FDI in India

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Impact of FDI on Kirana-stores/retailing in India
Impact of FDI on Kirana-
Stores/Retailing in India.
Group Members
NameRoll.no
1. GauravJadhav 57
2. MayurThakre 52
3. ShantanuBhople 31
4. Vidhi Bhatt 08
5. Kokila Patel 17

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ACKNOWLEDGEMENT
We would like to thank our teacher and our guide Dr. Swati who
inspired us and supported us in doing our research in the right
way. We would also like to thank all the people who gave their
valuable feedback by answering our questioner.

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PREFACE
This project is a part of an on-going and collaborative research
project among the students of S.Y.BMS – A of M.L DHANKUAR
college. Our project is guided by Dr. Swati.
The intention of the project is to know and understand the
people’s views on the proposed changes in the FDI policy with
regards to retailing in India.

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Sr.No. Index Page.No.
1.
2.
3.
4.
5.
6.
7.
Introduction
Review of literature
Research Methodology
Results
Conclusion
Recommendations
Bibliography
01
07
09
13
15
16
19

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Introduction
Retailing :
Retailing is the interface between the producer and the individual
consumer buying for personal consumption. This excludes direct
interface between the manufacturer and institutional buyers such
as the government and other bulk customers. A retailer is one who
stocks the producer’s goods and is involved in the act of selling it
to the individual consumer, at a margin of profit. As such, retailing
is the last link that connects the individual consumer with the
manufacturing and distribution chain. In India’s GDP, retailing
contributes 10-11 %. The retail industry is divided into organized
and unorganized sectors. Organized retailing refers to trading
activities undertaken by licensed retailers, that is, those who are
registered for sales tax, income tax, etc. These include the
corporate-backed hypermarkets and retail chains, and also
the privately owned large retail businesses. Unorganized retailing,
on the other hand, refers to the traditional formats of low-cost
retailing, for example, the local kiranashops, owner manned general
stores, paan/beedishops, convenience stores, hand cart and
pavement vendors, etc.
Foreign Direct Investment :
Investment done by citizens and government of one country
(home country) invest in industries of another country (host
country) is called as FDI.Foreign direct investment (FDI) in this

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country assumed critical importance in the context of this
liberalization. Though India is the tenth most industrialized
country in the world, it is well known that it is mainly agro-based
with around 70% population engaged in the farm sector. However,
in the initial stage of liberalization, FDI was centered on the urban
manufacturing sectors because of its civic infrastructure,labour
availability, flexible taxation mechanism etc. The success story of
FDI in these sectors is known to you.

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Review of Literature survey
1. According to the books;
a) FDI in India’s Retail Sector, More Bad than
Good?byByMohan
Guruswamy,KamalSharma,Jeevan,Prakash
Mohanty,Thomas J. Korah.
b) Impact of FDI on Indian Retail Trade:Good, Bad or
Mix by Dr. KakaliMajumdar.
c) Foreign Direct Investment in Indian Retail Sector – An
Analysis by Paulkitagarwal.
Employment in Retailing:
A simple glance at the employment numbers is enough to paint a
good picture of the relative sizes of these two forms of trade in
India – organized trade employs roughly 5 lakh people, whereas
the unorganized retail trade employs nearly 3.95 crores. According
to a GOI study the number of workers in retail trade in 1998 was
almost 175 lakhs. Given the recent numbers indicated by other
studies, this is only indicative of the magnitude of expansion the
retail trade is experiencing, both due to economic expansion as
well as the ‘jobless growth’ that we have seen in the
past decade. It must be noted that even within the organised
sector, the number of individually-owned retail outlets far
outnumber the corporate backed institutions. Though these

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numbers translate to approximately 8% of the workforce in the
country (half the normal share in developed countries)
there are far more retailers in India than other countries in
absolute numbers, because of the demographic profile and the
preponderance of youth, India’s workforce is proportionately
much larger. That about 4% of India’s population is in the retail
trade says a lot about how vital this business is to the socio-
economic equilibrium in India.
The Waiting Foreign Juggernaut:
The largest retailer in the world ‘Wal-Mart’ has a turnover of $ 256
bn. And is growing annually at an average of 12-13%. In 2004 its
net profit was $9,000 mn. It had 4806 stores employing 1.4 mn
persons. Of these 1355 were outside the USA. The average size of
a Wal-mart is 85,000 sq.ft and the average turnover of a store was
about $ 51 mn. The turnover per employee averaged $ 175,000. In
2004 Wal-Mart had a 9% return on assets and 21% return on
equity.By contrast the average Indian retailer had a turnover of Rs.
186,075. Only 4% of the 12 million retail outlets were larger than
500 sq.ft in size. The total turnover of the unorganized retail sector
was Rs. 735,000 crores employing 39.5 mn persons.
Let alone the average Indian retailer in the unorganized sector, no
Indian retailer in the organised sector will be able to meet the
onslaught from a firm such as Wal-Mart when it comes. With its
incredibly deep pockets. Wal- Mart will be able to sustain losses for
many years till its immediate competition is wiped out. This is a
normal predatory strategy used by large players to drive out small
and dispersed competition. This entails job losses by the millions.

