FDI in Indian Retail Industry


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What's the big fuss about FDI in Indian Retail Industry? Single brand and multi brand retailing being opened up in India. What are the pros and cons of FDI..?

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FDI in Indian Retail Industry

  1. 1. The big fuss over FDI in INDIAN RETAIL.. www.profmanishparihar.blogspot.com November 2011
  2. 2. <ul><li>Indian Government </li></ul><ul><li>(comprised of a coalition of political parties called the UPA) </li></ul><ul><li>has announced (Nov 2011) : </li></ul><ul><li>100 % FDI in single brand retail and 51 % FDI in multi-brand retail.. </li></ul>
  3. 3. This decision has invoked a hue and cry all over..
  4. 4. <ul><li>Opposition political parties are threatening to STALL the Parliament Winter Session.. </li></ul>
  5. 5. <ul><li>Even political leaders within the ruling UPA government DIVIDED on the issue.. </li></ul><ul><li>eg. Kerala CM, Ramesh Chennithala & DMK leader Karunanidhi and others </li></ul>
  6. 6. But why is everyone so scared about it..?? Let’s start with the basics:
  7. 7. 14 Source: http://www.slideshare.net/rahulogy/the-great-indian-retail-story
  8. 8. Global Retail is a $14 trillion industry Source: http://www.clearwatercf.com/documents/sectors/IMAP_Retail_Report_2010.pdf
  9. 9. Indian Retail Scenario <ul><li>The Rs 18,673 billion (US$ 401 billion) Indian retail market is only 3 per cent of Global retail…. </li></ul>Source: http://www.ibef.org/industry/retail.aspx
  10. 10. <ul><li>Of this only 6% is organised retail as of 2010. </li></ul><ul><li>The rest 94% remains unorganized: </li></ul><ul><ul><li>What we call Kirana Stores, ‘mom-and-pop’ stores, people selling on footpaths and so on… </li></ul></ul>
  11. 11. <ul><li>But surprisingly, Indian retail sector accounts for 22% of the country's gross domestic product (GDP) and contributes to 8 per cent of the total employment… </li></ul>Source: http://focusafrica.gov.in/Sector_Profile_DRC.html
  12. 12. So, what are the THREATS of allowing global retailers in India..?
  13. 13. Threats: <ul><li>Global giants like WalMart will crush our unorganized retail sector.. </li></ul><ul><li>(Which consists of around 12 million kirana stores in the country ) </li></ul>Source: www.indianretailing.com
  14. 14. Because… Global
  15. 15. Dinosaurs Indian Retail WalMart
  16. 16. <ul><li>Hence, if we open up our retail sector, then our desi retailers and the millions of kirana stores will go out of business .. </li></ul><ul><li>Indians will be drained of all their hard earned money through consumerism .. </li></ul><ul><li>Money will be drained out of our country </li></ul>
  17. 17. In short, as they say in Gaul.. “The sky may fall on our heads*..!” * From the popular comic series: Asterix
  18. 18. But let us take a look at the other side of the coin..
  19. 19. A recent study by IIM-A and Tata Institute of Social Sciences says.. <ul><li>Source: Prof. Arbind Sahay (IIM-A) and Prof. Gordhan Saini (TISS) </li></ul><ul><li>“ Effect of credit and low price guarantee on consumer purchase intention </li></ul><ul><li>A comparative study of kirana store and modern retail store in an </li></ul><ul><li>Emerging Market, 2011 </li></ul>
  20. 20. <ul><li>‘ While low price guarantee (LPG) is the attraction of malls, a majority of customers are ready to go to the kirana stores because of the credit facilities and the level of personalized service ’ </li></ul><ul><li>kirana stores have a very strong “ knowledge intimacy ” with their customers </li></ul>
  21. 21. Hence, Malls & Kirana Stores can co-exist in India..
  22. 22. Indian Consumer Behavior <ul><li>Indian consumer does NOT drive to the outskirts of the city in her big car at the end of each month to purchase her monthly groceries… </li></ul>
  23. 23. Also.. <ul><li>She sometimes goes to malls for the thrill and shopping experience, but her major chunk of purchases are from the unorganized sector.. </li></ul>
  24. 24. + Conditional FDI.. <ul><li>The current FDI relaxation comes with a condition: 30% of sourcing of all products has to be done from Indian suppliers / SMEs.. </li></ul><ul><li>This recommendation can create much needed employment in India </li></ul>
  25. 25. Hence we don’t need to have..
  26. 26. Our desi retailers and kirana stores can give WalMarts of the world a run for their money..!
  27. 27. Wait….. By the way, what is the current state of our retail industry?
  28. 28. <ul><li>Pathetic condition of supply side channels .. </li></ul><ul><li>of the existing un/organized retail industry as well as Government-run Public Distribution System.. </li></ul><ul><li>This is an important factor contributing to spiraling inflation.. </li></ul>
  29. 29. <ul><li>Public Distribution System (PDS) is almost defunct .. With grains rotting away / eaten by mice.. </li></ul>
  30. 30. <ul><li>Food wasted in FCI godowns could have fed 2500 lakh families for 10 years !!! </li></ul>Source: http://arindamchaudhuri.blogspot.com/2010/07/food-wasted-in-fci-godowns-could-have.html
  31. 31. <ul><li>With around 20 to 30 crore Indians sleeping hungry every night and over 7000 Indians dying of hunger every day , such waste is not less than a criminal offence. </li></ul>
  32. 32. <ul><li>A fresh estimate from the ministry of food processing says a whopping Rs 58,000 crore worth of agriculture food items get wasted in the country every year. </li></ul><ul><li>That’s almost 50% of the total annual agricultural produce..!! </li></ul>Source: http://www.rediff.com/money/2007/mar/16food.htm
  33. 33. Hence, our country’s supply chain infrastructure is grossly underdeveloped..
  34. 34. <ul><li>FDI in retail can result into developing “farm-to-fork” infrastructure consisting of integrated storage, cold chain and transport links.. </li></ul><ul><li>A much needed repair of our grossly leaking distribution system… </li></ul>
  35. 35. And, doesn’t this big fuss over liberalization in retail industry remind us of..
  36. 36. déjà vu…? <ul><li>The big fuss before 1991 reforms …? </li></ul><ul><li>The big fuss before letting global telecom players enter Indian Telecom Industry before 2000…? </li></ul>
  37. 37. We know very well that these have actually fuelled The Great India Growth Story* *Not factoring in the great Indian 2G Scam… :-P
  38. 38. <ul><li>What ultimately matters is : </li></ul><ul><ul><li>Operational efficiencies.. </li></ul></ul><ul><ul><li>Best deal to the final customer.. </li></ul></ul><ul><ul><li>True globalization… </li></ul></ul>
  39. 39. So that’s it about.. The big fuss over FDI in INDIAN RETAIL..
  40. 40. with all these angry birds around..
  41. 41. What kind of bird should we be right now....? © www.profmanishparihar.blogspot.com The end. ? ?