This report talks about the impact of FDI in Retail in India along with critically analyzing the versatility of the regulations which have been recently introduced for Multi Brand Retail
The document provides an overview of foreign direct investment (FDI) in the retail industry in India. It discusses the benefits of FDI for farmers, suppliers and consumers through improved supply chain management and technology adoption. While FDI can benefit the economy through job creation and lower prices, there are also concerns about its impact on small retailers and employment. The document analyzes both sides of the debate around allowing FDI in multi-brand retail in India.
This document is a project report submitted by Akash Rana for his M.Com degree in economics at Smt. Chandibai Himatmal Mansukhani College. The project is titled "FDI in Retail Sector of India" and was completed in the 2015-2016 academic year under the guidance of Professor Shyam Lilani. The report includes an acknowledgement section, declaration, executive summary, table of contents, and sections on the introduction to FDI, types of FDI, India's FDI policy and retail sector, impact of allowing FDI in retail, and issues/problems with FDI in India.
FDI in retail is a controversial issue in India. While it could provide benefits like new technologies, jobs, and infrastructure; there are also concerns it could hurt small farmers and retailers. The government allows 100% FDI in single brands and 51% in multi-brand retail, but places restrictions to protect local interests. It will only be allowed in large cities and foreign companies must source 30% of products domestically. Overall FDI could help India's economy grow, but the effects must be monitored and issues addressed.
This document discusses foreign direct investment (FDI) in India's retail sector. It provides an overview of the retail sector and FDI policy in India. It notes that historically FDI was only allowed up to 51% for single brand retail and 100% for cash and carry wholesale, but the new policy will allow up to 51% for multi-brand retail. The document discusses the opportunities that FDI in retail provides, such as job creation and improvement of supply chain infrastructure, as well as challenges around competition and impact on small retailers. It concludes that FDI in retail will benefit the Indian economy if implemented carefully.
The document summarizes the impact of foreign direct investment (FDI) in the retail sector in India. It notes that while FDI in retail can generate employment, increased investment, and benefits for customers through greater competition and variety, it may also displace unorganized local retailers and small businesses. A survey by the Confederation of Indian Industry found that most small and medium enterprises believe FDI in retail would increase their sales and new orders or contracts, though opinions were more mixed on impacts to employment.
1) The document discusses foreign direct investment (FDI) in the retail sector in India, including the types of retail (single brand, multi-brand), current FDI policies that allow up to 100% in single brand and 51% in multi-brand retail, and the impacts of FDI in retail such as increased competition and quality/variety of products.
2) It also outlines trends in FDI, including growth in specialty retail stores, the continued dominance of unorganized traditional retail, and expansion in smaller cities and towns.
3) FDI provides benefits to India like access to markets and technology, but India must also develop infrastructure and skills to encourage investment and benefit from it.
FDI in retail refers to foreign investment in the retail sector of India. The document discusses the various forms of FDI in retail in India - single brand retail allowing up to 51% FDI, cash and carry wholesale allowing 100% FDI, and multi-brand retail which is currently not allowed. It also outlines the debates around the benefits and criticisms of allowing FDI in retail, such as job creation but also threats to small retailers. Overall, it examines both sides of the issue and suggests there are difficult questions for policymakers to address around how best to leverage FDI while supporting domestic industries and employment.
Foreign direct investment in multi-brand retail trading (MBRT) in India is a current issue. Allowing 51% FDI in MBRT would allow large global retailers like Walmart to set up operations in India. However, there are concerns this could negatively impact small retailers and farmers. The document discusses arguments for and against increased FDI in retail, conditions other countries place on retail FDI, and India's existing FDI policies in retail.
The document provides an overview of foreign direct investment (FDI) in the retail industry in India. It discusses the benefits of FDI for farmers, suppliers and consumers through improved supply chain management and technology adoption. While FDI can benefit the economy through job creation and lower prices, there are also concerns about its impact on small retailers and employment. The document analyzes both sides of the debate around allowing FDI in multi-brand retail in India.
This document is a project report submitted by Akash Rana for his M.Com degree in economics at Smt. Chandibai Himatmal Mansukhani College. The project is titled "FDI in Retail Sector of India" and was completed in the 2015-2016 academic year under the guidance of Professor Shyam Lilani. The report includes an acknowledgement section, declaration, executive summary, table of contents, and sections on the introduction to FDI, types of FDI, India's FDI policy and retail sector, impact of allowing FDI in retail, and issues/problems with FDI in India.
FDI in retail is a controversial issue in India. While it could provide benefits like new technologies, jobs, and infrastructure; there are also concerns it could hurt small farmers and retailers. The government allows 100% FDI in single brands and 51% in multi-brand retail, but places restrictions to protect local interests. It will only be allowed in large cities and foreign companies must source 30% of products domestically. Overall FDI could help India's economy grow, but the effects must be monitored and issues addressed.
This document discusses foreign direct investment (FDI) in India's retail sector. It provides an overview of the retail sector and FDI policy in India. It notes that historically FDI was only allowed up to 51% for single brand retail and 100% for cash and carry wholesale, but the new policy will allow up to 51% for multi-brand retail. The document discusses the opportunities that FDI in retail provides, such as job creation and improvement of supply chain infrastructure, as well as challenges around competition and impact on small retailers. It concludes that FDI in retail will benefit the Indian economy if implemented carefully.
The document summarizes the impact of foreign direct investment (FDI) in the retail sector in India. It notes that while FDI in retail can generate employment, increased investment, and benefits for customers through greater competition and variety, it may also displace unorganized local retailers and small businesses. A survey by the Confederation of Indian Industry found that most small and medium enterprises believe FDI in retail would increase their sales and new orders or contracts, though opinions were more mixed on impacts to employment.
1) The document discusses foreign direct investment (FDI) in the retail sector in India, including the types of retail (single brand, multi-brand), current FDI policies that allow up to 100% in single brand and 51% in multi-brand retail, and the impacts of FDI in retail such as increased competition and quality/variety of products.
2) It also outlines trends in FDI, including growth in specialty retail stores, the continued dominance of unorganized traditional retail, and expansion in smaller cities and towns.
3) FDI provides benefits to India like access to markets and technology, but India must also develop infrastructure and skills to encourage investment and benefit from it.
FDI in retail refers to foreign investment in the retail sector of India. The document discusses the various forms of FDI in retail in India - single brand retail allowing up to 51% FDI, cash and carry wholesale allowing 100% FDI, and multi-brand retail which is currently not allowed. It also outlines the debates around the benefits and criticisms of allowing FDI in retail, such as job creation but also threats to small retailers. Overall, it examines both sides of the issue and suggests there are difficult questions for policymakers to address around how best to leverage FDI while supporting domestic industries and employment.
Foreign direct investment in multi-brand retail trading (MBRT) in India is a current issue. Allowing 51% FDI in MBRT would allow large global retailers like Walmart to set up operations in India. However, there are concerns this could negatively impact small retailers and farmers. The document discusses arguments for and against increased FDI in retail, conditions other countries place on retail FDI, and India's existing FDI policies in retail.
FDI in Indian retail market- oppertunities and challengesGuru Selvan
The document discusses foreign direct investment (FDI) in the Indian retail market, including opportunities and challenges. It notes that India has one of the top five retail markets in the world and allows 100% FDI in single brand retail and cash and carry, as well as 51% FDI in multi-brand retail. The impacts of FDI include accelerated retail market growth, benefits to farmers and consumers, and promotion of competition and infrastructure development. However, challenges include the need for Indian retailers to consolidate, potential job losses, high borrowing costs negatively impacting domestic retailers, and predatory pricing by global retailers wiping out domestic competition.
This document is a project report submitted by Nishant Singh to Sikkim Manipal University in partial fulfillment of an MBA degree. The report analyzes the role of foreign direct investment in the Indian retail sector. It begins with an abstract that summarizes the objectives of analyzing the impact of India's FDI policy in retail using a SWOT analysis. It then provides background on FDI and the retail sector in India. The literature review discusses previous research on determinants of FDI policies in India and factors influencing consumer retail store choice. The report will analyze India's legal framework for retail FDI, conduct a SWOT analysis, and provide conclusions and recommendations.
This document provides an overview of foreign direct investment (FDI) policies related to the retail sector in India. It defines key terms like organized and unorganized retail, and outlines India's historical restrictions on FDI in multi-brand retail. The document discusses the various entry options foreign players used prior to FDI policy changes, as well as the current policies allowing FDI in single-brand and cash-and-carry wholesale retail. It also examines concerns around partially opening the retail sector to FDI and limitations of India's present retail setup.
Impact of FDI on retail sector in IndiaKaran Tyagi
Foreign direct investment (FDI) refers to investment from one country into another country. Allowing FDI in India's retail sector could provide benefits like new technologies, capital, and management skills but may threaten small unorganized retailers. India's $250 billion retail sector is mostly unorganized but organized retail is growing at 15-20% annually. Major retailers in India include Pantaloon, Tata, Reliance, and others operating stores like Big Bazaar and Reliance Fresh. Common retail formats are mom-and-pop stores, department stores, shopping malls, e-commerce, discount stores, and vending machines.
FDI in retail has the potential to benefit consumers through more choices, lower prices, and improved quality and supply chain efficiency. However, there are also risks like job losses for small retailers and increased competition. India's retail sector is currently dominated by unorganized and family-run small shops. The document discusses the various formats through which FDI can enter India like franchises, wholesale trading, and manufacturing subsidiaries. It also provides an overview of the growth prospects and impact of organized retail on the Indian economy. While FDI can boost investment and infrastructure, policymakers will need to ensure a level playing field for domestic retailers as well.
This document discusses foreign direct investment (FDI) in multi-brand retail in India. It begins with background on the team members presenting and an outline of the presentation. It then provides definitions of FDI and foreign institutional investment (FII) and distinguishes between the two. The document discusses opportunities for FDI in retail in India such as benefits to farmers and consumers, as well as challenges such as political instability and public opposition. It analyzes the retail sector and provides sector-wise analysis of FDI inflows in India. The document concludes with a comparison of FDI in India and China.
This document provides an overview of the retail sector in India and discusses the prospects and perils of allowing foreign direct investment (FDI) in retail. It notes that India's retail sector is highly fragmented, with over 12 million small, family-owned shops. Allowing FDI in retail could strengthen infrastructure, improve supply chains, and create jobs, but it may also negatively impact small retailers and the livelihoods of those employed in the retail sector. There is debate around whether FDI in retail will benefit farmers and consumers or hurt small businesses. The document examines both sides of the issue.
This document discusses FDI in multi-brand retail in India. It provides background on organized and unorganized retail sectors in India currently. It then outlines the history of FDI policies in India for single brand and multi-brand retail, including allowing up to 51% FDI in multi-brand retail with certain conditions like minimum investment amounts and sourcing from small local suppliers. The document addresses some of the major controversies around allowing FDI in multi-brand retail in India, such as potential job losses or gains, effects on prices and competition, need for foreign investment, and profits going overseas.
Foreign direct investment (FDI) refers to long term cross-border investment involving foreign management and technology transfer. There are inward, outward, and net FDI flows. India promotes productive FDI to stimulate industrialization. FDI increases capital, technology, employment, and aggregate supply and demand. However, FDI can reduce competition and domestic policy control. India's FDI policy allows up to 100% foreign ownership in some sectors with approval. Restrictive regulations, unclear policies, high tariffs, and limited state autonomy present issues for attracting beneficial long-term FDI to India.
This document discusses FDI in India's retail sector. It provides an overview of India's retail industry, which is largely unorganized. It then discusses the benefits of FDI, the types of FDI (single brand and multi-brand retail), and the impacts on various stakeholders like farmers, consumers, small businesses and the government. It outlines the debate around the issues like job losses and impact on small retailers. Finally, it discusses the current scenario of FDI in retail in India and provides an overall conclusion that FDI in retail can prove beneficial if implemented properly.
This document analyzes the SWOT of allowing foreign direct investment in India's retail sector. Currently, FDI is allowed for cash and carry wholesale and single brand retail up to 100% with government approval. The government may now allow 51% FDI in multi-brand retail stores over 1 million people. This would organize the retail sector, increase competition, quality control and infrastructure development while bringing in foreign capital. However, political support and global economic conditions remain threats. Overall FDI could benefit India's retail sector which currently contributes significantly to GDP but is unorganized with low productivity.
FDI or Foreign Direct Investment is a self explanatory term well sort of. In a layman’s language it refers to any monetary investment that is made by an entity in business if any kind on foreign shores.I'am sure this presentation will help you to understand FDI better .
Fdi in india:An analysis on the impact of fdi in india’s retail sectorSubhajit Ray
This presentation aims to briefly discuss the critical aspects of FDI in India, present a case study on the success of reforms in the telecommunications sector, analyze both sides of the arguments currently going on regarding FDI in retail and conclude with suggestive measures on the part of the government which can eliminate the negative effects of allowing FDI in India’s retail sector.
FDI allows foreign investment in retail in India. Single-brand retail allows up to 51% FDI for stores selling a single international brand. Multi-brand retail, which allows foreign stores to sell multiple brands, is currently not permitted. Organized retail makes up 3-4% of the market while 96% is unorganized. FDI could impact unorganized retailers through unfair competition but benefit organized retailers and farmers through better prices and supply chains. It may also benefit consumers through variety and quality while creating jobs. Issues around its impact still need monitoring and regulation.
The document provides an overview of FDI in the Indian retail sector and competition issues. It discusses India's history with FDI, the retail sector in India, debates around allowing FDI in retail, the current FDI policy, potential advantages and disadvantages, and global case studies. Experts both support and oppose FDI in retail due to concerns around its impact on small retailers and farmers. The policy aims to balance opportunities and risks by imposing conditions on foreign retailers.
FDI in Retail in India (Single & Multi Brand)Devansh Parmar
The document discusses foreign direct investment (FDI) in the retail sector in India. It provides background on FDI trends globally and in different countries. FDI in retail was first allowed in India in 2006 in the cash and carry/wholesale sector, then in single brand retail in 2011 and multi-brand retail in select cities in 2012. The retail sector is an important part of the Indian economy, contributing 14-15% to GDP. Supporters argue FDI will boost investment, technology, tax revenue and consumer choice, while critics argue it could displace small retailers and sellers and cost jobs.
The document discusses foreign direct investment (FDI) in retail in India. It outlines the organized and unorganized sectors of retail in India. The organized retail sector is nascent, while the unorganized sector employs over 12 million people and accounts for over 10% of India's GDP. Allowing FDI in retail could help address issues like supply chain inefficiencies, but there are concerns it may negatively impact small retailers and farmers. The document analyzes arguments for and against FDI before cautiously concluding that India should allow up to 51% FDI in multi-brand retail.
This document discusses the past, present, and future of the Indian retail industry. It notes that historically retail in India was dominated by small, unorganized stores and street vendors. However, in recent decades organized retail has grown significantly as India's economy and middle class have expanded. Major domestic and international companies have entered the Indian retail market, introducing modern formats like malls, supermarkets, and hypermarkets. While organized retail currently makes up only about 6% of the sector, it is growing rapidly at around 35% annually. The future of retail in India is promising as incomes continue rising and consumers, especially younger generations, become more accustomed to a shopping culture.
