fdi in retail sector in india


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fdi in retail sector in india

  1. 1. WHAT IS FDI….????? FDI as defined in Dictionary of Economics is “investment in a foreign country through the acquisition of a local company or the establishment there of an operation on a new site”. To put in simple words, FDI refers to capital inflows from abroad that is invested in or to enhance the production capacity of the economy
  2. 2. Current FDI Policy with Regard to Retailing in India FDI in Single Brand Retail FDI in Multi Brand Retail In single-brand retail, FDI up to 51 per cent is allowed • FDI in Multi Brand retail implies thatSubject to the following conditions…. a retail store with a foreign investment can sell multiple brands under one roof.(a) Only single brand products would be sold • FDI is not permitted in Multi Brand Retailing in India(b) Products should be sold under the same brand internationally,(c) Single-brand product retail would only cover products which are branded during manufacturing(d) Any addition to product categories to be sold under “single-brand” would require fresh approval from the government.
  3. 3. INDIAN RETAIL……• India is fifth most attractive emerging retail market: a potential goldmine.• Indian retail is largest among all industries(200 billion $).• 96% Unorganized, 4% organized• Contributes to the 10% of India’s GDP.• Growing at the rate of 20-25%• Provides 8% - employment
  4. 4. UNORGANISED RETAILERS ORGANISED RETAILERS•2nd largest self employment, after • Constitute 3-4% of trading massagriculture • Payers of sales, income and various•Link between producer and taxesconsumer • Constitute corporate players like Birla more, reliance group, Pantaloons,•Very marginal traders(35% of this has future groups.investment below 30,000 and lives • Corporate retailers have wellwith 2$ per day) established outlets in 125 and more•Most of them constituted by citiesHUF(family is depended) • Not adopted complex procurement•13%-15% are women workers chains like Wallmart, Carrefour•Poor hygiene, illeteracy, no • Financially weaker when compared to foreign players.government benefits
  5. 5. POSSIBLE IMPACT ON UNORGANISED RETAILERS• It would lead to unfair competition and ultimately result in large-scale exit of domestic retailers• Entry of large global retailers such as Wal- Mart would affect the unorganized retailer• leading to large scale displacement of persons employed in unorganized retail• There may be consolidation and it may lead to monopoly in the long run
  6. 6. IMPACT ON ORGANISED RETAIL• As foreign retailers want penetration into market, they partner the well established Indian corporate retailer• Fund flow is increased there by, can expand stores to towns with population of 10 lakh and above.• Retail managerial expertise and high level shopping malls come up• Creation of jobs for middle level managers with retail expertise• Marginal organized traders may be thrown out
  7. 7. AGRICULTURE• 65% of Indian population is engaged in agriculture and agricultural labour• Have major responsibility in food security• Marginal producers with 2 to 3 acres of land holdings• Illeteracy backed by poverty• Facing problem with pricing, middle agent exploitations• Poor market infrastructure/warehousing• Problem of transportation• Poor road connectivity in rural areas• No modern technique adopted• Dependent on rain(undeveloped irrigation)
  8. 8. OPPORTUNITY• Giant retailers make purchase directly from farmers• Farmers get up-to-date market price prior to selling• Income increases• Collective farming• Quality seeds, fertilizers on time• Enormous saving on wastage that occur from post harvest stage till it reaches consumer• Introduction of modern farming technology• Opportunity of mixed farming, there by increased income•
  10. 10. FOOD PROCESSING INDUSTRY• India is second largest producer of fruits and vegetables in the world• Negligible development in food processing sector• 35-40% of produce is wasted• No investment in value addition of farm product• Poor productivity in diary sector
  11. 11. OPPORTUNITIES•Government has stated 30-35% procurementfrom Indian SME’s• Export oriented plans from FY’12•Estimated potential of 20,000 crore business by2020•Will emerge as one of the largest employmentproviding sector•Will contribute largely to GDP
  12. 12. WAREHOUSING AND LOGISTICS•There will be huge investment on warehousingand logistics•Investment in cold storage units is estimated toRs. 800 crore•Creation of jobs in this sector for semi skilled andunskilled labourers• Can add up 7% employment•Distress selling can be prevented•Wastage is enormously reduced•Investment in cold storage can improve pesicultreand allied meat sector
  13. 13. CONSUMERS GOVERNMENT• About 122 million consumers • Increased tax from organized will be benefited sector • Increased GDP• Quality commodity at low • Creation of new employment price opportunity• Wide range of products at one • Farmer development store • Major step in food security• Benefits of modern shopping • Protection of 122 million consumer interest
  14. 14. CONCLUSION• The Indian retail sector in is severely constrained by limited availability of bank finance, efficiency should be brought is lending policy, so there should be some time gap• There should be a national commission to monitor the functioning of foreign player, and state commission to safe guard the pricing policy• Sufficient measure should be taken to check there is balanced regional development• Entry of foreign player should be gradual and initial investment should flow to back-end infrastructre,and then should be issued with license to trade