector in India

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  • 1. Impact of FDI on Retail Sector inIndia Karan Tyagi 11113048 Kaustubh Kulkarni 11113052
  • 2. Impact of FDI on Retail Sector in India
  • 3. What is FDI?An Introduction Foreign direct investment (FDI) is investment directly into production in a country by a company located in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. It is cross border investment, where foreign assets are invested into the organizations of the domestic market excluding the investment in stock.Impact of FDI on Retail Sector in India
  • 4. What is FDI? FDI refers to the net inflows of investment (inflow minus outflow) to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor. It usually involves participation in management, joint-venture, transfer of technology and expertise.Impact of FDI on Retail Sector in India
  • 5. What is FDI?It brings private funds from overseas into products or services. The domestic company in which foreign currency is invested is usually being controlled by the investing foreign company.Foreign direct investment (FDI) plays an extraordinary and growing role in global business. It can provide a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing.Impact of FDI on Retail Sector in India
  • 6. What is FDI?Why is FDI important for any consideration of going global?The simple answer is that making a direct foreign investment allowscompanies to accomplish several tasks: Avoiding foreign government pressure for local production. Circumventing trade barriers, hidden and otherwise. Making the move from domestic export sales to a locally-based national sales office. Capability to increase total production capacity. Opportunities for co-production, joint ventures with local partners, joint marketing arrangements, licensing, etc;Impact of FDI on Retail Sector in India
  • 7. What is FDI?How is FDI beneficial to the host nation…For a host country or the foreign firm which receivesthe investment, it can provide a source of newtechnologies, capital, processes, products,organizational technologies and management skills,and as such can provide a strong impetus toeconomic development.Impact of FDI on Retail Sector in India
  • 8. Retail IndustryAn Introduction The Retail Industry is the sector of economy which is consisted of individuals, stores, commercial complexes, agencies, companies, and organizations, etc., involved in the business of selling or merchandizing diverse finished products or goods to the end-user consumers directly and indirectly. Goods and products of the retail industry or sector are the finished final objects/products of all sectors of commerce and economy of a country.Impact of FDI on Retail Sector in India
  • 9. Retail IndustryRetail Sector in India: The Retail sector of India is vast, and has huge potential for development, as the majority of its constituents are un-organized. The retail sector of India contributes about 15% to the national GDP, and employs a massive workforce of it, after the agriculture sector.Impact of FDI on Retail Sector in India
  • 10. Retail IndustryRetail Sector in India: The retail sector of India handles about $250 billion every year, and is expected by veteran economists to reach to $660 billion by the year 2015. The business in the organized retail sector of India is expected to grow at the rate of 15-20% every year, and can reach the level of $100 billion by the year 2015.Impact of FDI on Retail Sector in India
  • 11. Retail IndustryImpact of FDI on Retail Sector in India
  • 12. Division of Retail Industry – Organised andUnorganised RetailingThe retail industry is mainly divided into:- Organised Retailing Unorganised Retailing Organised retailing refers to trading  Unorganised retailing, on the other activities undertaken by licensed hand, refers to the traditional retailers, that is, those who are formats of low-cost retailing, for registered for sales tax, income example, the tax, etc. These include the local kirana shops, owner manned corporate-backed hypermarkets general and retail chains, and also the stores, paan/beedi shops, convenie privately owned large retail nce stores, hand cart and businesses. pavement vendors, etc.Impact of FDI on Retail Sector in India
  • 13. Retail IndustryRetail Sector in India: The Indian retail sector is highly fragmented with 97 per cent of its business being run by the unorganized retailers. The organized retail however is at a very nascent stage. The sector is the largest source of employment after agriculture, and has deep penetration into rural India generating more than 10 per cent of India‟s GDP.Impact of FDI on Retail Sector in India
  • 14. Major Retailers in IndiaPantaloon: Pantaloon is one of the biggest retailers in India with more than 450 stores across the country. Headquartered in Mumbai, it has more than 5 million sq. ft retail space located across the country. Its growing at an enviable pace and is expected to reach 30 million sq. ft by the year 2010. In 2001, Pantaloon launched countrys first hypermarket „Big Bazaar‟.Impact of FDI on Retail Sector in India