This dissertation examines the impact of foreign direct investment (FDI) on India's unorganized retail sector, using the agro products industry as a case study. The student conducted this research under the guidance of faculty at Integral University to earn a Bachelor's degree in Business Administration. The report includes an introduction on FDI policies in India's retail sector, a literature review, research methodology, data analysis, findings, and conclusions. The key finding is that while large foreign retailers bringing new technologies and supply chain expertise could benefit consumers, they also pose challenges for local kirana stores in terms of competition and convenience. The report examines how foreign entrants might balance these impacts as they seek to gain a foothold in India's retail
This project report provides an overview of foreign direct investment (FDI) in the retail sector of India. It discusses the history of FDI policy in India, including the recent changes allowing FDI in single-brand and multi-brand retail. The report examines the impact of FDI on the retail sector, including benefits such as increased investment and concerns about its effect on small retailers. It also explores the prerequisites for further expanding FDI in retail, such as developing supply chain infrastructure. The project was completed by a student at SMT. CHANDIBAI HIMATMAL MANSUKHANI COLLEGE in Mumbai, India under the guidance of a professor.
FDI in Indian retail market- oppertunities and challengesGuru Selvan
The document discusses foreign direct investment (FDI) in the Indian retail market, including opportunities and challenges. It notes that India has one of the top five retail markets in the world and allows 100% FDI in single brand retail and cash and carry, as well as 51% FDI in multi-brand retail. The impacts of FDI include accelerated retail market growth, benefits to farmers and consumers, and promotion of competition and infrastructure development. However, challenges include the need for Indian retailers to consolidate, potential job losses, high borrowing costs negatively impacting domestic retailers, and predatory pricing by global retailers wiping out domestic competition.
This document is a project report submitted by Nishant Singh to Sikkim Manipal University in partial fulfillment of an MBA degree. The report analyzes the role of foreign direct investment in the Indian retail sector. It begins with an abstract that summarizes the objectives of analyzing the impact of India's FDI policy in retail using a SWOT analysis. It then provides background on FDI and the retail sector in India. The literature review discusses previous research on determinants of FDI policies in India and factors influencing consumer retail store choice. The report will analyze India's legal framework for retail FDI, conduct a SWOT analysis, and provide conclusions and recommendations.
This document provides an overview of foreign direct investment (FDI) policies related to the retail sector in India. It defines key terms like organized and unorganized retail, and outlines India's historical restrictions on FDI in multi-brand retail. The document discusses the various entry options foreign players used prior to FDI policy changes, as well as the current policies allowing FDI in single-brand and cash-and-carry wholesale retail. It also examines concerns around partially opening the retail sector to FDI and limitations of India's present retail setup.
Impact of FDI on retail sector in IndiaKaran Tyagi
Foreign direct investment (FDI) refers to investment from one country into another country. Allowing FDI in India's retail sector could provide benefits like new technologies, capital, and management skills but may threaten small unorganized retailers. India's $250 billion retail sector is mostly unorganized but organized retail is growing at 15-20% annually. Major retailers in India include Pantaloon, Tata, Reliance, and others operating stores like Big Bazaar and Reliance Fresh. Common retail formats are mom-and-pop stores, department stores, shopping malls, e-commerce, discount stores, and vending machines.
FDI in retail has the potential to benefit consumers through more choices, lower prices, and improved quality and supply chain efficiency. However, there are also risks like job losses for small retailers and increased competition. India's retail sector is currently dominated by unorganized and family-run small shops. The document discusses the various formats through which FDI can enter India like franchises, wholesale trading, and manufacturing subsidiaries. It also provides an overview of the growth prospects and impact of organized retail on the Indian economy. While FDI can boost investment and infrastructure, policymakers will need to ensure a level playing field for domestic retailers as well.
This document discusses foreign direct investment (FDI) in multi-brand retail in India. It begins with background on the team members presenting and an outline of the presentation. It then provides definitions of FDI and foreign institutional investment (FII) and distinguishes between the two. The document discusses opportunities for FDI in retail in India such as benefits to farmers and consumers, as well as challenges such as political instability and public opposition. It analyzes the retail sector and provides sector-wise analysis of FDI inflows in India. The document concludes with a comparison of FDI in India and China.
This document provides an overview of the retail sector in India and discusses the prospects and perils of allowing foreign direct investment (FDI) in retail. It notes that India's retail sector is highly fragmented, with over 12 million small, family-owned shops. Allowing FDI in retail could strengthen infrastructure, improve supply chains, and create jobs, but it may also negatively impact small retailers and the livelihoods of those employed in the retail sector. There is debate around whether FDI in retail will benefit farmers and consumers or hurt small businesses. The document examines both sides of the issue.
This document discusses FDI in multi-brand retail in India. It provides background on organized and unorganized retail sectors in India currently. It then outlines the history of FDI policies in India for single brand and multi-brand retail, including allowing up to 51% FDI in multi-brand retail with certain conditions like minimum investment amounts and sourcing from small local suppliers. The document addresses some of the major controversies around allowing FDI in multi-brand retail in India, such as potential job losses or gains, effects on prices and competition, need for foreign investment, and profits going overseas.
Foreign direct investment (FDI) refers to long term cross-border investment involving foreign management and technology transfer. There are inward, outward, and net FDI flows. India promotes productive FDI to stimulate industrialization. FDI increases capital, technology, employment, and aggregate supply and demand. However, FDI can reduce competition and domestic policy control. India's FDI policy allows up to 100% foreign ownership in some sectors with approval. Restrictive regulations, unclear policies, high tariffs, and limited state autonomy present issues for attracting beneficial long-term FDI to India.
This document discusses FDI in India's retail sector. It provides an overview of India's retail industry, which is largely unorganized. It then discusses the benefits of FDI, the types of FDI (single brand and multi-brand retail), and the impacts on various stakeholders like farmers, consumers, small businesses and the government. It outlines the debate around the issues like job losses and impact on small retailers. Finally, it discusses the current scenario of FDI in retail in India and provides an overall conclusion that FDI in retail can prove beneficial if implemented properly.
This document analyzes the SWOT of allowing foreign direct investment in India's retail sector. Currently, FDI is allowed for cash and carry wholesale and single brand retail up to 100% with government approval. The government may now allow 51% FDI in multi-brand retail stores over 1 million people. This would organize the retail sector, increase competition, quality control and infrastructure development while bringing in foreign capital. However, political support and global economic conditions remain threats. Overall FDI could benefit India's retail sector which currently contributes significantly to GDP but is unorganized with low productivity.
FDI or Foreign Direct Investment is a self explanatory term well sort of. In a layman’s language it refers to any monetary investment that is made by an entity in business if any kind on foreign shores.I'am sure this presentation will help you to understand FDI better .
Fdi in india:An analysis on the impact of fdi in india’s retail sectorSubhajit Ray
This presentation aims to briefly discuss the critical aspects of FDI in India, present a case study on the success of reforms in the telecommunications sector, analyze both sides of the arguments currently going on regarding FDI in retail and conclude with suggestive measures on the part of the government which can eliminate the negative effects of allowing FDI in India’s retail sector.
FDI allows foreign investment in retail in India. Single-brand retail allows up to 51% FDI for stores selling a single international brand. Multi-brand retail, which allows foreign stores to sell multiple brands, is currently not permitted. Organized retail makes up 3-4% of the market while 96% is unorganized. FDI could impact unorganized retailers through unfair competition but benefit organized retailers and farmers through better prices and supply chains. It may also benefit consumers through variety and quality while creating jobs. Issues around its impact still need monitoring and regulation.
The document provides an overview of FDI in the Indian retail sector and competition issues. It discusses India's history with FDI, the retail sector in India, debates around allowing FDI in retail, the current FDI policy, potential advantages and disadvantages, and global case studies. Experts both support and oppose FDI in retail due to concerns around its impact on small retailers and farmers. The policy aims to balance opportunities and risks by imposing conditions on foreign retailers.
FDI in Retail in India (Single & Multi Brand)Devansh Parmar
The document discusses foreign direct investment (FDI) in the retail sector in India. It provides background on FDI trends globally and in different countries. FDI in retail was first allowed in India in 2006 in the cash and carry/wholesale sector, then in single brand retail in 2011 and multi-brand retail in select cities in 2012. The retail sector is an important part of the Indian economy, contributing 14-15% to GDP. Supporters argue FDI will boost investment, technology, tax revenue and consumer choice, while critics argue it could displace small retailers and sellers and cost jobs.
The document discusses foreign direct investment (FDI) in retail in India. It outlines the organized and unorganized sectors of retail in India. The organized retail sector is nascent, while the unorganized sector employs over 12 million people and accounts for over 10% of India's GDP. Allowing FDI in retail could help address issues like supply chain inefficiencies, but there are concerns it may negatively impact small retailers and farmers. The document analyzes arguments for and against FDI before cautiously concluding that India should allow up to 51% FDI in multi-brand retail.
This document discusses the past, present, and future of the Indian retail industry. It notes that historically retail in India was dominated by small, unorganized stores and street vendors. However, in recent decades organized retail has grown significantly as India's economy and middle class have expanded. Major domestic and international companies have entered the Indian retail market, introducing modern formats like malls, supermarkets, and hypermarkets. While organized retail currently makes up only about 6% of the sector, it is growing rapidly at around 35% annually. The future of retail in India is promising as incomes continue rising and consumers, especially younger generations, become more accustomed to a shopping culture.
This dissertation examines the impact of foreign direct investment (FDI) on India's unorganized retail sector, using the agro products industry as a case study. The student conducted this research under the guidance of faculty at Integral University to earn a Bachelor's degree in Business Administration. The report includes an introduction on FDI policies in India's retail sector, a literature review, research methodology, data analysis, findings, and conclusions. The key finding is that while large foreign retailers bringing new technologies and supply chain expertise could benefit consumers, they also pose challenges for local kirana stores in terms of competition and convenience. The report examines how foreign entrants might balance these impacts as they seek to gain a foothold in India's retail
This project report provides an overview of foreign direct investment (FDI) in the retail sector of India. It discusses the history of FDI policy in India, including the recent changes allowing FDI in single-brand and multi-brand retail. The report examines the impact of FDI on the retail sector, including benefits such as increased investment and concerns about its effect on small retailers. It also explores the prerequisites for further expanding FDI in retail, such as developing supply chain infrastructure. The project was completed by a student at SMT. CHANDIBAI HIMATMAL MANSUKHANI COLLEGE in Mumbai, India under the guidance of a professor.
Foreign Direct Investment in India (FDI)Ameya Gandhi
This document lists the group members of a project and provides information about foreign direct investment (FDI) in India. It summarizes key sectors that receive FDI in India like services, manufacturing, retail, and tourism. It also outlines India's FDI policies and restrictions in different sectors. Major investing countries in India include Mauritius, Singapore, USA, and UK. The document emphasizes the need to attract quality FDI and focus on export-oriented investments to benefit the local economy.
The document discusses trends in foreign direct investment (FDI) and foreign institutional investment
(FII) in India from 1991-2007. It examines FDI flows by country and sector, finding the largest shares
came from Mauritius, the US, and UK, with highest FDI in electrical equipment, telecommunications,
and services. It also analyzes trends in FII investment in the Indian stock market and examines the
influence of FII on movements in the National Stock Exchange during the post-liberalization period.
The document discusses foreign direct investment (FDI) in the retail sector in India. It outlines the different types of FDI allowed in retail - 100% in single brand, 51% in multi-brand, and 100% in cash and carry. Both sides of the debate around FDI in multi-brand retail are presented, focusing on the potential impacts on unorganized retailers, farmers, consumers, small businesses, employment, inflation. The performance and challenges of Indian organized retailers are also examined, as well as alternatives to FDI in retail.
This document discusses foreign direct investment (FDI) in India across several sectors. It defines FDI and compares it to foreign institutional investment. It outlines India's FDI policies for sectors like retail, telecom, pharmaceuticals, IT, automobiles and others. It discusses the types of FDI, top investing countries, trends over time, key players and investments, and impact of FDI policies on employment, technology, and economic growth in India. Charts and figures are provided on FDI flows and sector-wise cumulative inflows from 2000-2013.
An analytical study of fdi in india (2000 2015)Abhishek vyas
Foreign Direct investment plays a very important role
in the development of the nation. Sometimes domestically
available capital is inadequate for the purpose of overall
development of the country. Foreign capital is seen as a way of
filling in gaps between domestic savings and investment. India
can attract much larger foreign investments than it has done in
the past. The present study has focused on the trends of FDI
Flow in India during 2000-01 to 2014-15 (up to June, 2015).
The study also highlights country wise approvals of FDI
inflows to India and the FDI inflows in different sector for the
period April 2000 to June 2015. The study based on Secondary
data which have been collected through reports of the Ministry of
Commerce and Industry, Department of Industrial Promotion and
Policy, Government of India,
Fdi in tradable_services___8211__final_reportKrishna Murari
This document provides a final report on an FDI research project conducted for the Northern Ireland Department of Enterprise, Trade and Investment. The report examines the benefits of foreign direct investment (FDI) in Northern Ireland's tradable services sector. Key findings include:
1) FDI can generate economic benefits like new jobs, output, technology, and skills as well as wider benefits to local suppliers and labor markets.
2) Recent global and UK FDI trends show growth in high-tech and business services. Emerging markets are becoming more prominent locations while the US and UK remain top recipients.
3) Case studies of Ireland, Sweden, and Poland found tradable services FDI was important to economic
This document discusses foreign direct investment (FDI) and its impact on retail trade in India. It notes that while India is tipped to become an economic superpower, liberalizing FDI further could have both benefits and drawbacks. The objectives of the study are to examine the relationships between FDI and Indian dependence, price competition, and employment. The research methodology involved surveying 100 academics in Aurangabad, India. Tables show the respondents' profiles and opinions on allowing 51% FDI in retail, with a majority disagreeing or strongly disagreeing. The conclusion is that while retail FDI could boost the economy initially, over-reliance on multinational corporations could negatively impact India's economy and politics in the long run
FDI in retail refers to foreign investment in companies operating in the retail sector in another country. Allowing FDI in India's retail sector could provide benefits like new technologies and skills, jobs, and higher prices for farmers, but it may also displace many small shops and retailers. The document discusses views on both the pros and cons of FDI in India's retail sector, focusing on how it impacts farmers, small retailers, food prices and supply chain efficiency. It concludes that fears of small shops being displaced are exaggerated and farmers may benefit from more competitive retail options.
This document summarizes a study on foreign direct investment (FDI) in India. It examines the present status and future forecast of FDI in India through 2026. The study uses statistical analysis methods like regression analysis and trend analysis to determine the relationship between FDI equity inflows and total FDI inflows to India. It finds that FDI equity inflows significantly impact total FDI inflows. It also provides an overview of FDI in India by sector and by country source. The services sector, including financial and non-financial services, has attracted the most FDI on average over the past decade. The study aims to present both the current situation and future outlook for FDI in India.
Role of compensation practices on employees’ motivation: A study on Prime Ban...Masum Hussain
Workforce today is more expressive about their needs. Employees desire the best of everything competitive salaries, comfortable & inspirational lifestyles, job security, career enhancement options, work-life balance, and so on. Competition for talent is ever increasing and organizations need to have well-defined philosophies and strategies to help them develop innovative ways of tapping intrinsic motivation of employees by engaging their hearts and minds. The focus should be given on how managers are able to implement these types of motivation into their specific work place. This will show how motivation is important to all industries, and how it can change and impact the amount sales a bank performs. Motivated employees will in turn create a successful bank.
Foreign exchange operation (export procedure) of prime bankWINNERbd.it
The document is an internship report submitted by Tawhid Rifat Ami to Syeda Shaharbanu Shahbazi as part of their BBA program requirements. The report provides an overview of Prime Bank Limited's foreign exchange operations, with a focus on export procedures. It includes an introduction to PBL, its vision, mission, organizational structure and key services. The report also analyzes PBL's export and import volumes, performs comparisons to other banks, and provides observations and suggestions based on the internship experience.