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India has 35 towns each with a population over 1 million. If Wal-
Mart were to open an average Wal-Mart store in each of these
cities and they reached the average Wal-Mart performance per
store – we are looking at a turnover of over Rs. 80,330 mn with
only 10195 employees. Extrapolating this with the average trend in
India, it would mean displacing about 4,32,000 persons.
If large FDI driven retailers were to take 20% of the retail trade, as
the now somewhat hard-pressed Hindustan Lever Limited
anxiously anticipates, this would mean a turnover of Rs.800 billion
on today’s basis. This would meanan employment of just 43,540
persons displacing nearly eight millionpersons employed in the
unorganized retail sector.

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Research Methodology
1. The research design used in the research is ‘Research design in
descriptive studies’. Descriptive study are those studies which
are concerned with specific predictions, with narrations of the
facts and characteristics concerning individual, group or
situation are examples of descriptive research studies. Most
studies of social research are under this category.
2. The steps followed are as followed :-
a) Formulating the objective of study-
The objective of the research conducted is to find out the
impact of proposed FDI policy on Retail sector in Indian
economy.
b) Designing the data collection methods–
The method used for collecting the data is ‘Questioner
method’. The questions used in the questioner method were
multiple choice questions and open ended questions the follow
questions were asked ;

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1. Are you aware about the proposed changes in F.D.I policy with
regards to retailing in India ?
2. Where will you prefer to shop ?Why ?
Kirana–store
Wal-Mart/Carrefour.
3. Do you think it will affect the Retailers ?How ?
4. Do you think it will help the government in generating higher
revenue ?
5. Will it cause a rise or fall in employment ?How ?
6. Due you think the prices of the goods will fall due to increase in
the competition between the retailers ?
7. Where do you get a better service ?Why ?
Kirana-store
Supermarkets.
8. According to what are the challenges that the Kirana-stores will
suffer ?
9. Do you think the implementation of the policy will affect the
standard of living of the people ?how ?
Advantages

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Cost-Effective
Non-Partial technique
Longer time provide to answer the questions
Large samples of questions make results more reliable
c) Selecting the sample–
The sample selected should be selected in such a way it covers
the whole population. Hence, we have divided the sampling
into two parts, out of the total 50 copies of questioner 25 will
be filled by the retailers and 15 by the working population and
10 by the students of various colleges.
d) Collecting the data-
The data was collected in two forms i.e; by descriptive study
and by questioner method. The descriptive data was collected
from various internet site and also from various books such as
[FDI in India’s Retail Sector, More Bad than Good? by
ByMohan Guruswamy, Kamal Sharma,
Jeevan,PrakashMohanty, Thomas J. Korah].The questioner
method was anwered by the general public.
e) Processing and analyzing the data –
The data was then properly processed and analysed. The point
of view of every person who answered the questioner was
taken into consideration and their ideas and thoughts were
analysed and accordingly the research was prepared.

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f) Reporting the searched data –
After analyzing the whole research, the conclusion must be
formed and it has to be neatly and properly submitted.Aproper
layout should be planned, which helps in presenting the report
in simple and effective style.

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Results
1) After analyzing all the reviews it was found out thatout of 50
people who answered the questioner 40 people said that due to
the implementation of the FDI policy the retailers in India
would suffer due to the entry of big Multinational
supermarkets such as Wal-mart, Carrefour etc. The retailers
will also suffer due to the lower prices which will be provided
by the giant supermarkets. They will also suffer because the
facilities and infrastructure what will be provided by them will
be less as compared to the large supermarkets. They will also
have to change as the changing trends in the retailing business,
which will not be possible for the small retailers.
2) After analyzing the literature survey it was found out that
around 18.89 crore people are doing the retailing business out
of the whole population of 1 billion in India, that means
around 8% of the total population are employed under the
retail business and who contribute around 10-11% in the total
GDP of India. The big giants such as Wal-Mart who have a
networth of 9,000 million dollar. It has 4085 stores all ovr the
world, in which 1.4 million (14 lakh) people are

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employedwhereas the total retailing population in India is
18.89 crores.
3) It has been predicted by some of the economists that if the
FDI policy is allowed in retail sector then, let alone the average
Indian retailer in the unorganized sector, no Indian retailer in
the organised sector will be able to meet the onslaught from a
firm such as Wal-Mart when it comes. With its incredibly deep
pockets Wal-Mart will be able to sustain losses for many years
till its immediate competition is wiped out. This is a normal
predatory strategy used by large players to drive out small and
dispersed competition. This entails job losses by the
millions.India has 35 towns each with a population over 1
million. If Wal-Mart wereto open an average Wal-Mart store in
each of these cities and they reached the average Wal-Mar
performance per store – we are looking at a turnover of over
Rs. 80,330 million with only 10195 employees. Hence the
desired result ill not be found and lacks of people who deal in
the retail sector will end jobless.