  • 15. Major Retailers in IndiaPantaloon: It has the following retail segments:  Food & Grocery: Big Bazaar, Food Bazaar  Home Solutions: Hometown, Furniture Bazaar, Collection-i  Consumer Electronics: e-zone  Shoes: Shoe Factory  Books, Music & Gifts: Depot  Health & Beauty Care: Star, Sitara  E-tailing: Futurebazaar.com  Entertainment: Bowling Co.Impact of FDI on Retail Sector in India
  • 16. Major Retailers in IndiaImpact of FDI on Retail Sector in India
  • 17. Major Retailers in IndiaTata Group: Tata group is another major player in Indian retail industry with its subsidiary Trent, which operates Westside and Star India Bazaar. Established in 1998, it also acquired the largest book and music retailer in India „Landmark‟ in 2005. Trent owns over 4 lakh sq. ft retail space across the country.Impact of FDI on Retail Sector in India
  • 18. Major Retailers in IndiaImpact of FDI on Retail Sector in India
  • 19. Major Retailers in IndiaRPG Group: RPG Group is one of the earlier entrants in the Indian retail market, when it came into food & grocery retailing in 1996 with its retail Foodworld stores. Later it also opened the pharmacy and beauty care outlets „Health & Glow‟.Impact of FDI on Retail Sector in India
  • 20. Major Retailers in IndiaReliance: Reliance is one of the biggest players in Indian retail industry. More than 300 Reliance Fresh stores and Reliance Mart are quite popular in the Indian retail market. Its expecting its sales to reach ` 90,000 crores by 2010.Impact of FDI on Retail Sector in India
  • 21. Major Retailers in IndiaAV Birla Group: AV Birla Group has a strong presence in Indian apparel retailing. The brands like Louis Phillipe, Allen Solly, Van Heusen, Peter England are quite popular. Its also investing in other segments of retail. It will invest ` 8000-9000 crores by 2010.Impact of FDI on Retail Sector in India
  • 22. Major Retailers in IndiaImpact of FDI on Retail Sector in India
  • 23. Retail formats in IndiaMom-and-pop stores (Kirana store): They are family owned business catering to small sections; they are individually handled retail outlets and have a personal touch.Impact of FDI on Retail Sector in India
  • 24. Retail formats in IndiaDepartmental stores: These are general retail merchandisers offering quality products and services.Impact of FDI on Retail Sector in India
  • 25. Retail formats in IndiaShopping malls: The biggest form of retail in India, malls offers customers a mix of all types of products and services including entertainment and food under a single roof.Impact of FDI on Retail Sector in India
  • 26. Retail formats in IndiaE-traders: Are retailers providing online buying and selling of products and services.Impact of FDI on Retail Sector in India
  • 27. Retail formats in IndiaDiscount stores: These are factory outlets that give discount on the MRP.Impact of FDI on Retail Sector in India
  • 28. Retail formats in IndiaVending: It is a relatively new entry, in the retail sector. Here beverages, snacks and other small items can be bought via vending machine.Impact of FDI on Retail Sector in India
  • 29. Retail formats in IndiaCategory killers: Small specialty stores that offer a variety of categories. They are known as category killers as they focus on specific categories, such as electronics and sporting goods. E.g. Selection Centre Sports, Strand Book StoreImpact of FDI on Retail Sector in India
  • 30. Retail formats in IndiaSpecialty stores: These are retail chains dealing in specific categories and provide deep assortment. Mumbais Crossword Book Store and RPGs Music World are a couple of examples.Impact of FDI on Retail Sector in India
  • 31. Differences in single brand retail and multi brandretail:Single Brand Retail: Nike Company opens outlets in Ahmadabad, Bangalore, Delhi and Mumbai selling nothing but Nike Shoes, Nike wrist-watches and Nike t-shirts only. This is single brand retail. FDI in Single-Brand Retailing was permitted in 2006, to the extent of 51%. These were mostly outlets for sportswear, luxury goods, apparel, fashion clothing, jewellery, hand bags, life- style products.Impact of FDI on Retail Sector in India
  • 32. Differences in single brand retail and multi brandretail:Single Brand Retail: But neither the Political parties nor Local Kiranawala raised any voice against this, why? Because these are „high-end‟ luxury items for brand conscious upper middle class and rich class people. It doesn‟t hurt population at large. It was not like people would stop purchasing from local garment store to get Nike or Adidas.Impact of FDI on Retail Sector in India
  • 33. Differences in single brand retail and multi brandretail: Multi Brand Retail: Big Bazaar opens mall in above cities: selling t-shirts of multiple-brands such as Reebok, Nike, Adidas, Allen Solley, Van Huesen, Peter England etc. +and+ they also sell unbranded t-shirts (you know those buy one get three t-shirts free from unknown companies.) So this is multi-brand retail: when an outlet sells a product (tshirt, tie, shoes anything) of more than one brand.Impact of FDI on Retail Sector in India
