An investment is.. The commitment of money or capital to purchase financial instruments or assets in order to gain profitable returns.
An investment becomes foreign investment when.. Foreign Investment through Investment done by citizens and government of one country (home country) invest in industries of another country (host country). Foreign Direct Investments Foreign Institutional Investors
FDI Routes Automatic Route Government No permission required Approval /License required.
47 global fortune companies & 25 of Asia's top 200 companies are retailers.
US, EU & Japan constitute 80% of world retail sales.
Retailtrade in Europe employs 15% of the Europeanworkforce (3 million firms and 13 million workers).
The world’s population is poised to expand 50% by 2050. The world currently comprises of 78% poor, 11% middle income and 11% rich.
Contribution Of Retail Industry to GDP of Various Economies
Indian Retail Industry Organized retail: trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. Un-Organized retail: traditional formats of low-cost retailing, for example, the local Kirana shops, owner operated general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.
FDI in organized multi brand retail:India not yet ready Employment loss:
There are about 35 towns in India with population exceeding 1 million. There are at least 4, 32,000 people employed in these towns in India in small-scale to medium-scale shops. With the entry of big chains, many of them will lose jobs.
In food retail, farmers (the producers right at the tip of the back end chain) being left at the mercy of the foreign investors
Inflation cannot be checked: The point is that inflation cannot be checked as consumers would still have to bear the cost
WHO ARE WE LETTING IN? Annual turnover $ 400 bn 18 lakh rs. crores Annual turnover $ 130 bn 5.85 lakh rs. crores
Cont…. These are some of the ferocious, predatory companies in the world. Their practices in the market are ruthless and designed to wipe out competition. Their resources are enormous. They can invest and lose money for years till then lakh of local retailers will be wiped out.
Comparison between Wal-mart and Indian retail industry The annual turnover of Wal-Mart (Sales in 2010 were $409 billion) is higher than the size of Indian retail industry (estimated at about $370 billion) and almost 100times more than the turnover of HUL (India's largest FMCG company). The size of any Wal-Mart store is much higher than the size of any existing shopping mall in India. Wal-Mart has over 8500 stores (over 95 million square meters) where as none of India's large format store (Shoppers' Stop, Westside, Lifestyle) have more than 250.
Cont…. New stores opened annually by Wal-Mart are about 600, much higher than all organized Indian retailers put together. Wal-Mart has around 40,000 suppliers throughout the world and more than 700,000 SKU's on its web site, a number that cannot be compared. Daily customers are about 18 million (almost equivalent to Mumbai's entire population). Time between each Barbie Sale at Wal-Mart is just two seconds (same rate at which babies are produced in India!) None of the Indian organized retailer has ventured overseas where as Wal-Mart is now in 15 countries and will expand to 21 countries in two years.
arguments in favor of FDI Factors necessitates FDI in India
To achieve expected growth in Indian GDP by
To reduce gap between farm prices and final retail prices through structural change in distribution - Inflation control mechanism.
To acquire market-savvy, market-intelligent and best management practices.
To bring trade balance
To increase liquidity by the way of foreign exchange reserves