Impact of FDI in Retail Sector Presented by, Deep Jyoti Das CUN110501021 BBA 3’X
Introduction• Foreign direct investment (FDI) is direct investment into production 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.
Foreign Investment In India Is Regulated By• RBI- Reserve Bank of India• FIPB- Foreign Investment Promotion Board
Foreign Direct Investment In India• Starting from a baseline of less • Mauritius, Singapore, US and UK than $1 billion in 1990 were among the leading• A recent UNCTAD survey sources of FDI. projected India as the second • FDI in India in 2010 was $44.8 most important FDI destination billion (after China) for transnational • In 2011 experienced an corporations during 2010–2012. increase of 13% to $50.8 billion.• The sectors that attracted • Mauritius has been the largest higher inflows were “Direct Investor” in India (US $ – services 20 billion) – telecommunication • The US is the 2nd largest investor – construction activities in India (US$6 billion) – computer software and hardware
FOREIGN DIRECT INVESTMENT; NET INFLOWS (% OF GDP) IN INDIA
Forms of FDI in Indian Retailing• Joint Ventures• Franchising• Sourcing of Supplies from small-scale sector• Cash &Carry operations• Non-Store Formats
Why FDI in India• Developing economy• Low salaried employees• Low wage workers• Abundant human resources• Big private economy• Growing urban population• Changing customer pattern
Present Condition• Farmers get only 10-15% of the price we pay• 3-4 middlemen in between farmers & customers• Huge post produce losses for farmers due to inadequate facilities• A poorly managed food supply infrastructure
Why Do We Need FDI• For adequate infrastructure facilities.• For controlling food inflation.• It will create 1.5 million more jobs in 5 years.• It will increase competition which is always beneficial for the customers.• It will remove the middle-man from the equation.• It will reduce costs which in-turn will reduce prices
Challenges of FDI in Retailing• Economies of scale:- providing the customer the best at lowest price• Brand Name:- they bring with world class products which have high quality and high valued brand name• Technology:- global players are highly advanced in technology• Attract Skilled Employees:- attractive salary and high incentives can attract skilled employees towards global players• Joint Venture:- global players may not prefer to enter into joint ventures with Indian firms• Political Challenge: The support of the political structure has to be there towards the investing countries abroad.
FDI In Retail Advantages Drawbacks Generates huge employment × Foreign players would displace the unorganized retailers Increased investment in because of their superior technology financial strengths The huge tax revenue × The entry of large global generated retailer such as Wal-Mart would kill local shop and millions of jobs The customer gains from the wide variety of choices and a more diversified basket. × Increase in real estate prices and marginalize domestic entrepreneurs
THE IMPACT OF FDI IN RETAIL ON SME SECTOR- A Survey Report by CII (Confederation of Indian Industry) SALESMajority of the respondents (98.6 percent) are of the opinion that the opening ofthe FDI in retail will augment growth of sales of their products.