FDI and FII impact on dollar rupee exchange rate1987jiteshjain
FDI and FII investments and rules can impact the exchange rate of the rupee versus the dollar. FDI brings foreign capital into the country through direct investment, while FII represents short-term foreign investment in the stock market. Large FII inflows can influence stock prices and appreciation of the rupee, impacting exports. Proper regulation of FII limits is important to control inflation and impacts on the economy.
Report- Impact of CSR on financial performance of the companyBindu Priya Pasham
A team of dedicated professionals from IIM Udaipur, Futurescape and Economic Times have worked on the CSR study of 2015 and has listed India’s top 100 companies for CSR in the year. The top 5 companies and the bottom top 4 companies of the list i.e. 95-99 companies will be considered. The financial data of those companies will be taken and ratios will be performed, so that we come to know whether CSR policy has benefited the companies financially or not.
Foreign direct investment (FDI) plays an important role in the economic development of developing countries like India. While India received some FDI during the colonial period, inflows increased substantially after the economic reforms of 1991 that opened the country's economy. The document discusses the meaning and benefits of FDI for host countries. It outlines the objectives of studying FDI in India, including analyzing sectoral and state-wise inflows over time. FDI in India has grown significantly since reforms, from Rs. 409 crores in 1991-92 to over Rs. 1,45,518 crores in 2013-14, though there was some fluctuation in between. The liberalized policy environment in India has made it an attractive destination for
This document provides an introduction and proposal for a minor project on foreign direct investment (FDI) in multi-brand retail in India. It outlines the background and debate around allowing FDI in multi-brand retail. The objectives are to examine growth and future scenarios of FDI in India and study its importance in the current retail sector. Research questions are posed around the role, benefits, and impacts of FDI on small retailers, farmers, and food inflation. Secondary data sources will be used to conduct an exploratory, descriptive, and analytical study of the multi-brand retail sector and driving forces behind FDI.
With the emergence of supermarkets, kirana stores have been depleting day by day. Government is in the grave situation to decide whether to allow 50% FDI or not in the retail sector. There are certain retail outlets such as Walmart, Metro which are better in quality, cheaper in rates, and offering a range and variety of products under one roof. These malls have entered in India but they are into cash and carry business only and not in the multi brand retail sector. Many of them have entered through joint ventures. If government allow them to enter in India, it can be said that all the small shops and kirana stores will not be able to stand in the market. They cannot compete with them. Now the question arise how the kirana stores can be saved from these big giants in the market. It is the need of the hour today to save these kirana stores because in a developing country like India where the income of an average man is low, such types of small business can make them able to earn their living. The present research is an attempt to find out the weaknesses of kirana stores as compared to the malls and to find out the solutions for the betterment of the stores. The research is conducted on various kirana stores in Punjab. The study identifies the problems being faced by kirana merchants such as recovery of credit, inventory management, goodwill in terms of quality, low space, and lack of variety etc. But during the research it has been found out that there are certain areas where these kirana stores have an edge over the market such as emotional attachment with the customer, to fulfil the timely need of credit of the customer, easy availability etc. It is concluded that both kirana stores and malls are important to the Indian economy. FDI is important for the growth of the economy but it should come for the rescue of the existing business and not as a threat. Secondly government intervention is seeked to make improvements in the functioning of the kirana stores. If kirana stores starts using their strategic advantages to the optimum level, they can make can make their existence strong in the market.
This document is a business plan submitted by students at Praxis Business School for their proposed retail store called JooTaz, which will sell footwear. It begins by providing context on the retail industry in India, noting its large size and growth potential. Key drivers of growth for the Indian retail market include demographics, rising consumption, availability of credit, and government policies allowing foreign investment. The footwear industry in India is also growing due to rising incomes and changing lifestyles. The business plan then discusses the global and Indian footwear markets in more detail before outlining JooTaz's proposed positioning and store model.
Jll research india’s_retail_luxury_quotient_sep2013Anil GROVER
India has experienced strong growth in consumption driven by favorable demographics and rising incomes. The retail sector accounts for around 18% of India's GDP and is growing at 15% annually, faster than the country's GDP growth. While retail is currently dominated by the unorganized sector at 93%, the organized sector is growing rapidly at 24% annually and is expected to reach 10% of the total retail sector by 2016-2017. The growth prospects for India's retail sector remain strong due to the country's changing consumption patterns and growing middle class.
This document provides an introduction and overview of a project submitted for a Master's degree in Business Administration. It contains 6 chapters that discuss developing an alternate revenue stream by channelizing customer returns for a retail company. The introduction covers trends in the Indian fashion retail market, including growth projections, market share breakdown, and key trends related to demographics, policies, and consumer buying behavior. It also acknowledges those who helped and supported the project.
This document discusses foreign direct investment (FDI) in the Indian retail sector. It begins by providing background on the growth of organized retail in India since the 1980s. It then outlines the research methodology, which is to examine the advantages and disadvantages of FDI for various stakeholders and evaluate the impact of organized retail on unorganized retail.
The document analyzes trends in the Indian retail industry, including the rise of modern retail formats. It also details India's policies around FDI in retail, allowing 100% FDI in wholesale cash and carry and single brand retail under certain conditions. The impact of FDI in "single brand" retail is specifically discussed. In closing, the document aims to provide insight into FDI
11.swot analysis for opening of fdi in indian retailingAlexander Decker
This document provides an overview of foreign direct investment (FDI) in the retail sector in India. It discusses the history and current policies around FDI in retail. Key points include:
1. Retail in India is currently divided between organized retail (corporate chains) and unorganized retail (small shops). Organized retail makes up only a small portion of the overall retail market.
2. The government first allowed FDI in cash and carry wholesale in 1997 and single-brand retail in 2006. Multi-brand retail remains restricted.
3. Supporters argue FDI could improve supply chains and infrastructure. Critics worry about potential job losses for small shops.
Swot analysis for opening of fdi in indian retailingAlexander Decker
This document discusses foreign direct investment (FDI) in the Indian retail sector. It provides background on the current regulatory environment for FDI in India, which allows up to 51% investment in single-brand retail but prohibits FDI in multi-brand retail. The document then discusses factors that determine FDI policies in India like technology, labor skills, and infrastructure. It also summarizes the structure of retail in India, which is dominated by unorganized small retailers but is growing to include more organized large retail chains. Finally, it defines key terms like FDI, organized and unorganized retail, and discusses how retail contributes to India's GDP and employment.
The survey found that most consumers support allowing FDI in retail in India. 84% said the government should open FDI restrictions and 72% supported requiring foreign retailers to reserve 50% of jobs for rural areas. Consumers believe FDI will benefit farmers (68%) and consumers (88%) by increasing competition and quality. However, 78% said it may negatively impact unorganized retailers. While opinions varied on other industries, many (41%) were unsure of impacts. Overall, consumers see benefits from FDI but also want policies to support local industries and jobs.
This document discusses a research project conducted by students to understand people's views on proposed changes to India's FDI policy regarding retail. The introduction provides background on retailing and foreign direct investment in India. The literature review covers existing research on the impact of FDI in Indian retail. The methodology section outlines the descriptive research design used, including developing objectives, collecting data through questionnaires, selecting samples, processing and analyzing responses. The results section analyzes responses indicating retailers will suffer from competition from large foreign supermarkets. The conclusion is that while consumers may benefit, many small retailers risk job losses. Recommendations focus on supporting small retailers through financing, regulations on large retailers, and developing alternative cooperative retail models.
This document summarizes a study on the impact of foreign direct investment (FDI) in the Indian retail sector. The study used questionnaires to collect primary data from 50 people on their awareness and shopping habits related to FDI. It analyzed the data using statistical tools to understand the impact of FDI and people's opinions. The findings show that while FDI contributes to growth in areas like employment and GDP, it also negatively impacts local retailers and is not helping develop Indian retailers. Overall, the study concludes that FDI in the Indian retail sector has had both positive and negative impacts.
The document summarizes the growth opportunities in the Indian retail sector. Some of the key points discussed include:
- The Indian retail sector is highly fragmented but growing rapidly, projected to reach $948 billion by 2018-19, up from $534 billion in 2013-14. However, only 4% of retailers are organized.
- Major opportunities exist in serving rural consumers, the growing middle class, youth population, and increasing number of high-net-worth individuals.
- Organized retail is concentrated in the top 10 cities but expanding to tier 2/3 cities. Online retail and luxury retail are also growing segments.
- Private labels, e-commerce, and foreign investment could further drive the modern
India’s strong consumption story relies on its demographic structure, which, at this
point in time, is highly favourable compared to most other emerging nations. As per
the UN population statistics, this favourable demographic dividend will last for another
25–30 years. Before that, most other emerging nations would have already begun to
witness a slowdown in the growth of young (working-age) population.
The ensuing benefits with regard to the rising income and household spending would
provide a significant boost to the consumption-driven growth story of India. A glimpse
of the changing pattern of India’s consumption is already visible in the breakdown
of private final consumption spending data provided by the government. There is
a marked increase in spending on lifestyle products and services such as hotels,
mobiles, transportation and other miscellaneous goods. As against that, spending on
essentials has only remained stable.
International retailers are well aware of these benefits that the Indian economy offers.
Barring few legislative challenges that could be tackled through the policy reforms and
opening up of the retail sector, retailers have often expressed their intention to enter
and invest in India’s attractive retail sector. This is very well reflected in AT Kearney’s
Global Retail Development Index 2012, where India ranks as the fifth most attractive
retail market for international retailers. The retail sector is a significant contributor to India’s economic activity. Though a
direct measurement of the retail sector is difficult to derive through government
statistics, the trade, hotels and restaurant sectors come close to giving us an
estimate of its contribution. That component, in which retail (both organised and
unorganised) is the dominant activity, accounts for around 18% of India’s GDP.
Within the services sector of India, this component is the largest contributor
to the economy. Many institutions, however, may not agree with this possibly
understated measurement of the retail sector, as it may not accurately account
for the unorganised sector. For instance, as per the estimates of the Associated
Chamber of Commerce and Industry (ASSOCHAM) presented in one of its retail
reports of 2012, the contribution of both organised and unorganised retail stood
at 22% of GDP. This would mean that Indian retail sector size should measure
closer to INR 19.2 trillion in 2012. Leading research institutions such as AT
Kearney and ASSOCHAM estimate this sector to grow at around 15% y-o-y over
the next three–five years as against a 12%–13% nominal growth of India’s GDP
estimated by the International Monetary Fund (IMF). Going by that logic, the retail
sector should reach a size of INR 34 trillion by 2016. This is a significant growth.
The sector is also an important contributor towards the socioeconomic well-being
of the economy as it employs close to 9.4% of India’s labour force, as per the
association.
This document discusses foreign direct investment (FDI) in retail in India. It provides background on the history of FDI restrictions in India and the government's gradual opening of the retail sector to FDI over time. It also outlines some of the debates around allowing FDI in multi-brand retail, including potential benefits like more options and lower prices for consumers, concerns about impact on small retailers, and issues around sourcing requirements. The document aims to explore both sides of the debate over whether India should further open its retail sector to FDI in multi-brand stores.
The document discusses India allowing FDI in retail. It provides background on India's existing FDI policy for retail sectors like cash and carry wholesale, single brand retail, and prohibition on multi-brand retail. It then discusses limitations of the current system like lack of infrastructure, dominance of intermediaries, issues with public distribution, and inability of small businesses to reach global markets. The rationale given for allowing FDI in retail includes improving competition, benefiting consumers and farmers, and helping small businesses. The document outlines prerequisites for allowing FDI in multi-brand retail like developing a legal framework, extending credit to small retailers, and requiring foreign retailers to first invest in backend infrastructure. Industry leaders generally support opening the sector to FDI.
Marketing is defined as the process of creating, communicating, delivering and exchanging products and services that have value for customers, partners and society. The key elements of marketing include identifying customer needs, developing products to meet those needs, determining appropriate pricing, selecting distribution channels and promoting products. Marketing aims to create value for customers to build strong, long-term customer relationships and capture value in return. It involves identifying, satisfying and retaining customers while focusing on customer needs above all else.
big bazaar-organisational commitment reportnishakp
The document provides an overview of the Indian retail industry and organized retail sector. It discusses the growth of the Indian retail market, key growth factors in the organized retail sector such as changing demographics and consumer behavior. It also outlines opportunities and challenges facing the organized retail sector in India. The profile of Future Group, a leading Indian retail business house, is briefly described.
Advantage India: A Study of Competitive Position of Organized Retail IndustryIOSR Journals
Organised retail industry is one of the untapped industry sectors in India with huge growth potential. Indian retail sector mainly divided into unorganised and organised retail. Organizes retail has limited market share in this sector. Recently Government of India allowed FDI in single brand retailing and multi brand retail. Due to this decision it will create market opportunity to foreign big retail players to enter into Indian retail market. Organised retailing continues to be the least evolved industries in India and the growth of organized retailing in India much slower as compared to other Asian and European countries. The present paper discusses the competitive advantage of India for FDI in retail sector with the help of National diamond Model suggested by Michael Porter (1990) for competitive advantage of nation. The purpose of the study is to analyse the strategic competitive position of India for investment in retail sector and also analyses the world wide retail market opportunity as compared with Indian retail sector. Analysis of retail industry is done by using various market research reports on retail sector published by market research firm, government publication, and industry news and online resource. Michael Porter’s model on competitive advantage of nation is applied here with the help of secondary data and analysed the each determinants of competitiveness of nation. Some of determinant used for analysis from the report published by World Economic Forum. The findings of the study are point out that FDI in retail would undoubtedly enable Indian economy to boost at faster rate than current situation. There are various advantages to foreign retailer to enter into the Indian retail sector. Growth in disposal income and a change in the standard of living of Indian society create demand condition for retail. Absence of bigger organised retail players, largest demand and market size, availability of low cost labour, developing infrastructure, economy of scale and global sourcing are the key market potential indicators for foreign investor to invest in India. It is concluded that foreign direct investment in retail industry will create positive and favourable business opportunity for foreign retailers and all the determinant of competitiveness are positive for retail industry in India.
This document discusses FDI in the Indian retail sector. It provides background on the phased opening of the retail sector to FDI over time, from wholesale to single brand retail to multi-brand retail. It analyzes the impact of FDI on the retail sector, including benefits like new opportunities, technological improvements, and support for farmers, as well as risks like potential job losses for small retailers. Overall, it argues that if managed properly, FDI could benefit the retail sector and Indian economy through modernization and upgrading, while existing retailers need to adapt to competition through cooperation and innovation.
This document provides an overview of foreign direct investment (FDI) in the retail sector of India. It discusses the scope and objectives of allowing FDI in retail. It provides background on the evolution of the Indian retail industry and defines key terms like retail. It also reviews past literature on topics like the changing dynamics of consumer behavior and factors affecting retail store choice. The document outlines the research methodology used and presents an analysis of the impact of FDI in retail by comparing India to China. It analyzes data and provides results, suggestions, and conclusions on allowing FDI in India's retail sector.
Similar to Report on Impact of FDI in Retail in India (20)
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2. Table of Contents
Sno.
Description
Chapter 1 – About the Report
1.
1.1.
4
Abstract
1.2.
Pages
Methodology
Chapter 2 – Indian Retail Sector
2.
2.1.
Introduction
2.2.
Sector Overview
2.3.
5 – 16
Growth and Evolution of Indian Retail Sector
Chapter 3 – FDI policy in Retail
3.
3.1.
Understanding the term FDI
3.2.
Evolution of FDI policy in Retail
3.3.
Structure of FDI policy in Retail
3.4.
FDI in Single Brand Retail Trade (SBRT)
3.5.
FDI in Multi Brand Retail Trade (MBRT)
3.6.
FDI Policy in E – commerce
3.7.
17 – 24
Acceptance of FDI Policy by Indian States
Chapter 4 – Impact of FDI in Retail on Macroeconomic factors in other Countries
4.