  • 34. FDI in Retailing in India: Until 2011, Indian central government denied Foreign Direct Investment (FDI) in multi-brand retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or any retail outlets.Even single-brand retail was limited to 51% ownership and a bureaucratic process.In November 2011, Indias central government announced retail reforms for both multi-brand stores and single-brand stores.Impact of FDI on Retail Sector in India
  • 35. FDI in Retailing in India:These market reforms paved the way for retail innovation and competition with multi-brand retailers such as Wal-Mart, Carrefour and Tesco, as well single brand majors such as IKEA, Nike, and Apple. Even single-brand retail was limited to 51% ownership and a bureaucratic process.The statement flickered intense activism, both in opposition and in support of the reforms.Impact of FDI on Retail Sector in India
  • 36. FDI in Retailing in India:In December 2011, under pressure from the opposition, Indian government placed the retail reforms on hold till it reached a consensus.The statement flickered intense reactions, both in opposition and in support of the reforms. In January 2012, India approved reforms for single- brand stores welcoming anyone in the world to innovate in Indian retail market with 100% ownership, but imposed the requirement that the single brand retailer source 30% of its goods from India.Impact of FDI on Retail Sector in India
  • 37. FDI in Retailing in India:Recently, a couple of weeks ago, on 14 Sepetember 2012, the Cabinet approved FDI upto 51% in multi- brand retail, along with a slew of economic reforms, subject to many riders. This move has led to the political situation heating upto a boiling point, with TMC having withdrawn support from the government.Impact of FDI on Retail Sector in India
  • 38. FDI in Retailing in India:Impact of FDI on Retail Sector in India
  • 39. Major Players in the International Market:Wal-Mart: Wal-mart is an American multinational retailer corporation that runs chains of large discount department stores and warehouse stores. The company is the worlds third largest public corporation, according to the Fortune Global 500 list in 2012. It is also the biggest private employer in the world with over two million employees, and is the largest retailer in the world.Impact of FDI on Retail Sector in India
  • 40. Major Players in the International Market:Wal-Mart in India: Bharti Wal-Mart Private Limited is a joint venture between Bharti Enterprises, one of Indias leading business groups with interests in telecom, agri-business, insurance and retail, and Wal-Mart, the world‟s leading retailer, renowned for its efficiency and expertise in logistics, supply chain management and sourcing. The joint venture is establishing wholesale cash-and carries stores and back-end supply chain management operations in line with Government of India guidelines. Under the agreement, Bharti and Wal-Mart hold 50:50 stakes in Bharti Wal-Mart Private Limited.Impact of FDI on Retail Sector in India
  • 41. Major Players in the International Market:Impact of FDI on Retail Sector in India
  • 42. Major Players in the International Market:Carrefour:It is an international hypermarket chain headquartered in Boulogne Billancourt, France, in Greater Paris. It is one of the largest hypermarket chains in the world (with 1,395 hypermarkets at the end of 2009, the second largest retail group in the world in terms of revenue and third largest in profit after Wal-Mart and Tesco).Impact of FDI on Retail Sector in India
  • 43. Major Players in the International Market:Carrefour in India: The Carrefour Group announces the opening of its first cash & carry store in India in New Delhi under the name "Carrefour Wholesale Cash & Carry.” With a sales area of 5200 m2, this store located east of New Delhi in the Shahadra neighbourhood will offer more than 10.000 SKUs in food and non-food to professional businesses, institutions, restaurants and local retailers. This opening is in line with the groups strategy to be present in major emerging markets that offer significant expansion and medium- and long-term growth opportunities.Impact of FDI on Retail Sector in India
  • 44. Major Players in the International Market:Tesco: It is a British multinational grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom. It is the third-largest retailer in the world measured by revenues (after Wal-Mart and Carrefour) and the second-largest measured by profits (after Wal-Mart). It has stores in 14 countries across Asia, Europe and North America and is the grocery market leader in the UK, Malaysia, the Republic of Ireland and Thailand.Impact of FDI on Retail Sector in India
  • 45. Major Players in the International Market:Tesco in India: Tesco has had a limited presence in India with a service centre in Bangalore, and outsourcing. In 2008 Tesco announced their intention to invest an initial £60m ($115m) to open a wholesale cash-and- carry business based in Mumbai with the assistance of the Tata Group.Impact of FDI on Retail Sector in India