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Conclusion
1) After doing the research it has been concluded that if FDI
policy is introduced in the retail sector then it will affect the
retailers in India.
2) The small retailer who are earning for their livelihood will
suffer a major loss due to the competition of the giant
supermarket and will be jobless in the end.
3) But on the other hand, if it is introduced then the common
people will be benefited i.e; the prices of the goods will fall and
the infrastructure facilities will improve, the quality of the
goods will improve, the standard of living of the people will
improve and this will lead to a better life of the general public.
4) So it has been found out that the loss suffered by the retailers
will be major and it will lead to major crisis. For example in the
state of West Bengal, ¾ of the population in major cities and
village earn their livelihood by doing the retailing business.

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Recommendations
1. The retail sector in India is severely constrained by limited
availability of bank finance. The Government and RBI need to
evolve suitablelending policies that will enable retailers in the
organised andunorganised sectors to expand and improve
efficiencies. Policies thatencourage unorganised sector retailers to
migrate to the organised sectorby investing in space and
equipment should be encouraged.
2. A National Commission must be established to study the
problems of the retail sector and to evolve policies that will enable
it to cope with FDI– as and when it comes.
3. The proposed National Commission should evolve a clear set of
conditionalities on giant foreign retailers on the procurement
of farm produce, domestically manufactured merchandise and
imported goods. These conditionalities must be aimed at
encouraging the purchase of goods in the domestic market, state
the minimum space, size and specify details like, construction and
storage standards, the ratio of floor space to parking space etc.
Giant shopping centres must not add to our existing urban snarl.
4. Entry of foreign players must be gradual and with social
safeguards so that the effects of the labour dislocation can be
analysed& policy finetuned. Initially allow them to set up
supermarkets only in metros. Make the costs of entry high and

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according to specific norms and regulations so that the retailer
cannot immediately indulge in ‘predatory’ pricing.
5. In order to address the dislocation issue, it becomes imperative
to develop and improve the manufacturing sector in India.
There has been a substantial fall in employment by the
manufacturing sector, to the extent of 4.06 lakhs over the period
1998 to 2001, while its contribution to the GDP has grown at an
average rate of only 3.7%17. If this sector is given due attention,
and allowed to take wings, then it could be a source of great
compensation to the displaced workforce from the retail industry.
6. The government must actively encourage setting up of co-
operativestores to procure and stock their consumer goods and
commodities from small producers. This will address the dual
problem of limited promotion and marketing ability, as well as
market penetration for the retailer. The government can also
facilitate the setting up of warehousing units and cold chains,
thereby lowering the capital costs for the small retailers.
7. According to IndiaInfoline.com, agro products and food
processing sector in India is responsible for $69.4 billion out
of the total $180 billion retail sector (these are 2001 figures).This
is more than just asizeable portion of the pie and what makes it
even more significant is the fact that in this segment, returns are
likely to be much higher for any retailer. Prices for perishable
goods like vegetables, fruits, etc. are not fixed (as opposed to, say,
branded textiles) and therefore, this is where economies of scale
are likely to kick in and benefit the consumer in the form of lower
prices. But due attention must be given to the producer too.

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Often the producer loses out, for example, when the goods are
procured at Rs.2 and ultimately sold to the consumer at about
Rs.15 as in the case of tomatoes now. The Government
themselves can tap into theopportunities of this segment, rather
than letting it be lost to foreign players. And by doing so, they can
more directly ensure the welfare of producers and the interest of
the consumers.
8. Set up an Agricultural Perishable Produce Commission
(APPC), to ensure that procurement prices for perishable
commodities are fair to farmers and that they are not distorted
with relation to market prices.

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Bibliography
2. Questionner.
3. FDI in India’s Retail Sector, More Bad than Good
?byByMohan Guruswamy, Kamal Sharma,
Jeevan,PrakashMohanty, Thomas J. Korah.
4. Impact of FDI on Indian Retail Trade:Good, Bad or Mix by
Dr. KakaliMajumdar.
5. Foreign Direct Investment in Indian Retail Sector – An
Analysis by Paulkitagarwal.

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