4.1.
China
4.2.
Thailand
4.3.
Indonesia
4.4.
Brazil
4.5.
Russia
4.6.
24 – 27
Mexico
Chapter 5 – Impact of FDI in Retail in China
5.
5.1.
Impact on Farmers
5.2.
Impact on Organized Retail
5.3.
Impact on Traditional Retail
5.4.
Impact on Supply Chain
5.5.
27 – 30
Impact on Consumers
Foreign Participation in Indian Retailscape: Revolution or Evolution | Analysis from a Technocratic Perspective
Page 2 of 56
3. Chapter 6 – Critical Analysis of Impact of FDI in Retail in India
6.
6.1.
Impact on Farmers
6.2.
Impact on Traditional Markets
6.3.
Impact on Consumers
6.4.
Impact on Supply Chain
6.5.
Impact on Employment
6.6.
Impact on Inflation
6.7.
31 – 41
Impact on Government Revenue from Taxes
Chapter 7 – SME Sector‘s viewpoint on Impact of FDI policy in Retail
7.
7.1.
Impact on Sales
7.2.
Impact on Size of Industry, Business / Capacity addition
7.3.
Impact on New Orders / Contracts
7.4.
Impact on Qualitative improvements & Branding of products
7.5.
Impact on Supply Chain efficiencies
7.6.
41 – 45
Impact on Employment
Chapter 8 – Analysis of current entry structure in line with FDI Policy regulations
8.
8.1.
Entry structure for Foreign Retailers
8.2.
FDI policy regulations for Single Brand Retail Trade (SBRT) – an analysis
8.3.
FDI policy regulations for Multi Brand Retail Trade (MBRT) – an analysis
8.4.
Impact of regulation: Minimum investment of USD 100 Mn
8.5.
Impact of regulation: 50% of FDI to be invested in backend infrastructure in 3 years
8.6.
Impact of regulation: 30% sourcing from small industries
8.7.
Impact of regulation: Only cities with population more than 1 Million
8.8.
Impact of regulation: Approval from State Government required
8.9.
45 – 52
Impact of regulation: E – Commerce not permissible
9.
Chapter 9 – Key Challenges
10.
Chapter 10 – SWOT Analysis
11.
Chapter 11 – Conclusion
55 – 56
12.
Chapter 12 – References
56
Foreign Participation in Indian Retailscape: Revolution or Evolution | Analysis from a Technocratic Perspective
52 – 53
54
Page 3 of 56
4. 1. Chapter 1 – About the Report
1.1. Abstract
India is one of the top five Retail markets in the world in terms of economic value, and the fastest
growing market in the world with a catchment of over 1.2 billion people.
Retail sector in India is considered to be the sunrise sector with a huge growth potential. Estimated to be
between USD 450 – 550 Billion in 2012, the Retail Sector is expected to grow to USD 750 – 850 Billion
by 2015. In its present state, the Retail sector accounts for nearly 14 – 15% of the country‘s GDP.
However, in spite of its immense contribution to the economy, retailing continues to be the least evolved
industries and the growth of organized retailing in India has been much slower as compared to rest of the
world.
This situation of the retail sector, despite the on – going wave of continuous liberalization and
globalization can be blamed on weak policy framework and the absence of an encouraging and well
structured FDI policy in the sector.
In the above context, this research paper attempts to analyze the strategic impact of the influx of the
Foreign Direct Investment (FDI) Policy introduced in its most current format in September 2012, for the
Indian retail industry.
This paper broadly covers the principal policy decisions of the FDI policy in Retail, and analyses the
effects of these decisions on the retail sector. This paper also attempts to broadly study the impact of the
FDI policy on major stakeholders, covering impact on farmers, traditional retail, consumers, supply chain,
employment, inflation, and Government revenue in form of taxes.
This paper attempts to draw out the benefits of allowing FDI in retail, and broad recommendations most
suited to our country‘s diverse and dispersed retail market.
1.2. Methodology
Reliance has been placed on the information contained in journals, reports, newspapers, research papers,
online databases, etc. No information has been collected directly from primary sources. The research
paper is based on secondary data / resources available for review.
Foreign Participation in Indian Retailscape: Revolution or Evolution | Analysis from a Technocratic Perspective
Page 4 of 56
5. 2. Chapter 2 – Indian Retail Sector
2.1. Introduction
Indian retail industry is one of major pillars of the Indian Economy contributing nearly 14% – 15% to the
country‘s GDP.
However, as of date, the Indian Retail scenario has been dominated by owner manned small shops, mom
& pop stores, small ―kirana‖ grocery / daily needs stores, etc. In 2010, larger format convenience
stores and supermarkets accounted for about 4% of the industry, and these were present only in large
urban centers. The sector in its present form is highly unorganized, with organized retail accounting for a
meager 8% of the total sector.
Until 2012, the Indian Central Government denied Foreign Direct Investment (FDI) in multi-brand retail,
forbidding foreign groups from any ownership in supermarkets, convenience stores or other retail outlets.
Even single – brand retail was limited to 51% ownership and a bureaucratic process. In September 2012,
the Government of India passed a Foreign Direct Investment policy which now allows foreign retailers to
own up to 51% in multi – brand retail and 100% in single – brand retail.
With the introduction of the FDI policy, the organized retail sector in India, is estimated to grow at a
staggering growth rate of 30% by 2015, which is twice as fast as the forecasted growth rate of the overall
retail sector, which is expected to grow at a rate of 16%. It is hence anticipated, that these stores will now
have full access to over 200 million urban consumers in India, approximately 47% of which are below the
age of 30 and have high levels of consumption.
2.2. Sector Overview
According to the India Retail Report 2013, the Indian Retail market is estimated to exceed US$ 750
billion by 2015, presenting a strong potential for foreign retailers planning to enter India.
In its present state the sector stays predominantly unorganized, with organized retail counting for only 7%
to 8% of the overall retail market as compared to over 20% in China, and over 85% in developed
countries like the United States of America.
Foreign Participation in Indian Retailscape: Revolution or Evolution | Analysis from a Technocratic Perspective
Page 5 of 56
6. It can be perceived that the Indian retail market
is
in
its
nascent
stage,
dominated
Fig: Retail Penetration across major markets(2012)
by
Organized
Unorganized
unorganized players that controlled the market
with 95% market share during 2009 – 10,
15%
however the organized retailers gained market
share to 7% to 8% by 2011 – 12. There are
over 15 million ‗mom and pop‘ stores in India
which contribute to the large unorganized
92%
70%
80%
60%
45%
85%
30%
8%
20%
India
China
40%
Indonesia Thailand
55%
Malaysia
USA
market, whereas organized retail has been
limited to Urban Centre‘s.
Source: IBEF 2013
Organized retail in India is expected to cross 10% levels (of total retail market) by 2015 and 20% by
2020.
According to A T Kearney‘s Global Retail Development Index (GRDI) 2012, India was positioned the 5th
most favorable destination for international retailers. India also occupied a remarkable position in global
retail rankings, and the country is considered to have a high market potential, low economic risk, and a
moderate political risk. India also ranked 6th in the Global Apparel Index 2011. In terms of market
potential, India ranked second after Brazil. Net retail sales in India were also quite significant among
emerging and developed nations, the country is ranked 3rd after China and Brazil.
Food and Grocery account for a major portion of the Indian
Fig: Indian Retail Pie
Retail Market contributing nearly 60% of the total revenues in
the sector. This translates to nearly 48% of the total household
income being spent on food and groceries.
Apparel ranks second in the overall retail market, however is
the largest segment under the organized retail sector. This can
be attributed to the increasing demand for western outfits and
garments that has been growing at 40% – 45% annually.
Source: Deloitte 2013
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7. Fig: Organized Retail Setup
Source: Deloitte 2013
Online commerce is expected to be next major area for retail growth in India. India‘s e – trailer segment is
expected to grow to a size of USD 1.5 billion by 2015. The key drivers for growing importance of online
retail are a young population aided by easier access to credit and payment options, increasing internet
penetration and speed, 24 hour accessibility, convenient and secured transactions. Computer peripherals,
camera and mobiles, and lifestyle segments account for a majority of total purchases in Online commerce.
Table: Indian Retail Structure at a glance
Type
Characteristics
Benefit to Consumers
Mono / Exclusive
branded retail shops
Exclusive showrooms either owned or franchised
by a manufacturer
Complete range available for a given
brand, certified product quality
Multi Branded retail
shops
Focus on particular product categories and carry
most of the available brands
Customers have more choices as
many brands are on display
Convergence retail
outlets
Display most of convergence as well as
consumer / electronic products, including
communication and IT Group
It is an online shopping facility or buying and
selling products and services, the facility is
widely used for electronics, health and wellness
One–stop shop for customers, many
product lines of different brands on
display
Highly convenient as it provides
24x7 access, saves time, and ensures
secure transaction
e-retailers
Source: IBEF 2013
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8. The Indian Retail Industry has experienced a
Fig: Growth of Indian Retail Sector
growth of 10.6% CAGR between 2010 and
2012 and is expected to further grow at an
estimated CAGR of more than 18% between
2012 and 2015.
Source: Deloitte 2013
Within the retail sector, India has witnessed sustained growth in merchandise retail in the last decade
2002 – 2012. Even despite the economic uncertainty and the slowdown in India‘s economy, the growth of
merchandise retail is expected to continue to grow sustainably.
Table: Retail Market snapshot
GDP (USD Bn)
Estimated merchandize consumption
(Retail Market opportunity) (USD Bn)
Urban Consumption (% and absolute numbers)
Rural Consumption (% and absolute numbers)
Size of Corporatized Retail (%)
Size of Corporatized Retail (USD Bn)
2001
450
120
2012
1958
490
2021
3310
810
40%
(USD 48Bn)
60%
(USD 48Bn)
4%
5
48%
(USD 235 Bn)
52%
(USD 48Bn)
7%
34
56%
(USD 455 Bn)
44%
(USD 48Bn)
20%
162
Source: Technopak 2012
The main reason for this growth can be attributed towards India‘s GDP growth, which is expected
to grow at a sustained rate of nearly 6% in the next decade. This growth in GDP will get
translated to growing consumption in Indian households, which in turn will be manifested as
growth of merchandise retail through an increasing need for food, apparel and other sources of
discretionary spending.
India‘s share in merchandise retail is expected to grow from 48% in 2012 to nearly 56% by 2021.
Ten years ago, this contribution was approx 40%. As expected in future, an increasing share of
incremental merchandise retail will come from urban and semi – urban centers. This inference
can be drawn as an outcome of the rapid urbanization that India has witnessed in the past two
decades of sustained growth. Since 1991, India has witnessed the emergence of urban centers
with a massive scale of consumption. In 2012, there were 53 Indian cities with populations in
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9. excess of 1 million as compared to 23 such cities in 1991, and only 5 such cities in 1951. Apart
from these urban consumption centers (Metros, Tier I, and Tier II cities), urbanization of India
will also include towns and clusters where the majority (more than 50%) of households will no
longer be dependent on agriculture.
The most crucial inference is the fact that corporatized retail‘s share of total merchandise retail
will grow from the current 8% to 20% by 2021. The retail sector started to see private
investments from both Indian and International players in the past fifteen years. In spite of these
spirited efforts, Indian corporatized retailers have managed to garner a mere 7% to 8% of the
Indian retail pie. Thus, 92% of the retail sector still comprises independent retail and is highly
fragmented. This is despite the fact that India‘s GDP grew at more than 7% in the past decade.
Table: Historical & Projected Growth Scenario’s for Indian Retail Sector
2001 – 2007
2007 – 2012
India‘s real GDP CAGR
8.5%
7%
Corporatized Retail CAGR
17%
20%
Share of Corporatized Retail at the end of the period
4%
7%
Historical Growth
Growth Forecast
6% Real
Growth
7% Real
Growth
8% Real
Growth
GDP (USD Bn)
3308
3600
3914
Overall Retail Market (USD Bn)
810
980
1065
Organized Retail Market (USD Bn)
162
246
350
Organized Retail as % of overall Retail
19%
25%
33%
Source: Technopak 2012
In a recent report by Technopak advisors – a leading research and advisory firm, it has been estimated
that the share of corporatized retail, in a realistic scenario, will grow to no more than 20% of the total
merchandise retail pie by 2021. This will be due to the pressures of inflation and uncertainty in the world
economy, making a sustained real growth exceeding 6% over 10 years as a challenging objective. Other
reasons for this estimate have largely to do with the structural issues that adversely affect the value chain
of the retail sector. This also encompasses issues of real estate, sourcing and distribution. It is thus
opinioned that corporatized retail will not have enough leg – room to grow beyond the stated estimate.
The complexity of these issues is such that, in Technopak‘s view, ten years will not be a sufficient time
horizon for corporatized retail to overcome these hurdles and grow beyond the stated expectation.
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10. It will however be dependent on the actions taken by respective Governments to reform their views on
this aspect of growth, and make necessary provisions accordingly.
2.3. Growth & Evolution of Retail Sector
The retail sector in India has undergone many stages of maturation to reach its present stage. However, it
is still believed to be in a nascent stage, with organized retail accounting for only 7% – 8% of the total
sector. Below figures show the graduation of Indian retail sector over a period of time from Initiation,
Conceptualization, Expansion and Consolidation stage.
Fig: Stage and Type of Indian Retail
Source: resurgentindia 2011
Two most significant and learning phases of the Indian Retail Sector have been the ‗Hyper Growth Phase‘
between 2005 t0 2007 and the ‗Consolidation Phase‘ between 2007 to 2009. It is during these two action
packet phases that the Retail sector has matured by committing several mistakes. During the ‗Hyper
Growth Phase‘ in pursuit to capture market, many companies made strategic as well as operational errors
which were as follows:
Race for increasing retail space resulting in haphazard growth
Unviable formats
High lease rentals
Man power costs and productivity issues
Poor back end infrastructure
Entry of too many new players
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11. Then during the global slowdown 2007 – 2009, the Indian retail players paused to realize their past
mistakes and took time and effort to re – organize themselves by
Focusing on profitable growth
Exiting from unprofitable stores / formats
Rental renegotiation / revenue sharing arrangements
Reduction in salaries / higher man power productivity
Significant investments in backend
Exit of unsuccessful new entrants
Fig: Growth Cycle of Indian Retail Sector
Source: IBEF 2013
During the past decade of the evolution of the Indian Retail Sector, the organized retail segment has tried
to increase its offerings and make itself a one stop shop for its consumers. Traditionally, food and grocery
counted for the largest share of the retail segment, but with the organized sector gaining momentum, the
share of verticals has witnessed a change with the maximum share being taken by the apparels segment.
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12. Fig: Share of Verticals in overall and organized retail
Source: Assocham & Yes Bank 2012
Food and grocery segment accounts for more than two – thirds of the overall retail in India with a
share of approximately 70% of the total market size
However, the Organized Retail Penetration (ORP) in this vertical is the lowest at 2.4%. This
vertical is dominated by kirana stores (mom and pop stores), cart vendors and wet markets in the
unorganized space.