  • 46. Major Players in the International Market:IKEA: IKEA is a privately held, international home products company that designs and sells ready to- assemble furniture such as beds, chairs, desks, appliances and home accessories. The company is the worlds largest furniture retailer.Impact of FDI on Retail Sector in India
  • 47. Major Players in the International Market:IKEA in India: Swedish furniture home accessories IKEA is planning to enter India with a Euros 1.5 billion investment in a single-brand retail venture. In the first phase it plans to set up 25 stores with an investment of Euros 600 million (around Rs 4,200 crores) in opening 25 stores. The company has already sought government permission to set up a 100% Indian venture and has also promised to increase its sourcing from the country.Impact of FDI on Retail Sector in India
  • 48. Major Players in the International Market:IKEA:Impact of FDI on Retail Sector in India
  • 49. Government Policies:Background:India has liberalized its retail industry to permit foreign investment, with regulatory issues and legal structures pertinent to establish operations in this new dynamic market.Foreign Investment in India is governed by the FDI policy announced by the Government of India and the provision of the Foreign Exchange Management Act (FEMA) 1999.Impact of FDI on Retail Sector in India
  • 50. Government Policies:Background:As part of the economic liberalization process set in place by the Industrial Policy of 1991, the Indian government has opened the retail sector to FDI slowly through a series of steps.Impact of FDI on Retail Sector in India
  • 51. Government Policies:Background: 1995 – World Trade Organization‟s general agreement on trade in services, which include both wholesale and retailing services, came into effect 1997 – FDI in cash and carry (wholesale) with 100% rights allowed under the government approval route 2006 – FDI in cash and carry (wholesale) brought under the automatic route Up-to 51% investment in a single- brand retail outlet permittedImpact of FDI on Retail Sector in India
  • 52. Government Policies:Background: 2011 – 100% FDI in single –brand retail permitted 2012, Sep – 51% FDI in multi- brand retail permittedImpact of FDI on Retail Sector in India
  • 53. Government Policies:Background:The Indian government removed the 51% cap on FDI into single-brand retail outlets in December 2011, and opened the market fully to foreign investors by permitting 100% foreign investment in this area.It also made drastic progress in allowing multi-brand retailing, which had so far had been prohibited in India.Impact of FDI on Retail Sector in India
  • 54. Government Policies:Background: After months of policy paralysis, Manmohan Singh‟s government roared back to life on Friday, 14th of September by unleashing a blitz of reforms. It also made drastic progress in allowing multi-brand retailing, which had so far had been prohibited in India. The existence of large supermarket brands displacing traditional Indian mom-and-pop stores is a hot political issue in India, and the current move to allow 51% FDI in multi brand retail industry will remain a burning issue for some time yet to come.Impact of FDI on Retail Sector in India
  • 55. Political Developments: The Government declared its intention to allow FDI in multi brand retail upto 51% in November 2011. This move led to large scale protests from political parties in the opposition. The UPA and the NDA were divided on the issue, with differences of opinion about the benefits and disadvantages of FDI in multi brand retail to different sectors of the Indian economy. The BJP threatened to file an adjournment motion in Parliament if the bill was passed without political consensus. Impact of FDI on Retail Sector in India
  • 56. Political Developments: BJP alleged the decision to allow 51 per cent FDI in multi- brand retail was taken under pressure from the US, UK and France and challenged the government to face the adjournment motion if it was confident of majority support. The TMC, in spite of being a part of the UPA, vehemently opposed the move. There were a variety of opinions from the myriad political parties in the melting pot of India‟s diverse political spectrum. After months of policy paralysis, Manmohan Singh‟s government roared back to life on Friday, 14th September, by unleashing a blitz of reforms. Impact of FDI on Retail Sector in India
  • 57. Political Developments: In less than 24 hours, the government announced more measures to liberalize the economy than in the past eight years. The government made a decision to allow foreign direct investment from abroad of up to 51 percent in multi-brand supermarkets, up to 49 percent in aviation, up to 71 percent in broadcasting and up to 49 percent in parts of the power industry. Singh has cleverly sidestepped opposition parties and waspish allies this time by leaving it to individual states to decide whether to allow the supermarkets on their patch. Impact of FDI on Retail Sector in India
