Fdi issues in retail


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fdi issues in retail

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Fdi issues in retail

  1. 1. FDI<br />issues in<br />Retail<br />
  2. 2. what is FDI? <br />
  3. 3. An investment is..<br /> The commitment of money or capital to purchase financial instruments or assets in order to gain profitable returns.<br />
  4. 4. An investment becomes foreign investment when..<br />Foreign Investment through<br /> Investment done by citizens and government of one country (home country) invest in industries of another country (host country).<br />Foreign Direct Investments<br />Foreign Institutional Investors<br />
  5. 5. FDI Routes<br /> Automatic Route<br />Government<br />No permission required<br /> Approval /License required.<br />
  6. 6. Retail Sector at Global Level<br /><ul><li>One of the world's largest industries exceeding US$ 9 trillion.
  7. 7. Dominated by developed countries.
  8. 8. 47 global fortune companies & 25 of Asia's top 200 companies are retailers.
  9. 9. US, EU & Japan constitute 80% of world retail sales.</li></li></ul><li><ul><li> Retailtrade in Europe employs 15% of the Europeanworkforce (3 million firms and 13 million workers).
  10. 10. The world’s population is poised to expand 50% by 2050. The world currently comprises of 78% poor, 11% middle income and 11% rich.</li></li></ul><li>Contribution Of Retail Industry to GDP of Various Economies<br />
  11. 11. Indian Retail Industry <br />Organized retail: <br />trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc.<br />Un-Organized retail:<br />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.<br />
  12. 12. Major Indian Retailers : Categories <br />
  13. 13. Segmentation<br />
  14. 14. Why Global Retailers Look Up to India?<br /><ul><li>India is a developing country.
  15. 15. Indian market is very large market
  16. 16. Retail is the topmost growing market in India
  17. 17. The environmental and political factors are not that much bad in India.
  18. 18. Tax breaks, import duty exemptions, land and power subsidies, and other enticements.</li></li></ul><li>Retail market in India <br /><ul><li>The total retail sales in India will grow from US$ 395.96 billion in 2011 to US$ 785.12 billion by 2015
  19. 19. Accounts for 14% of countries GDP
  20. 20. Accounts for 8% of countries employment </li></li></ul><li>Current Retail scenario in India<br /><ul><li>100% FDI is allowed in wholesale cash and carry trade.
  21. 21. 51% FDI in single brand retail
  22. 22. No FDI in multi brand retail</li></li></ul><li>WHAT WILL HAPPEN TO RETAIL TRADE<br /><ul><li>These companies open chain of shops. With a shop in each area the retail small shopkeepers will be put to heavy loss
  23. 23. Slowly the local shops will start closing down.
  24. 24. These shops will capture the trade.
  25. 25. In countries where they have established their market share is </li></ul>Name of Country % of Market Share<br />America 80% <br />England 80%<br />Western Europe 70%<br />Brazil 40%<br />Thailand 40%<br />Korea 35%<br />China 20%<br /><ul><li>Imagine Roadside DHABA’s after RELIANCE FOOD CHAIN Starts working.</li></li></ul><li>WHAT WILL HAPPEN TO LOCAL RETAIL TRADE<br /><ul><li>No of Retail outlets Between 1981-99 in United Kingdom came down from 56862 to 25800.
  26. 26. Between 1970-80 in Europe about 4 lakhs Retail shops were closed.
  27. 27. Competition shall be limited to Big Retail Houses
  28. 28. In the year 2000 Five Big Fast food companies captured following percent market share :</li></ul>Country % Share<br />Norway 99<br />Switzerland 88<br />Sweden 94<br />UK 64<br />Portugal 57<br />
  29. 29. WHAT HAPPENED IN THAILAND<br /><ul><li>In price war traditional shop keepers are facing problem of survival. Many small shop keepers have closed down their shops.
  30. 30. Big companies have seen growth of 40%
  31. 31. There was adverse impact on 60000 small shopkeepers.
  32. 32. The Prime Minister of Thailand agreed that there was adverse impact on retail trade.
  33. 33. The Govt. which had opened its door for FDI in retail trade with big bang had to provide financial assistance to retail traders by establishing a special fund. </li></li></ul><li>Now its India’s turn<br />Threat on unorganized retail players<br />Threat on organized retail players<br /><ul><li>Marginalize the domestic players
  34. 34. Huge spread of retail chain stores
  35. 35. Monopoly in the customer market and can be converted into cartel of global players.
  36. 36. Monopoly among suppliers</li></li></ul><li>FDI in organized multi brand retail:India not yet ready<br /> Employment loss:<br /><ul><li>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.
  37. 37. In food retail, farmers (the producers right at the tip of the back end chain) being left at the mercy of the foreign investors</li></ul>Inflation cannot be checked:<br />The point is that inflation cannot be checked as consumers would still have to bear the cost<br />
  38. 38. WHO ARE WE LETTING IN?<br />Annual turnover $ 400 bn<br />18 lakh rs. crores<br />Annual turnover $ 130 bn<br />5.85 lakh rs. crores<br />
  39. 39. Annual turnover $ 100 bn<br />4.5 lakh rs. crores<br />Annual turnover $ 96 bn<br />4.2 lakh rs. crores<br />
  40. 40. Cont….<br />These are some of the ferocious, predatory companies in the world.<br />Their practices in the market are ruthless and designed to wipe out competition.<br />Their resources are enormous. They can invest and lose money for years till then lakh of local retailers will be wiped out.<br />
  41. 41. Comparison between Wal-mart and Indian retail industry<br />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).<br />The size of any Wal-Mart store is much higher than the size of any existing shopping mall in India.<br />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.<br />
  42. 42. Cont….<br />New stores opened annually by Wal-Mart are about 600, much higher than all organized Indian retailers put together.<br />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.<br />Daily customers are about 18 million (almost equivalent to Mumbai's entire population).<br />Time between each Barbie Sale at Wal-Mart is just two seconds (same rate at which babies are produced in India!)<br />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.<br />
  43. 43. arguments in favor of FDI<br /> Factors necessitates FDI in India<br /><ul><li>To achieve expected growth in Indian GDP by </li></ul> encouraging export.<br /><ul><li>To reduce gap between farm prices and final retail prices through structural change in distribution - Inflation control mechanism.
  44. 44. To acquire market-savvy, market-intelligent and best management practices.</li></li></ul><li><ul><li>To bring trade balance
  45. 45. To increase liquidity by the way of foreign exchange reserves
  46. 46. Modernize the supply chain
  47. 47. Will bring healthy competition in market</li></li></ul><li>