Fig: Sale in Grocery Vs Non Grocery (2006 – 2011)
Source: Assocham & Yes Bank 2012
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13. During the period 2006 to 2011, grocery retailing maintained a steady share between 65% to 68%
of the total retail sales and non – grocery retailing accounted for between 32% to 34% of the total
retail sales
Fig: Sales in store based retailing by category (2006 – 2011)
Source: Assocham & Yes Bank 2012
In Store – based retailing, which accounts for 99% of all sales, grocery retailers had the major
share in sales with 66% share in 2010 – 11and non – grocery retailers accounted for 34% of the
total sales during the same period
Sales by grocery retailers grew by 14.8% in 2010 – 11 and that of non – grocery retailers grew by
12.8% with the overall growth in store – based retailing at 14.1% during the same period
Grocery retailers grew at a CAGR of 12.9% over the period 2006 – 11 whereas non – grocery
retailers grew at 12.1% during the same period. Store – based retailing as a whole grew at a
CAGR of 12.6% during 2006 – 11
In absolute terms grocery retailers grew by 84.3% and non – grocery retailers grew by 72.5%
between 2006 and 2011, with the overall growth of the store – based retail segment pegged at
80.1%
The Indian retail market has traditionally been dominated by the mom and pop stores which made major
household goods available in the immediate vicinity. But with the advent of new concepts which are
better organized, the sales can be seen shifting towards the modern retail stores.
However in no case, do these formats have the potential to completely wipe out the existence of these
kirana stores as they do not reach the smallest towns of the country. Even in the metro cities the location
of the traditional and modern formats is totally varied. Furthermore, the Indian consumers tend to do a lot
of impulse buying, for which the traditional format is preferred.
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14. Fig: Sales in Grocery Retailers by Category: 2006 – 2011 (INR Bn)
Source: Assocham & Yes Bank 2012
Independent small grocers such as kirana stores remained the largest channel for grocery retailing
in 2011, representing almost 68% of the total sales, and growing at 13.8% in 2010 – 11 with a
CAGR of 11.8% during 2006 – 11
Hypermarkets saw a strong and steady growth in 2011, growing by 18.2% and had a CAGR of
37.9% between 2006 and 2011
Supermarkets also witnessed strong growth in 2011 with a 13.3% increase and a 16.2% CAGR
between 2006 and 2011
Convenience stores saw the maximum growth in Modern retail formats at 27% in 2011
Fig: Sales in Modern Grocery Retail by Category (INR billion)
Source: Assocham & Yes Bank 2012
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15. Fig: Sales in Traditional Grocery Retail by Category (INR billion)
Source: Assocham & Yes Bank 2012
Value sales of the traditional grocery retailers accounted for 98% of sales in 2011
Traditional grocery retailers as a whole grew at 14.8% during 2010-11 whereas as modern
grocery retailers exhibited a growth of 16.8% during the same period
In CAGR terms, the growth of Modern grocery retailers was almost double at 25.6% during
2006-11 as compared to that of Traditional grocery retailers which was 12.8% during the same
period
The total contribution of modern grocery retailers expanded to 2% of overall sales value in
grocery retailing, from less than 1% in 2005
Fig: Percentage Value growth in Sales (2006 – 2011)
Source: Assocham & Yes Bank 2012
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16. In its recent stages, the retailing segment has come up with various new forms of selling to the consumers.
Broadly classified under Store based retailing viz the traditional form of retailing which is limited to the
presence of a physical store. Non store based retailing has developed recently with e–commerce gaining
traction. However, the share of sales of non store based retailing has been quite low but is on a gradual
increase with the increasing literacy levels and changing lifestyle of the Indian population.
Store based retailing accounted for the major share of sales in retail by category and comprised
nearly 99.2% of all retail sales in 2011
Store based retailing grew by 14% during 2010 – 11 as compared to 33.3% for non – store
retailing
Overall the retail sector grew by 14.2% during 2010 – 11
Over the period of 2006 – 11, store – based retailing grew at a CAGR of 12.6% as compared to
24.5% for non – store retailing whereas the CAGR for the retail sector as a whole was 12.7% for
the period 2006 – 11
Overall, store – based retailing has grown by 81.2% in absolute terms in the period 2006-11 and
non-store based retailing has grown by a phenomenal 200% during the same period.
The retail sector as a whole has grown by 82% in absolute terms from 2006 to 2011.
Fig: Sales in Retailing by Category (INR Billion): 2006 – 2011
Source: Assocham & Yes Bank 2012
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17. 3. Chapter 3 – FDI Policy in Retail
3.1. Understanding the term FDI (Foreign Direct Investment)
Foreign Investment in India is governed by the FDI policy announced by the Government of India and the
provision of the Foreign Exchange Management Act (FEMA) 1999. The Reserve Bank of India (RBI) in
this regard had issued a notification, which contains the Foreign Exchange Management Regulations,
2000. This notification has been amended from time to time. Department of Industrial Policy and
Promotion (DIPP) under the Ministry of Commerce and Industry, Government of India is the nodal
agency for monitoring and reviewing the FDI policy on continued basis and changes in sectoral policy /
sectoral equity cap which goes from 26% to 100% at present. The FDI policy is notified through Press
Notes / Policy Circulars by the Secretariat for Industrial Assistance (SIA), Department of Industrial
Policy and Promotion (DIPP) Ministry of Commerce & Industry. FDI is allowed under Direct Route and
Government Approval Route. The foreign investors are free to invest in India, except few sectors /
activities, where prior approval from the RBI or Foreign Investment Promotion Board (FIPB) would be
required. FDI in retail sector is allowed through Government Route only.
3.2. Evolution of FDI policy in Retail
PWC‘s 15th Annual Global CEO Survey indicated that half of CEO‘s in developed countries believed
that emerging economies are more important to their company‘s future. With the developed markets
witnessing an economic turmoil, emerging countries are fast becoming the retail hotspot for foreign
players. In the past five years, retail chain giants such as Walmart, Tesco and Metro Group, saw revenues
in developing countries grow 2.5 times faster than their home markets.
In light of the Globalization trends, the Indian Government had been anticipating, the introduction of a
Foreign Direct Investment Policy for the Indian Retail Sector, however amidst severe criticism from
conservative political opposition, the approval of the policy has undergone a long waiting period. Finally
after several years of debate, a somewhat structured FDI policy has been announced by the current
Government in September 2012, permitting FDI in Single Brand Retail Trade, and Multi Brand Retail
Trade, laying out several conditions, conceptually believed to be for the protection of the traditional
retailer, and the indigenous farmer.
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18. Fig: Evolution of FDI policy in Indian Retail Sector
Source: Recreated from IBEF 2013 & Deloitte 2013
3.3. Structure of FDI Policy in Retail
Press Note 4 of 2006 issued by DIPP and consolidated FDI Policy issued in October 2010 which has
further been revised in 2011 and 2012 vide Press Note 1 of 2011 dt.14.2011, Press Note 2 of 2011 dt.
1.10.2011, Press Note 3 of 2011 dt.8.11.2011, Press Note 1 of 2012 dt.10.1.2012, FDI Policy Circular 1
of 2012 dt. 10.4.2012, Press Note 2 of 2012 dt. 31.7.2012, Press Note 3 of 2012 dt. 1.8.2012 and Press
Notes 4, 5, 6, 7 & 8 dt. 20.9.2012 provides the sector specific guidelines for FDI with regard to the
conduct of trading activities. Press Notes 4 & 5 dt. 20.9.2012 particularly pertains to the FDI policy for
Retail Sector. Detailed guidelines are available in the following press notes.
a) FDI up to 100% for cash and carry wholesale trading and export trading allowed under the
automatic route in 2006.
b) FDI up to 100 % with prior Government approval (i.e. FIPB) for retail trade of ―Single Brand‟
products, subject to Press Note 4 (2012 Series)
c) 51% FDI is permitted in Multi Brand Retailing in India under Government Route (Press Note 5 of
2012).
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19. 3.4. FDI Policy in Single Brand Retail Trade (SBRT)
Paragraph 6.2.16.4 of 'Circular 1 of 2012 – Consolidated FDI Policy', effective from April 10, 2012,
relating to single – brand product retail trading, presently reads as follows ―6.2.16.4 Single Brand product
retail trading under 100% Government Route
1) Foreign Investment in Single Brand product retail trading is aimed at attracting investments in
production and marketing, improving the availability of such goods for the consumer,
encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian
enterprises through access to global designs, technologies and management practices.
2) FDI in Single Brand product retail trading is subject to the following conditions:
a. Products to be sold should be of a 'Single Brand' only
b. Products should be sold under the same brand internationally i.e. products should be sold
under the same brand in one or more countries other than India.
c. 'Single Brand' product-retail trading would cover only products which are branded during
manufacturing
d. The foreign investor should be the owner of the brand.
e. In respect of proposals involving FDI beyond 51%, mandatory sourcing of at least 30%
of the value of products sold would have to be done from Indian 'small industries/ village
and cottage industries, artisans and craftsmen'. 'Small industries' would be defined as
industries which have a total investment in plant & machinery not exceeding US $ 1.00
million. This valuation refers to the value at the time of installation, without providing for
depreciation. Further, if at any point in time, this valuation is exceeded, the industry shall
not qualify as a 'small industry' for this purpose. The compliance of this condition will be
ensured through self – certification by the company, to be subsequently checked, by
statutory auditors, from the duly certified accounts, which the company will be required
to maintain.
3) Application seeking permission of the Government for FDI in retail trade of 'Single Brand'
products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of
Industrial Policy & Promotion. The application would specifically indicate the product, Product
categories which are proposed to be sold under a 'Single Brand'. Any addition to the product,
product categories to be sold under 'Single Brand' would require a fresh approval of the
Government.
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20. 4) Applications would be processed in the Department of Industrial Policy & Promotion, to
determine whether the products proposed to be sold satisfy the notified guidelines, before being
considered by the FIPB for Government approval‖
Revision dated 20/09/2012
―Revised Position w.e.f.20.9.2012: 2.1 The Government of India has reviewed the position in this regard
and decided to amend paragraphs 6.2.16.4 (2) (d) & 6.2.16.4 (2) (e) of the existing policy. 3.0
Amendment to paragraph 6.2.16.4: 3.1 Accordingly, paragraph 6.2.16.4 of 'Circular 1 of 2012Conso1idated FDI Policy', effective from April 10, 2012, is amended, as below: 6.2.16.4 Single Brand
product retail trading under 100% Government Route.
1) Foreign Investment in Single Brand product retail trading is aimed at attracting investments in
production and marketing, improving the availability of such goods for the consumer,
encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian
enterprises through access to global designs, technologies and management practices.
2) FDI in Single Brand product retail trading would be subject to the following conditions:
a. Products to be sold should be of a 'Single Brand' only.
b. Products should be sold under the same brand internationally i.e. products should be sold
under the same brand in one or more countries other than India.
c. 'Single Brand' product-retail trading would cover only products which are branded during
manufacturing.
d. Only one non-resident entity, whether owner of the brand or otherwise, shall be permitted
to undertake single brand product retail trading in the country, for the specific brand,
through a legally tenable agreement, with the brand owner for undertaking single brand
product retail trading in respect of the specific brand for which approval is being sought.
The onus for ensuring compliance with this condition shall rest with the Indian entity
carrying out single-brand product retail trading in India. The investing entity shall
provide evidence to this effect at the time of seeking approval, including a copy of the
licensing / Franchise / sub – license agreement, specifically indicating compliance with
the above condition.
e. In respect of proposals involving FDI beyond 51%, sourcing of 30% of the value of
goods purchased will be done from India, preferably from MSMEs, village and cottage
industries, artisans and craftsmen, in all sectors. The quantum of domestic sourcing will
be self-certified by the company, to be subsequently checked, by statutory auditors, from
the duly certified accounts which the company will be required to maintain. This
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21. procurement requirement would have to be met, in the first instance, as an average of five
years total value of the goods purchased, beginning April of the year during which the
first tranche of FDI is received. Thereafter, it would have to be met on an annual basis.
For the purpose of ascertaining the sourcing requirement, the relevant entity would be the
company, incorporated in India, which is the recipient of FDI for the purpose of carrying
out single-brand product retail trading.
f.
Retail trading, in any form, by means of e – commerce, would not be permissible, for
companies with FDI, engaged in the activity of single-brand retail trading.
3) Applications seeking permission of the Government for FDI in retail trade of ‗Single Brand‘
products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of
Industrial Policy & Promotion. The applications would specifically indicate the product / product
categories which are proposed to be sold under a ‗Single Brand‘. Any addition to the product /
product categories to be sold under ‗Single Brand‘ would require a fresh approval of the
Government.‖
3.5. FDI Policy in Multi Brand Retail Trade (MBRT)
51% FDI in Multi Brand retail implies that a retail store with a foreign investment can sell multiple
brands under one roof with the following conditions:
1) FDI in multi brand retail trading, in all products, will be permitted, subject to the following
conditions: Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh
poultry, fishery and meat products, may be unbranded
2) Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million.
3) At least 50% of total FDI brought in shall be invested in ‗backend infrastructure‘ within three
years of the first tranche of FDI, where ‗backend infrastructure‘ will include capital expenditure
on all activities, excluding that on front – end units, for instance, back end infrastructure will
include investment made towards processing, manufacturing, distribution, design improvement,
quality control, packaging, logistics, storage, warehouse, agriculture market produce
infrastructure etc
4) Expenditure on land cost and rentals, if any, will not be counted for purposes of back end
infrastructure
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22. 5) At least 30% of the value of procurement of manufactured processed products purchased shall be
sourced from Indian ‗small industries‘ which have a total investment in plant & machinery not
exceeding US $ 1.00 million. This valuation refers to the value at the time of installation, without
providing for depreciation. Further, if at any point in time, this valuation is exceeded, the industry
shall not qualify as a ‗small industry‘ for this purpose. This procurement requirement would have
to be met, in the first instance, as an average of five years total value of the manufactured
processed products purchased, beginning 1st April of the year during which the first tranche of
FDI is received. Thereafter, it would have to be met on an annual basis.
6) Self-certification by the company, to ensure compliance of the conditions at serial nos. (2), (3)
and (4) above, which could be cross – checked, as and when required. Accordingly, the investors
shall maintain accounts, duly certified by statutory auditors.
7) Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per
2011 Census and may also cover an area of 10 kms around the municipal / urban agglomeration
limits of such cities. Retail locations will be restricted to conforming areas as per the Master /
Zonal Plans of the concerned cities and provision will be made for requisite facilities such as
transport connectivity and parking. In States / Union Territories not having cities with population
of more than 10 lakh as per 2011 Census, retail sales outlets may be set up in the cities of their
choice, preferably the largest city and may also cover an area of 10 kms around the municipal /
urban agglomeration limits of such cities. The locations of such outlets will be restricted to
conforming areas, as per the Master / Zonal Plans of the concerned cities and provision will be
made for requisite facilities such as Transport connectivity and parking.
Table: FDI in retail trading – snapshot of recent policy changes
Previous FDI Policy
Revised FDI Policy
Single Brand
Retail Trading
(SBRT)
FDI upto 100% permitted under FDI upto 100% permitted under Government
Government approval route subject to approval route Liberalization of conditions
onerous conditions
w.r.t
Ownership of ‗brand‘
Local sourcing obligation
Multi Brand
Retail Trading
(MBRT)
FDI was prohibited in MBRT, except FDI upto 51% permitted in MBRT, under
in Cash & Carry Wholesale Trading
Government approval route, subject to
specified conditions
Presently possible only in specified
states / union territories
Source: BMR Taxand 2012
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23. 3.6. FDI Policy E – Commerce
100% FDI has been permitted in E – commerce under the automatic route
E-commerce understood as activity of buying and selling through the E – commerce platform
Only Business to Business (B2B) E – commerce permitted
As per recent policy, companies engaged in SBRT and MBRT are not permitted retail trading
by way of E – commerce
To provide B2C services, several foreign investors have adopted structures involving tie –
ups with domestic online retail websites
Status is unclear if E – commerce includes M – commerce (mobile commerce)
Need for separate policy / guidelines for E – commerce distinguishing it from retail trading
3.7. Acceptance of FDI Policy by Indian States
The main opposition party of India and its allies constantly opposed the introduction of FDI in multi –
brand retail in 2012. Some of the ruling party allies such as DMK, UDF (Kerala) were also against the
policy.