  • 58. Political Developments: The government appears to be gambling that its political fortunes in the 2014 national elections are best served by being bold. India‟s benchmark BSE index rose 2.46 percent to 18,464.27 points on Friday, its highest close since 26 July, 2011. The Cabinet‟s decision to approve FDI in multi brand retail has led to a total disruption of Parliament, with the Opposition forcing constant adjournments over the issue. However, the TMC has been a constant thorn in UPA‟s side and it has withdrawn support to the Government and the six Cabinet Ministers of the TMC have submitted their resignations to the Prime Minister. Impact of FDI on Retail Sector in India
  • 59. Political Developments: For now though, the Government is safe because the SP and the BSP have pledged outside support to the UPA, in spite of their opposition to the Government‟s recent moves. The BJP has also made its stand clear, declaring that it does not intend to file a no-confidence motion. Impact of FDI on Retail Sector in India
  • 60. Political Developments:Impact of FDI on Retail Sector in India
  • 61. FDI proposal in its current form: The Cabinet has approved the proposal of the Department of Industrial Policy & Promotion for permitting FDI in multi-brand retail trading, subject to specified conditions. The proposal had earlier been approved by the Cabinet in its meeting on 24.11.2012. However, implementation of the proposal had been deferred, for evolving a broader consensus on the subject. The Chief Ministers of Delhi, Assam, Maharashtra, Andhra Pradesh, Rajasthan, Uttarakhand, Haryana and Governments of the State of Manipur and the Union Territory of Daman & Diu and Dadra and Nagar Haveli, have expressed support for the policy in writing. Impact of FDI on Retail Sector in India
  • 62. FDI proposal in its current form: The Chief Minister of Jammu & Kashmir, through his press statements, has publicly endorsed the policy and asked for its implementation. The State Governments of Bihar, Karnataka, Kerala, Madhya Pradesh, Tripura and Odisha have expressed reservations. During the consultations with the stakeholders, views for and against FDI in multi-brand retail trading were expressed. On balance, however, the discussions generally indicated support for the policy, subject to the introduction of adequate safeguards. Impact of FDI on Retail Sector in India
  • 63. FDI proposal in its current form:Accordingly, the following proposals have been approved: (i) Retail sales outlets may be set up in those States which have agreed or agree in future to allow FDI in MBRT under this policy. The establishment of the retail sales outlets will be in compliance of applicable State laws/ regulations, such as the Shops and Establishments Act etc.Impact of FDI on Retail Sector in India
  • 64. FDI proposal in its current form:(ii) Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per 2011 Census. The outlets may only be setup in areas which have been approved by the Municipal Corporations of the concerned cities, subject to various conditions. On the other hand, States/ Union Terrritories, which do not have any city with a population exceeding 10 lakhs, but are desirous of implementing the policy, would have the flexibility to do so.Impact of FDI on Retail Sector in India
  • 65. FDI proposal in its current form: (iii) A three year timeframe has been fixed for setting up the back-end infrastructure, which includes capital expenditure on all activities, excluding that on front-end units; for instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of backend infrastructure. This condition will bind the foreign investors to invest in critical back-end infrastructure, which is a felt need across the country. It would also make the foreign investors accountable for proper implementation of the condition. Impact of FDI on Retail Sector in India
  • 66. FDI proposal in its current form: (iv) A high-level group under the Minister of Consumer Affairs may be constituted to examine various issues concerning internal trade and make recommendations for internal trade reforms.Impact of FDI on Retail Sector in India
  • 67. Impact of FDI on Retail Sector in India
  • 68. Impact of FDI : Different points of viewGovernment Argument Huge investments in the retail sector will see gainful employment opportunities in agro- processing, sorting, marketing, logistics management and front-end retail.Impact of FDI on Retail Sector in India
  • 69. Impact of FDI : Different points of viewGovernment ArgumentAt least 10 million jobs will be created in the next three years in the retail sector.Impact of FDI on Retail Sector in India
  • 70. Impact of FDI : Different points of viewGovernment ArgumentFDI in retail will help farmers secure remunerative prices by eliminating exploitative middlemen.Impact of FDI on Retail Sector in India
  • 71. Impact of FDI : Different points of viewGovernment ArgumentForeign retail majors will ensure effective supply-chain efficiencies. That will also create an opportunity for the local players in retail to learn from them.Impact of FDI on Retail Sector in India