States in Favor of
1.
2.
3.
4.
5.
6.
7.
8.
9.
Maharashtra
Haryana
Andhra Pradesh
Rajasthan
Jammu & Kashmir
Uttrakhand
Manipur
Assam
Delhi
States Opposing
1.
2.
3.
4.
5.
6.
7.
8.
Gujarat
Uttar Pradesh
West Bengal
Bihar
Tamil Nadu
Kerala
Chattisgarh
Odisha
Source:
Source: Deloitte 2013
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24. However, post elections in Karnataka, Madhya Pradesh, and Chhattisgarh, these states may change their
stance on FDI in MBRT depending on who comes to power.
The principal opposition party supported the FDI in Multi-Brand Retail when it was in power at the
Center in 2002. Further, many of the current allies who oppose the policy are still supporting the UPA
Government.
4. Chapter 4 – Impact of FDI in Retail on Macroeconomic factors in other countries
To understand the impact of FDI in retail on other nations similar to India in terms of demographics and
various macroeconomic factors, major impacts on countries like China, Thailand, Indonesia, Brazil,
Russia and Mexico can be compared.
4.1. China
China developed its open door policy in the aspect of FDI in retail in order to take a transition from a
―planning‖ to a ―market‖ economy.
Following has been the series of events with respect to FDI in retail in China:
i.
FDI in retailing was allowed in China for the first time in 1992. Foreign ownership was
initially restricted to 49%.
ii.
In December 2004, the Chinese government lifted all the restrictions on FDI in Retail.
iii.
After liberalization of the retail sector in China (1996 – 2001), following changes took place
a. Over 600 hypermarkets were opened between 1996 and 2001
b. The number of small outlets increased from 1.9 million to over 2.5 million
c. Number of traditional retailers in China also increased by around 30%
d. Employment in the retail increased from 28 million people to 54 million people.
Employment in the retail and wholesale trade increased from about 4% of the total labour
force in 1992 to about 7% in 2001.
e. The country witnessed an average GDP growth rate of 8% after the introduction of FDI
in Retail
f.
Inflation rate decreased to -0.8% and -1.4% in 1998 and 1999 respectively. Now after 20
years, inflation rate is at 2% rather than 14.6% and 24.2% in 1993 and 1994.
g. The total FDI inflow & outflow in retail also increased significantly after the introduction
of FDI in retail leading to increased trade openness.
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25. 4.2. Thailand
FDI in Retail was introduced in 1997 in Thailand. However, many adverse effects of FDI in retail were
observed. Thailand permits 100% foreign equity, with no limit on the number of outlets.
Following has been the series of events with respect to FDI in retail in Thailand:
i.
Traditionally, wet market and small family owned grocery stores dominated the Thai Retail
industry. After the Asian crisis in 1997, the entry ban on foreign players was removed and
soon, the foreign players increased and developed their operations significantly. Eventually,
most of the local players had to close down their business.
ii.
However, there were certain positive effects as well:
a. Expansion of organized retailing and soon Thailand emerged as a major shopping
destination for global travelers.
b. The Agro and food processing industry received huge encouragement and lead to
enhancement of exports
iii.
Impact on macroeconomic factors:
a. GDP growth rate of Thailand plummeted to -10.5% in 1998 due to the shutting down of
local retailers.
b. Unemployment rate remained low.
c. Inflation rate also remained at 0.3%
d. The openness indicator reached its maximum in 2002.
e. FDI inflows increased to 7.3 Bn in 1998.
4.3. Indonesia
Modern retail was introduced in Indonesia in the 1990‘s and mostly involved domestic chains. FDI in
retail led to the multi – nationalization and rapid consolidation of the supermarket sectors.
Following is the sequence of events with respect to FDI in retail in Indonesia:
i.
Currently, Indonesia permits 100% foreign equity in retail business, with absolutely no limit
on the number of outlets.
ii.
In 1958, the leading chain Matahari started as a small shop, and expanded into a chain of
department stores, and was then bought by a giant banking and real estate conglomerate
Lippo Group in 1997. Between 2002 and 2006, Matahari doubled its sales, becoming a
billion-dollar chain.
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26. iii.
Impact on macroeconomic factors
a. A deep economic recession in 1997 – 98 led to inflation of 80% during the mid 1997
b. During the same period, the GDP growth plunged to -13%
c. The Indonesian Government introduced a wide range of institutional reforms and a
redirected monetary policy towards maintaining price and exchange rate stability.
Eventually, price stability was reinstated.
d. Export, imports and the real exchange rate remained consistent
e. There was an increasing effect of FDI in retail on the total FDI inflows in retail.
However, FDI outflows in retail dropped after 1994.
4.4. Brazil
The Impact on macroeconomic factors since the opening of FDI in retail in Brazil (1994) has been as
follows:
i.
According to a report by CUTS International, since opening up to the foreign investment in
1994, the traditional small retailers managed to increase their market shares by 27%
ii.
The annual GDP growth remained stable and positive
iii.
The unemployment rate decreased after 1994 after its maximum at 9.6
iv.
After 1994, the Brazilian currency (Real) appreciated with respect to U.S Dollar
v.
The value of exports and imports too increased after 1994
vi.
In 1998, the total FDI inflows in retail reached their peak
4.5. Russia
Russia witnessed a supermarket revolution in 2000‘s. In 2002, sales of the top – 15 retail chains in Russia
amounted to $2.7 billion, by 2006, the sales of these chains surged to $19.2 billion. The share of the top –
3 retail chains jumped from about 40% in 2002 to 54% in 2006. Sales from foreign retailers stood at 33%
in 2002 and 35 % in 2006 leading to 8 foreign chains being amongst the top 15.
The Impact on macroeconomic factors since the opening of FDI in retail in Russia has been as follows:
i.
The GDP growth has been positive
ii.
Since 2000, the unemployment rate has decreased.
iii.
After 2002, a sharp increase was observed in FDI inflows and outflows in retail.
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27. 4.6. Mexico
Until the early 1990s, nearly all the retail sales in Mexico were dominated by domestic chains. Mexico
opened its doors to foreign retailers in 1991. By 2002, 48% of the $24 billion from retail sales was
accounted by the top – 7 chains. By 2006, the sales from these top – 7 chains nearly doubled to $38
billion, and out of which 53% was by foreigners.
The Impact on macroeconomic factors since the opening of FDI in retail in Mexico has been as follows:
i.
With the influx of foreign retailers in 1991, few major retail stores started dominating the
market, and many of the smaller retailers were made to shut down. By 2001, only 4 chains
dominated the market:
a. Wal-Mart de Mexico(Walmex) with almost half (45.6 percent)
b. Comerical Mexicana with a little over a fifth (20.6 percent) market share
c. Gigante with 15.5 percent share
d. Soriana with 14 percent share
ii.
The GDP rate has been consistent except in 1995 when it reached -6.2
iii.
Wal-Mart took over nearly half of Mexico's retail business with just over 200,000 employees
iv.
The unemployment rate increased to 6.9 in 1995
v.
Though the value of exports and imports was consistent throughout but the exchange rate was
seen fluctuating after 1991
vi.
An increase in the total FDI inflows in retail was observed
5. Chapter 5 – Impact of FDI in Retail in China
5.1. Impact on Farmers
As per a research paper by Kaanan Gupta in 2012, on ―FDI in multi brand retailing – Lessons from
China‖, the operations of the global supermarkets in China indicated that the entry of foreign retailers did
not make much difference to the producer‘s share in the consumer‘s rupee. Due to the sheer size and
buying power of foreign supermarkets, the producer prices did get a bit depressed, however, they were
compensated in the long run. As per the research paper; for a farmer from Hebei province in China, who
grew vegetables on a 0.67 hectare plot of land, the opening of retail had increased, not reduced his client
base. He had direct sales in a Beijing neighborhood every evening, while also supplying to a supermarket
chain.
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28. Further there had been an impact in improving the productivity of farmers, by increasing the size of their
landholdings. For another instance, each household in Hebei, had between 0.06 and 0.13 hectare of
cultivable land, but as more farmers moved to the cities for work, they rented out their land to those
farmers who stayed behind.
However, consolidation of the retail sector in China, as a result of the government – supported rise of
local retail giants in order to protect them from foreign retailers, had put many small farmers who could
not cope with lower prices, out of work.
5.2. Impact on Organized Retail
China's largest retail chains in 2010, were all Chinese companies — the Shanghai Bailian group, Suning
Home Appliances, Gome Home Appliances and Dashang Group, all had bigger sales than Walmart in
China.
Table: Top 10 Chinese Retail Chains 2010
Rank
Name of Company
Sales
(Bn. US$ )
Number
of Stores
Operational Format
Region
of Origin
1
Suning Appliance
Group
24.76
1,342
Electronics Specialty
China
2
Gome Electrical
Appliances
Company Limited
Bailian Group
Company Limited
24.55
1,346
Electronics Specialty
China
16.43
5,809
China
4
Dashang Group
Company Limited
13.66
170
5
Vanguard Company
Limited
11.38
3,155
6
RT-MART
International
Company Limited
Carrefour Société
Anonyme (China)
7.96
143
Supermarket, Department
Store, Convenience Store,
Home Improvement
Supermarket, Department
Store, Electronics
Specialty, Home
Improvement
Supermarket, Department
Store, Convenience Store,
Drug Store, Food and
Beverage
Supermarket
Taiwan
6.66
182
Supermarket
France
8
Anhui Huishang
Group Company
Limited
6.42
2,915
Supermarket, Department
Store, Convenience Store,
Electronics Specialty
China
9
Wal-Mart Stores,
Incorporation
6.34
219
3
7
China
China
Supermarket
Foreign Participation in Indian Retailscape: Revolution or Evolution | Analysis from a Technocratic Perspective
US
Regions of
Operation
More than 300
cities in all
regions, Hong
Kong, Japan
More than 200
cities in all
regions
20 provinces
and cities in
China
Northeast
China, North
China and
West China
27 provinces
and cities in
China
21 provinces
and cities in
China
21 provinces
and cities in
China
50 cities in
China
20 provinces
and cities in
Page 28 of 56
29. 10
(China)
Chongqing General
Trading (Group)
Company Limited
6.06
319
Supermarket, Department
Store, Electronics
Specialty
China
China
Chongqing,
Sichuan,
Guizhou
Source: Kaanan Gupta 2012
This was primarily because the global retail giant‘s strengths in their home countries were based on
factors that are totally absent in other countries. For instance, Wal-Mart was able to drive costs down
because of its incredible logistics and supply chain networks, which were absent in China. Further the
physical infrastructure like roads and ports were not as developed in China, to the same level as they are
in the US and thus it did not provide the kind of scale that they require to negotiate and bargain with the
suppliers and drive down the cost.
Post liberalization, competition became cut-throat in the supermarket and the hypermarket segment of
China‘s retail segment. By 2010, the largest player in the supermarket segment, the China-based Shanghai
Bailian Group (with 5,809 stores in 2010), constituted only 11% in terms of market share. Even Wal-Mart
which dominates the retail market in the United States, occupied only around 6% market share in China,
despite of the fact the big – box retailer had set up shop nearly 15years ago in the country. RT-Mart
International Limited, a Taiwan-headquartered company was the biggest retailer on the Chinese mainland
with 6.3% market share until mid-2011, attracting more than one-fourth of households in the mainland
market. The French retail giant Carrefour Group, the world's second-largest retailer by revenue held a
4.9% market share during 2010. Tesco Public limited company, the world's third-largest grocer by
revenue, had a 2.1% market share in China over the year 2011. CR-Vanguard Group saw its market share
rise from 6.2% in the second quarter of 2010 to 6.7% in the second quarter of 2011.
The overall number of foreign retail stores in China in the Top 100 increased by 25.64%, exceeding the
11.49% of Chinese retail stores in 2010. There were 135 newly-opened stores of the six major foreign
supermarket operators in 2010, up 22.77% over the previous year.
Among the Top 100, foreign retailers had a sales growth of 18.09% in 2010, vs 25.3% sales growth of
Chinese retailers.
5.3. Impact on Traditional Retail
Since the opening up of Retail sector in 1992, China has attracted huge investments without affecting
either the small retailers or domestic retail chains. In fact, between 2004 – 2010, the number of small
Chinese outlets had increased to around 2.5 million from 1.9 million. It was because the market was so
large and growing so quickly that even today, hypermarkets, convenience stores and other examples of
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30. organized retail make up less than half of the urban food market. In China, unorganized retail, represented
by street vendors and neighborhood ―community retailers‖, continued to thrive, offering cheaper prices
than supermarkets and retail chains. Further, the products which are offered at a lower price by modern
retail are less relevant for the poor who buy them loose in small quantities. Likewise, the presence of big
global retailers in rural China is also much smaller.
Certainly consolidation of the retail sector in China, as a result of the government-supported rise of local
retail giants like Bailian, has put many small retailers who could not cope with the surge in number of
competitors and lower prices, out of work. Nevertheless, the job losses in China have not been felt
because of the pace of urbanization and the growth of cities.
5.4. Impact on Supply Chain
Though it is somewhat perceived that in China, the global big – box retailers have mostly focused more
on opening stores in a drive to capture the market share, there has not been much investment in making
supply chain improvements and operational efficiencies. Wal-Mart has a 40,000 square meter, central
distribution centre in Kengzian (China) and Carrefour uses a different approach, it relies more on local
distributors to deliver direct to the stores to reduce the cost of developing its supplier network and supply
chain. Yet, almost two decades after China opened up retail fully, the sector has seen rapid growth against
the backdrop of increased market consolidation, higher production efficiency enabled by rising
investments in rural infrastructure and booming exports made possible by the setting up of new supply
chains.
5.5. Impact on Consumers
It is evident that the entry of global retail giants heats up the competition, giving consumers a better deal,
both in prices and choices. Mega retail chains need to keep price points low and attractive – that is the
USP of their business. This is done by smart procurement and inventory management, good practices.
For Chinese consumers the attractions of hypermarkets are low prices and one stop shopping for food and
general merchandise. China‘s middle class consumers visit hypermarkets once every 10 days on average.
While hypermarkets are gaining market share among food retailers, the majority of consumers still bought
food at supermarket stores and traditional open markets, especially in rural areas where supermarkets do
not exist.
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31. 6. Chapter 6 – Critical Analysis of Impact of FDI in Retail in India
6.1. Impact on Farmers
Since the early 1990s, supermarkets have revolutionized retail sector in developing countries. In order to
reach the mass market, supermarkets have now developed beyond the middle class and upper class
segments. This process has affected not only the traditional retailers, but a much broader spectrum
covering the wholesale, processing, and farm sectors within the entire supply chain. With respect to
quality, costs, volume, consistency and commercial practices, supermarkets require more from suppliers
when they modernize their procurement systems. Supermarkets affect suppliers in a biggest way for foodmanufacturing enterprises, since some 80% of contents sold by supermarkets comprise of processed,
staple, or semi-processed products.
In order to suffice the requirements desired by their clients, Supermarkets have to support small farmers
with training, credit, equipment, etc when they are unable to source from large scale or medium scale
farmers, and the small farmers lack the much needed assets.
The farmers in this way are not only be able to increase their output but also get better rewards in terms of
supplying to organized retailers by tying up long term contracts with them.
With the entry of Global retail giants, the farmers across India‘s 6,00,000 villages are expected to gain
with higher profits and better market access. As the competition increases, the farmers would get good
prices for their harvest. The original producers would get a higher price for their produce, since the profit
will flow to them directly, leaving behind the middle men. This is anticipated to happen as the giant
retailers have more access to capital and a high buying power. Direct purchase from farms will hugely
benefit small farmers who are not getting good returns by selling in the local wholesale market. The
payments will be made directly to the producers and will be free from commission agents. In turn these
large retailers will also benefit by saving 10 – 15% in commissions by purchasing fruits and vegetables
directly.
An Empirical analysis carried out by Sinha & Singhal (March 2013) shows that farmers tend to earn from
20% to 50% more in net terms when they enter direct supermarket channels. For example, net profit was
33% –39% higher among supermarket channel participants compared to traditional market participants
amongst tomato farmers in Indonesia. However this would require more up – front investment by the
farmers to meet greater demands for quality, consistency, and volume compared with marketing to
traditional markets.
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32. FDI in multi – brand retail is an important step to push more growth in the sector. Case studies of MNC‘s
helping farmer communities in India like PepsiCo India‘s potato farming program and Bharti Wal –
Mart‘s initiative through Direct Farm Project and several others suggest that opening of Indian retail
sector to FDI is a win – win situation for farmers.
Farmers would benefit significantly from the option of direct sales to organized retailers. Global majors
such as Wal-Mart, Carrefour and Tesco are expected to bring a global scale in their negotiations with the
MNCs such as Unilever, Nestlé, P&G, Pepsi, Coke, etc.
The improved cold chain and storage infrastructure will no doubt lead to a reduction in losses of
agriculture produce. It may also lead to removal of intermediaries in the retail value chain and curtail
other inefficiencies resulting in higher income to a farmer.
6.2. Impact on Traditional Markets
It is being anticipated that with the advent of major organized retail players in India, the existence of
traditional mom and pop stores will be in question. However, there is a theory that analyses co –
existence. The size, complexity and diversity of retail industry is a huge advantage for the smaller players
in India, however most of the organized retailers have opened shop in the Metros, Tier 1 and Tier 2
towns.
This has been the main reason, believed to be preventing the liberalization of the FDI norms for Indian
retail for very long. Political oppositions have time and again argued:
a) Adverse affect by the entry of global retail giants: Since these retailers have advanced capabilities
of scale and infrastructure along with being cash rich, this may result in the loss of jobs for people
in the Indian unorganized sector.
b) Better operational efficiencies of the organized players: Lower product prices by global giants
may hamper the profit margins of the unorganized players.
On the contrary some theorists believe, Multi – brand retail, if allowed, can transform the retail sector in
the following significant ways:
a) Firstly, the organized players are expected to bring in the much needed investment which will
help the domestic retailers that don‗t have the resources to sail through, during economic crisis.
b) Infrastructure support extended to improve the backend processes would enable to eliminate such
extreme wastages and enhance the supply chain operational efficiency.
c) FDI in multi – brand retail would in no way endanger the jobs of the people employed in the
unorganized retail sector. It would rather lead to the creation of millions of jobs as massive
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33. infrastructure capabilities would be needed to cater to the changing lifestyle needs of the urban
Indian who is keen on allocating the disposable income towards organized retailing like big box
stores along with the local kirana stores. These stores would be able to retain their importance
owing to their unique characteristics of convenience, proximity and skills in retaining customers.
Also, these would be more prominent in the Tier-II and Tier-III cities where the organized
supermarkets would find it harder to establish themselves.
Another way of approaching the problem is to analyze if the growth in market share by the International
Retailers will kill the Independent Retailers. Technopak advisors in their white paper on ―FDI‘s Impact on
Indian Retail sector and Indian Economy‖ (October 2012), have suggested that Corporatized retail is
expected to grow its share from the current 7% to nearly 20% in the next decade. By 2021, this will
translate into USD 162 billion in revenue for corporatized retail.
Table: Comparison of Corporatized, Independent and International Retail
Estimated merchandise consumption (USD Bn)
Share of Independent Retail
Size of Independent Retail
Share of Corporatized Retail
Size of Corporatized Retail
Share of Indian Corporatized Retailers in total Corporatized Retail
Share of International Retailers or International Retailers assisted Retail
Size of International Retailers (USD Bn)
2001
120
96%
~115
~4%
5
~100%
2012
490
93%
436
~7%
34
~95%
2021
810
80%
648
~20%
162
50%
50%
80
Source: Technopak 2012
In 2011, the total revenue of all hypermarkets (largely international retailers) in China was USD 80
billion including the revenues of Walmart, Carrefour, Tesco and other regional players. This is after a 15
year long journey for these retailers, in China.
Optimistically, if it is assumed that retail sector reforms in India will lead to the creation of a similar scale
for these players then, in 2021, all the international retailers in India can at best aspire for a USD 80
billion revenue share. This translates to approx 50% of the total revenues (USD 162 billion) coming from
organized retail in 2021, with Indian corporatized retailers contributing the balance. This further translates
to around 10% of the total retail market each for international and Indian corporatized retailers by 2021.
Technopak‘s analysis therefore assumes that international retailer‘s share of the Indian retail sector would
be no more than 10% in the next 10 years, even in a best – case scenario. Even with this being the case,
90% of the retail sector will still be attributable to independent retail or Indian corporatized retail.
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34. 6.3. Impact on Consumers
India is now home to the largest number of moneyed consumers. One of the key drivers in the growth in
retailing is the increased consumer demand resulting due to the growth of consumer groups with
disposable income between USD 2,500 and USD 10,000 per annum which grew from 47% in 2010 to
50% in 2011. The strongest impact of organized retailing would be seen on these consumers. Along with
the increase in disposable income and increased discretionary expenditure, the consumers will get better
choice of formats.
Due to the Direct Procurement model followed by organized retailers, there would be substantial cost
savings through disintermediation which would ultimately benefit the consumer.
Fig: Illustration for effect of direct procurement on Farmer and Consumer Price.
Source:Assocham & Yes Bank 2012
The Indian consumers will soon have the luxury of world class opportunity of shopping to meet the
requirements of their daily life. They will find a new world of enjoyment of picking up consumer items to
their greatest satisfaction. Big retailers will often allow discounts on selected items which will facilitate
the consumers and they can end up with marginal bargains.
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35. 6.4. Impact on Supply Chain
As per Industry estimates 35 – 40% of India‘s total production of fruits and vegetables and nearly 10% of
food grains, is wasted every year due to inadequate storage and transport facilities. Lack of adequate
storage facilities causes heavy losses to farmers in terms of quality degradation and wastage of produce in
general, and of fruits and vegetables in particular. Post-harvest losses of farm produce, especially of
fruits, vegetables and other perishables, have been estimated to be over INR 1 trillion per annum, 57% of
which is due to avoidable wastage and the rest due to avoidable costs of storage and commissions.
Though India is the second largest producer of fruits and vegetables (about 200 million MT), it has a very
limited integrated cold – chain infrastructure, with only 5,386 stand-alone cold storages, having a total
capacity of 23.6 million MT. It is estimated that India is already facing a shortage in Cold Storage space
by about 9 – 10 million MT. Moreover, the existing cold storage facilities now available are mostly for a
single commodity and around 80% of them are utilized for potato storage resulting in poor capacity
utilization. Since Indian agriculture is witnessing a major shift from traditional farming to horticulture,
meat, poultry and dairy products and the demand for fresh and processed fruits and vegetables is
increasing due to rising urban population and transforming consumption habits, the role of cold storages
becomes critical.
Further, the warehousing capacity available in India, in public, co-operative and private sector is about
108.75 million MT and another 35 million MT warehousing capacity is required during the Twelfth Five
Year Plan period for the storage of all major crops. This clearly indicates to the huge demand supply
mismatch. Moreover, the warehouses in our country have been built following traditional norms and
without proper specifications. They lack in optimal size, adequate design, ventilation facility, inventory
management and storage system.
Almost half of this wastage can be prevented if fruit and vegetable retailers have access to specialized
cold storage facilities and refrigerated trucks. Though FDI is permitted in cold – chain to the extent of
100%, through the automatic route, in the absence of FDI in front – end retail, investment flows into this
sector have been insignificant.
The opening up of FDI in Retail will bring in investments in this field compulsorily as the modern retail
formats will procure large quantities to gain economies of scale and will try to avoid wastages due to
improper storage facilities. As the business of organized retailing of food matures, it would increase
private investment in the area of supply chain infrastructure.
The organized retail will bring in efficient practices that will help farmers in the procurement process,
reduce wastage with finally efficient storage and will finally cut the losses. The giant retailers will help
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36. India to have strong storage system with highly developed transportation. This is also going to get a boost
from the various schemes of the Government to incentivize rural infrastructure creation (Terminal
Markets, Mega Food Parks, Rural Godowns etc.). This will benefit the farmers immensely by creating
feasible and competitive marketing alternatives for their produce. Giant retailers with decades of
experience on how to manage mountains of inventories, supply them to key distribution centers and do it
all faster, better, cheaper. The arrival of foreign retailers will definitely bring in synergies in distribution
management practices.
Agricultural value chains have increasingly become complex over time. Market requirements rapidly
change, driven by increasing demand, changing lifestyles and government policies.
In response to these changing market requirements, value chains need to become more coordinated
leading to more integration and concentration to achieve efficiency and minimize risks.
Product and market standards change with time which in turn, require changes from various factors in the
value chain that supply these products to meet market requirements. But this has not been the case with
the Indian Agriculture supply chain which has by and large remained the same over the years, not
incorporating the required changes for development and increased efficiency.
The farmers in India receive a share of less than 30% for most of the food grains and 15% – 20% for
horticultural produce, while in developed countries the share comes to around 50% – 70% for most of the
commodities. This is basically because of the large number of intermediaries involved in the chain.
Intermediaries, no doubt are an essential part of the chain and they add value to the commodities and help
in aggregation.
But this intermediation should essentially be limited to the level where value is actually being added. In
India unnecessary intermediaries get involved along the chain resulting in margin payouts at various
levels and losses due to multiple handling.
The margins taken by the intermediaries are generally product specific and are higher for fresh produce,
having shorter shelf life.
For grains and cereals, around 28% margin is added to the cost, before the produce reaches the
processors. Further costs are added when the produce is processed and passes through the Mandis. This
cost accounts for a 12% increase. These margins considerably increase the prices of grains and cereals for
end consumers.
Similar is the case with fruits and vegetables where significant margins are added up to the cost of
produce. But these margins are significantly higher in case of Fruits and Vegetables owing to their shorter
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37. shelf life and greater perish ability. In case of fresh fruits and vegetables, around 47% margin is added to
the cost of produce before it reaches for processing.
Further margins are added up during processing and movement through different levels in Mandis.
Generally, the prices of the produce double in such cases.
Entry of players in the organized retail tends to make the supply chain more effective and efficient by:
Sourcing directly from the farmers or at least closer to the farm gate and eliminating the
unnecessary intermediaries. This in turn results in better price realization to the farmers.
Overall, farmers are bound to gain from the advent of the organized food retailers under a proper
regulatory environment promoting direct procurement on one hand and machinery to prevent the
exploitation of farmers on the other hand.
Direct procurement also gives the farmers certain indirect benefits like knowledge of what needs
to be produced when, technological inputs and access to credit on account of assured market etc.
FDI in retail will eliminate or greatly reduce the role of middlemen and ensure a sustainable and
reasonable price for both the farmer and the consumer by shortening the supply chain through
increase in direct purchase
The players in the organized retail sector will put in all efforts to reduce wastage at all levels by a
substantial amount. FDI will bring in a spurt of investments in latest technologies for storage,
handling, processing and market information.
Fair grading weighment and payment would be the key areas of benefit for the farmers. This will
also encourage the farmers to grow better quality produce as it would command better prices. The
payment structure in most of the organized retail is prompt and inclusive of the cost of
transportation. This is a great benefit to the farmer.
As the organized retail focuses on good quality products, adulteration of food will be kept under
check.
There is a greater deal of transparency in organized retail and monitoring is much easier.
On the farming front retailers can partner with farmers to enhance their farming practices by providing
access to Finance, technical support and inputs.
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38. Fig: Efficiency in Supply Chain
Source:Assocham & Yes Bank 2012
6.5. Impact on Employment
Employment generation in the retail sector is a function of size and productivity within the sector. As we
are aware that the productivity norms differ between independent and corporatized retail thus an
assessment needs to be made to analyze the respective shares of independent and corporatized retail,
mapped against the respective productivity norms in order to determine the net impact of both
independent and corporatized retail on employment.
India is home to approx 15 million points of sale, or shops, of which a majority are run as standalone
entities owned and operated by members of the same family. These ―independent retail‖ shops thus
provide employment to family members and also paid employees. Almost all the paid employees in these
shops are part of an informal workforce and as such have no minimum wage or fixed working hours.
Employment in this segment averages approx 1.5 employees per shop.
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39. On the other hand, employment in corporatized retail comprises employees working on the shop floor,
clerks manning the billing counters, security guards and employees in central / corporatized functions.
The productivity norms for employment in corporatized retail are a function of sales per square feet, or
sq. ft., and employees per sq. ft.
In 2001, the share of corporatized retail in the retail sector was under 5% and the remaining 95% was
constituted by independent retail. By 2011, the share of corporatized retail grew to 7% and is projected to
grow further to 20% by 2021.
Table: Relation between Retail & Employment
GDP (USD Bn)
Estimated merchandise consumption (retail market opportunity) (USD Bn)
Share of Independent Retail (USD Bn)
No. of direct employees in Independent Retail (Mn)
Share of Corporatized Retail (USD Bn)
No. of direct employees in Corporatized Retail (Mn)
2001
450
120
115
18
5
0.1
2012
1958
490
455
22
34
0.7
2021
3310
810
648
32
162
3.3
Source:Technopak 2012
The above table shows the relation between share of independent and corporatized retail viz the number
of direct employees in the respective segment. It is evident that independent retail has added 4 million
jobs in the last decade. In the next decade, while corporatized retail is expected add another 2.6 million
jobs, independent retail will also create 9 million more jobs.
We can hence conclude, contrary to the belief that opening of FDI in retail will lead to a loss of jobs in
traditional retail, rather it can be inferred that opening up the retail sector will create new jobs in
corporatized retail, but the extent of this job creation will be limited by corporatized retail‘s inability to
grow its share in total merchandise retail, and the Independent retail sector will however continue to add
many more employment opportunities.
6.6. Impact on Inflation
We have seen above that the supply chain for retail operations comprises product development,
merchandising, vendor development, logistics, warehousing, in-store selling etc. Inarguably, retailing
requires scale, precision and efficiency in the supply chain for retailers to be profitable. Retailers do this
by integrating the supply chain thus ensuring that quality merchandise is delivered faster without damage
or leakage of any kind. The efficient working of this supply chain reduces the costs incurred in making
goods reach the consumer.
This reduction in the distribution cost of merchandise is passed on to the consumer through a lower retail
price for that merchandise. Thus, it contributes positively in reducing inflation.
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40. However, it is important to understand the various categories that make up merchandise retail and the
contribution of corporatized retail to each of these categories. Food has the largest impact on consumer
price inflation. This is validated by the fact that today 70% of merchandise retailing comprises food &
groceries. Therefore, mapping the share of corporatized retail in dispensing food merchandise will give an
objective picture of corporatized retail‘s ability (present and future) to tame inflation.
Table: Share of Retail Segments
Food & Groceries
Apparel
Others
Total Retail
USD Bn
343
38
110
490
2012
Corporatized Retail
(Share of Total Retail)
10 (3%)
6 (16%)
17 (15%)
34 (7%)
Total Retail
USD Bn
486
62
262
810
2021
Corporatized Retail
(Share of Total Retail)
24 (5%)
11 (17%)
125 (48%)
162 (20%)
Source:Technopak 2012
For simplicity, merchandise retail is broadly classified into three categories - Food & Groceries, Apparel,
and Others (Jewelry & Watches, Electronics, Home Improvement, Pharmacy, Footwear etc.)