  • 72. Impact of FDI : Different points of viewGovernment Argument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, s orting and processing. This is expected to considerably reduce post-harvest losses.Impact of FDI on Retail Sector in India
  • 73. Impact of FDI : Different points of viewGovernment ArgumentThis will have a salutary impact on food inflation from efficiencies in supply chain. This is also because food, which perishes due to inadequate infrastructure, will not be wasted.Impact of FDI on Retail Sector in India
  • 74. Impact of FDI : Different points of viewGovernment Argument Sourcing of a minimum of 30% from Indian micro and small industry is mandatory. This will provide the scales to encourage domestic value addition and manufacturing, thereby creating a multiplier effect for employment, technology upgradation and income generation.Impact of FDI on Retail Sector in India
  • 75. Impact of FDI : Different points of viewGovernment ArgumentA strong legal framework in the form of the Competition Commission is available to deal with any anti-competitive practices, including predatory pricing.Impact of FDI on Retail Sector in India
  • 76. Impact of FDI : Different points of viewGovernment ArgumentThere has been impressive growth in retail and wholesale trade after China approved 100% FDI in retail. Thailand has experienced tremendous growth in the agro-processing industry.Impact of FDI on Retail Sector in India
  • 77. Impact of FDI : Different points of viewGovernment Argument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.Impact of FDI on Retail Sector in India
  • 78. Impact of FDI : Different points of viewGovernment ArgumentIn any case, organized retail through Indian corporates is permissible. Experience of the last decade shows small retailers have flourished in harmony with large outlets.Impact of FDI on Retail Sector in India
  • 79. Impact of FDI : Different points of viewGovernment ArgumentBenefit to farmers: 7-10% higher price to farmers than what they get from Mandi 3-4% incentive for the quality of the produce farmers deliver to Bharti Wal-Mart based on customer requirement Expert advice on better crop planning and management Efficient crop calendar management aimed at catching early and late seasons for better prices Opportunity to maximize and improve income by offering better qualityImpact of FDI on Retail Sector in India
  • 80. Impact of FDI : Different points of viewGovernment ArgumentBenefit to stores & customers: Fresh produce Local source Consistent quality Safer food Value for money Lower cost compared to open market buysImpact of FDI on Retail Sector in India
  • 81. “The language that the BJP has employed tothreaten foreign investors is condemnable, veryregrettable and tantamount to verbal lumpenism. Tosay that governments will change in states afterrecent elections and new government may canceldecisions taken by the Centre on FDI is against thespirit of democratic polity....this indicates theirdictatorial mindset of my way or highway”Manmohan Singh, Prime Minister of India
  • 82. “There was a time when even the entry ofcomputers was resisted in the belief that itwould lead to a loss of jobs. If FDI canunleash the true potential of agricultural valuechain, we must welcome it. As far as thekirana store is concerned, let us notunderestimate Indian ingenuity. Wal-mart canco-exist with the small shop, each adding tocustomer choice.” Rajan Mittal, MD, Bharti Enterprises
  • 83. Impact of FDI : Different points of viewOpposition‘s Argument Move will lead to large-scale job losses. International experience shows supermarkets invariably displace small retailers. Small retail has virtually been wiped out in developed countries like the US and in Europe. South East Asian countries had to impose stringent zoning and licensing regulations to restrict growth of supermarkets after small retailers were getting displaced. India has the highest shopping density in the world with 11 shops per 1,000 people. It has 1.2 crore shops employing over 4 crore people; 95% of these are small shops run by self-employed peopleImpact of FDI on Retail Sector in India
  • 84. Impact of FDI : Different points of viewOpposition‘s ArgumentGlobal retail giants will resort to predatory pricing to create monopoly/oligopoly. This can result in essentials, including food supplies, being controlled entirely by foreign organizations, resulting in elimination of local stores.Impact of FDI on Retail Sector in India
  • 85. Impact of FDI : Different points of viewOpposition‘s ArgumentFragmented markets give larger options to consumers. Consolidated markets make the consumer captive. Allowing foreign players with deep pockets leads to consolidation. International retail does not create additional markets, it merely displaces existing markets.Impact of FDI on Retail Sector in India
  • 86. Impact of FDI : Different points of viewOpposition‘s ArgumentJobs in the manufacturing sector will be lost because structured international retail makes purchases internationally and not from domestic sources. This has been the experience of most countries which have allowed FDI in retail.Impact of FDI on Retail Sector in India
  • 87. Impact of FDI : Different points of viewOpposition‘s ArgumentArgument that only foreign players can create the supply chain for farm produce is bogus. International retail players have no role in building roads or generating power. They are only required to create storage facilities and cold chains. This could be done by governments in India.Impact of FDI on Retail Sector in India
  • 88. Impact of FDI : Different points of viewOpposition‘s ArgumentComparison between India and China is misplaced. China is predominantly a manufacturing economy. Its the largest supplier to Wal-Mart and other international majors. It obviously cannot say no to these chains opening stores in China when it is a global supplier to them. India in contrast will lose both manufacturing and services jobs.Impact of FDI on Retail Sector in India
  • 89. “FDI in multi-brand retail was taken underpressure from countries like America, whoseeconomic interests stand inverselyproportioned to that of small traders andfarmers.” Laxmikant Vajpayee, BJP State Chief
  • 90. “Our partys position is clear. We are opposedto FDI in retail sector. The Government says itwill allow FDI in branded goods. But it is aloose term as anything can be branded. Wewant the Government to specify the itemswhere FDI is allowed.”Sitaram Yechury, CPI-M
  • 91. Impact of FDI : Different points of viewImpact of FDI on Retail Sector in India
  • 92. Our View:In principle, governments should not prevent anybody, Indian or foreign, from setting up any business unless there are very good reasons to do so. Hence, unless it can be shown that FDI in retail will do more harm than good for the economy, it should be allowed.Impact of FDI on Retail Sector in India
  • 93. Our View:A major argument given by opponents of FDI in retail is that there will be major job losses. Frankly, the jury is out on whether this is the case or not, with different studies claiming different findings. Big retail chains are actually going to hire a lot of people. So, in the short run, there will be a spurt in jobs. Eventually, theres likely to be a redistribution of jobs with some drying up (like that of middlemen) and some new ones sprouting up.Impact of FDI on Retail Sector in India
  • 94. Our View:Fears of small shopkeepers getting displaced are vastly exaggerated. When domestic majors were allowed to invest in retail, both supermarket chains and neighbourhood pop-and-mom stores coexisted. Its not going to be any different when FDI in retail is allowed. Who, after all, will give home delivery? The local kirana. Why would anyone shun them?Impact of FDI on Retail Sector in India
  • 95. Our View:If anything, the entry of retail big boys 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 - thats the USP of their business. This is done by smart procurement and inventory management: Good practices from which Indian retail can also learn.Impact of FDI on Retail Sector in India
  • 96. Our View:If anything, the entry of retail big boys 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 - thats the USP of their business. This is done by smart procurement and inventory management: Good practices from which Indian retail can also learn.Impact of FDI on Retail Sector in India
  • 97. Our View: The argument that farmers will suffer once global retail has developed a virtual monopoly is also weak. To begin with, its very unlikely that global retail will ever become monopolies. Stores like Wal-Mart or Tesco are by definition few, on the outskirts of cities (to keep real estate costs low), and cant intrude into the territory of local kiranas. So, how will they gobble up the local guy? Secondly, it cant be anyones case that farmers are getting a good deal right now. The fact is that farmers barely subsist while middlemen take the cream.Impact of FDI on Retail Sector in India
  • 98. Bibliography: Print Media: 1. The Times Of India 2. The HinduElectronic Media: 1. NDTV 24X7 2. Times Now 3. Headlines Today 4. CNN IBNImpact of FDI on Retail Sector in India
  • 99. Bibliography: Internet:1.http://www.globaljurix.com/foreign-direct-investment-retail-fdi.php2.http://en.wikipedia.org/wiki/Foreign_direct_investment3.http://www.fibre2fashion.com/industry-article/7/604/fdi-in-retailing1.asp4.http://articles.timesofindia.indiatimes.com/2011-11-29/india/30453728_1_retail-sector-small-retailers-global-retail-giants5.http://sanjaykaul.wordpress.com/2011/12/02/10-reasons-why-fdi-in-retail-is-a-bad-idea/6.http://businesstoday.intoday.in/story/govt-may-announce-fdi-package-for-retail-aviation-sector/1/187955.htmlImpact of FDI on Retail Sector in India
  • 100. THANK YOU !! Thank you all for having had the patience to sit through an hour of this monotonous drone, but all we can say is, we are only repaying the favour in kind.Impact of FDI on Retail Sector in India

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