While 70% of total merchandise retail comprises Food & Groceries, only 3% of Food & Groceries is
retailed through corporatized retail. This scenario is not going to change much in the coming decade.
While, corporatized retail‘s share will register an impressive growth in other categories, Food &
Groceries will prove to be a challenge. By 2021, the share of corporatized retail in Food & Groceries
retail is expected to grow by a mere 2 percentage points, to around 5%. This is largely to do with the
market structure on the supply side of the Indian economy. This market structure will not allow
corporatized retailers to integrate their food & groceries supply chain. The lack of direct access to farmers
for sourcing, interstate movement of goods, tax structures, and inadequate capacities in the food supply
chain will act as the chief barriers to this integration. The inability of corporatized retail to grow its share
in food & groceries retail can therefore limit its impact in achieving the intended objective of taming
inflation to a very large extent.
6.7. Impact on Government Revenue from Taxes
There is a positive relationship between the increase in tax receipts and the increasing share of
corporatized retail. Most retail transactions conducted in the 15 million shops of Independent retailers in
India are in cash. This provides a significant leeway for a parallel economy to thrive. There are tax (VAT)
leakages via under – invoicing or non – reportage of sales. The structure of independent retail also
provides enabling conditions for the trade of spurious and counterfeit goods. With an increasing share of
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41. corporatized retail, the probability of such leakages would diminish leading to an increase in the certainty
of tax receipts which will provide the respective State Governments with extra revenue, which can be
better utilized in the development of other infrastructure.
Table: Tax Revenue from Retail
2001
120
4%
5
0.5
Total Merchandise Retail (USD Bn)
Size of Organized Retail
Size of Organized Retail (USD Bn)
Tax revenue @ weighted average tax rate of 10% (USD Bn)
2012
490
7%
34
3.4
2021
810
20%
162
16.2
Source:Technopak 2012
7. Chapter 7 – SME sector’s viewpoint on impact of FDI policy in Retail
As per a survey conducted by CII (Confederation of Indian Industries) during December 2011 and
January 2012, on the impact of FDI on SME‘s, which was based on a large sample size of 250 companies
covering different categories of SME‘s according to sales turnover, from different regions of the country
including SME‘s with a turnover of
Rs. 25 Lakhs to Rs. 1 Crore
Rs. 1 Crore to Rs 5 Crore
Rs 5 crore to Rs. 25 Crore
Rs. 25 Crore and Rs. 100 Crore and above
The CII Survey confirmed that almost 96% of the respondents from the SME sector were aware of the
Government‘s earlier decision to allow 100% FDI in single brand retail and 51% FDI in multi-brand retail
and also of the latest notifications issued thereafter. The SME Industry, according to the survey, was in
favor of the government‘s decision to allow 51% Foreign Direct Investment (FDI) in multi-brand retail
and 100% in single brand retail.
A majority of the SME companies that were
Fig: In favor of FDI in Multi Brand Retail
surveyed, had supported the government‘s
decision and the notification allowing 100% FDI
in single brand retail and about 52% of
respondents
were
hoping
for
an
early
implementation of 51% FDI in multi-brand
Source:CII Survey 2012
retail.
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42. On the question how the SME industry
Fig: Entry of MNC Retailers – Opportunity or Threat
considered the entry of MNC retailers as a threat
or opportunity, majority of respondents (66.7%)
saw it as an opportunity for their sector while
around 21 % of respondents perceived it as a
threat. About 12.5 % of respondents were of the
opinion that the decision would have little or no
Source:CII Survey 2012
impact on their company.
The CII survey also tried to find out and make an assessment of the impact of the opening of FDI in retail
on SME‘s in terms of different growth indicators / parameters like sales, size of the industry / capacity
expansion, employment, branding and achieving other efficiencies: -
7.1. Impact on Sales
Majority of the respondents (93.7 %) were of the opinion that, opening of the FDI in retail will result in
growth of sales of their products. Of them, around 21% respondents believed that the impact on the
growth of sales of their product would be in excellent range (> 20%), 31% of the respondents perceived
the impact on growth of sales to be in the high range (10 – 20%), 33 % expected it to be in a moderate
range (5 – 10 %), 8 % felt the growth to remain in a low range (0 – 5%) and the balance 6 % felt that the
decision would have a negative impact on the growth of sales of their products.
Fig: Growth in sales of product
Source:CII Survey 2012
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43. 7.2. Impact on Size of Industry, Business / Capacity Addition
On the aspect of the possible impact on the size of the industry, business and capacity addition, majority
of the respondents (97.9 %) expected the size of their Industry / company to grow with the opening of
FDI in multi – brand retail and single – brand retail. Around 22.9% of the respondents perceived that their
industry would grow by an excellent rate (> 20%), 25% of the respondents expected the impact to be in
the high range (10 – 20%), while 33% expected the growth to be in the moderate range (5 – 10%), and
22% felt the growth to be in the low range (0 – 5%). A significantly negligible 2% of the respondents felt
that the decision would have a negative impact on the growth of size of their industry and business.
Fig: Growth in size of Industry, Business / Capacity Addition
Source:CII Survey 2012
7.3. Impact on New Orders / Contracts
Majority of respondents (95.8%) were of the opinion that the decision of opening of the FDI in retail
would impact them positively in the form of new orders / contracts generated. Around 31% of
respondents expected the new orders and contracts to grow substantially with more than excellent rate
(>20 %), 27% expected the impact to be in the high range (10 – 20%), while 31% expected it to be in the
moderate range (5 – 10 %). Around 6% perceived the growth to be in a low range (0 – 5%), however 4 %
felt that the decision would have a negative impact on the growth of size of the industry in terms of new
orders and contracts.
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44. Fig: Growth in New Orders / Contracts
Source:CII Survey 2012
7.4. Impact on Qualitative improvements and branding of products
On the condition of mandatory sourcing of 30% from the SME Sector, over 56 % of the respondents were
of the view that the government‘s decision will help in achieving qualitative improvements and branding
of their products. This in turn, will ensure SMEs in receiving a sure source of market and higher value
realization for their products / supplies. It will also provide for expansion of their scales of production,
facilitating domestic value addition in manufacturing, thereby creating a multiplier effect on employment,
technology up gradation, income generation, demand and further investment.
7.5. Impact on Supply Chain efficiencies
Around 68% of the respondents surveyed, were of the opinion that Fig: Improvement in Supply Chain
the opening up of retail would lead to improvements in the supply
chain efficiency within their sector, which in turn will integrate
small and medium size enterprises with the modern trade process,
resulting in substantial amount of knowledge and skill transfers in
the sector. However, 17% believed that there would be no impact,
and 15% were not sure if the decision could have any impact on
the supply chain at all.
Source:CII Survey 2012
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45. 7.6. Impact on Employment
Around 48% of the respondents were of the opinion that the Fig: Impact on Employment
decision would have a positive impact on the employment in their
sector whereas 35% expected no change in the scenario. Around
16% believed the impact on the employment in the SME sector to
be negative.
Source:CII Survey 2012
8. Chapter 8 – Analysis of Current Entry Structure in line with FDI Policy Regulations
Many global retailers like Walmart, Metro, Ikea, Carrefour, Woolworth, Staples, etc which have been
wanting to establish and capture some market share in India are now trying to leverage on the policy of
100% in cash and carry wholesale and 51% in multi-brand retailing. Similarly retailers like Debanham,
Espirit, Nokia, Zara, Mark & Spencer, Hamleys etc. are leveraging policies based on single brand
retailing model. Significant foreign retailers‘ presence is seen in Apparel, Fashion, Luxury and food
retailing using either the franchise or licensing route.
Recently many global players like Amazon, Groupon, etc are taking advantage of online retailing and
hence are targeting Indian consumer by setting up relationship with supply chain companies to deliver
products to end customer therefore bypassing the need to create physical retail stores. To target Indian
consumer, identical efforts are expected by other leading global retailing giants leveraging on 3G and
smart phone apps, spreading virally on internet, and social networking platforms.
8.1. Entry structure for Foreign Retailers
India now provides an opportunity for retailers seeking to make investment in the emerging economies to
participate in the growth and increase their global presence. The nascent stage of organized retail
penetration in India and the shortage of availability of cash for expansion will prompt more business
activity in the sector.
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46. Fig: FDI entry options in Retail at a glance
Source:BMR, Taxand 2012
Retail sector requires significant capital investment. However, currently viable funding is not easily
accessible
Suggested modes of FDI involvement would be in the following formats:
Equity: Likely to be the main source of funding Indian operations
Offshore Debt / External Commercial Borrowings:
Regulatory restrictions on end-use of foreign borrowings will pose a severe challenge.
Foreign debt has also not been permitted in single-brand retail model
However, Offshore debt may be possible for multi-brand retail companies for establishment
of cold storage and warehousing facilities
Hybrid Securities: Some ‗hybrid securities‘ which are classified as ‗equity‘ from a regulatory
perspective will form an interesting format for FDI participation. Formats like CCD‘s, FCD‘s
(fully and compulsorily convertible preference shares and convertible debentures) will become a
major source of bringing Foreign money into India.
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47. Ever since the policy on single brand retail policy was announced in 2006, more than 60 brands have set
up retail operations in India in strategic joint ventures with Indian partners.
Some of these include:
Brand
Marks & Spencer
Fendi
Damas
Burberrey
JV Parner
Reliance Retail
Chordia Fashions
Gitanjali Lifestyle
Genesis Color
Brand
Georgia Armani
Ferragamo
Inditex (Zara)
S Oliver
JV Partner
DLF
DLF
Trent
Orient Craft
Source:PWC, FICCI 2012
Some of the other deals announced recently:
Investor
SAIF Ventures
Tiger Capital, Helion
Ventures, Accel India
Fidelity
Tiger Capital
Sequoia Capital India
Standard Chartered PE
Investee
Ink Fruit
Letsbuy.com
Sector
Online apparel site
Online consumer durables site
Big shoe bazaar India
CaratLane.com
Lovable Lingerie
Privi Organics
Online shoe site for wholesale purchases
Online jewellery site
Innerwear
Indian aroma chemical products manufacturer
Source:PWC, FICCI 2012
Acquirer
Future Venture India Ltd
Peter England Ltd
Target
Big Apple (Convenience Stores)
Pantaloons Retail India Ltd
Year
Sep 2012
Sep 2012
Deal Type
Acquisition
Acquisition
Pantaloons Retail India Ltd
Phoenix Mills Ltd
Flipkart Online Services Pvt. Ltd.
Gitanjali Gems Ltd
Shopper Stop Ltd
TTK Prestige Ltd
TV 18
Pantaloons Retail India Ltd
Shoppers Stop Ltd
TPG Capital, Bain Capital
R & R Salons
Classic Housing Projects Pvt. Ltd.
eTree Marketing Pvt. Ltd.
Crown Aim, China
Gateway Multichannel Retail India
Triveni Bialetti Pvt. Ltd.
On – Graph Technologies Pvt. Ltd.
Home Solutions Retail (India) Ltd
HyperCITY Retail India Pvt. Ltd.
Lilliput Kids wear Ltd.
May 2012
Mar 2012
Feb 2012
Dec 2011
Nov 2011
Sep 2011
Jul 2011
Aug 2010
June 2010
Apr 2010
Private Equity
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Acquisition
Private Equity
Source:IBEF 2013
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48. 8.2. FDI policy regulations for Single Brand Retail Trading (SBRT) – an analysis
Issue
Policy Requirements
Impact
Ownership of
the ‗brand‘
Investor entity need not be the owner of
the brand
Copy of licensing / franchise / sublicense agreement required to be
furnished by investing entity at the time
of seeking approval
Inclusion of sub-brands/ differentiated
brands/ variants of brands
All brands should be retailed together in
one or more country outside India
Products should be branded during
manufacturing
All product/product categories to be
sold in India need to be specifically
mentioned and approved
In case of FDI beyond 51%, sourcing of
30% of value of the goods purchased, to
be done from India, preferably from
MSMEs, village, cottage industries,
artisans and craftsmen, in all sectors
Condition to be met by the approved
retail trading entity
Condition would have to be met in the
first instance basis average of five
years; thereafter, to be met on an annual
basis
Quantum of domestic sourcing to be
self-certified by company (validated by
auditors)
Concept of
‗single brand‘
Mandatory
sourcing
of
30% products
from India in
case of FDI
beyond 51%
Amendment recognizes IP holding
structures established by retail
companies
Provides opportunity to use
investment holding company
structures in SBRT
Investment by Private equity /
financial investors (other than FIIs)
Brands owned by a separate legal
entity, cannot be consolidated in
single store
Any addition to product categories
would require approval
Offers flexibility to foreign retailers
for sourcing products
May still be a deterrent for foreign
investment in trading of high-end
technology niche products
Existing tie-ups for sourcing built
by various foreign companies in
India – whether to continue or
remodel?
Whether products purchased locally
should be exported or retailed in
India? – needs fact based analysis
Source:BMR, Taxand 2012
8.3. FDI policy regulations for Multi Brand Retail Trading (MBRT) – an analysis
Policy Requirements
Impact
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49.
Minimum investment – US$ 100 million
At least 50% of total FDI to be invested in
backend infrastructure
Sales outlets can be set up only in the States
that agree to allow FDI in MBRT
Can only be opened only in cities with
population of more than 1 million (only 53
cities as per 2011 census)
At least 30% of the value of products to be
sourced from Indian 'small industries‘
Small industries defined to include industries
having total investment in plant & machinery
not exceeding US$ 1 million
Mechanics to compute minimum investment in
case of investment at premium or in case of
acquisition will pose a question
Specialty stores may not be able to meet
minimum investment cap
Unbundling of back end infrastructure to a
group entity would pose difficulty
Investor can‘t have pan India presence due to
varied state policies / political circumstances
Need for developing an appropriate legal and
operational structure
Significance of cash and carry wholesale
trading model to continue – however
transactions with retail entity may be subject to
scrutiny from a policy perspective
Risk of future retroactive change in policy by
the Government – could be viewed as breach of
bilateral investment protection agreements and
constitutional laws
Establishing compliance with this condition
would be onerous and would require a robust
data capture process
Potential hindrance to building economies of
scale
Source:BMR, Taxand 2012
8.4. Impact of regulation – Minimum investment of USD 100 Million
Under the revised FDI policy for multi – brand
Fig: Snapshot of major retailers in 2010-11
retail, it has been proposed that a minimum
Segment
Apparel
by the foreign entity with a constraint to obtain a
maximum stake of 51% in the Indian Joint venture.
Mass Grocery
This condition acts as a barrier for entry to the
foreign retailer, as it implies that the minimum
Beauty &
Wellness
investment required by both, the foreign and the
Indian partner together, will be more than INR
Existing
Player
Pantaloon
Shoppers Stop
Westside
Big Bazaar
Reliance Fresh
Apollo
Revenue
(INR Cr)
4097
1927
821
6914
7599
860
Stores
Tata Eye+
investment of USD 100 million is to be brought in
328
>200
>65
>50
>60
>210
>400
>1350
Source: Deloitte 2013
1200 Cr. (considering 1 USD = INR 60).
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50. Mass Grocery and Apparel, which are two of the fastest growing organized retail segments where there
exist large domestic retailers, could be the potential segments for joint ventures with foreign retailers.
However, other segments like will not tend to benefit much from this condition.
8.5. Impact of regulation – 50% of FDI to be invested in backend infrastructure in 3 years
Minimum investment of 50% of total FDI (say more than INR 300 Cr) is to be invested in backend
infrastructure in the first three years of the first tranche of the investment.
Different retail segments have dynamic requirements of backend infrastructure. Mass Grocery needs
significant investment in the backend. (For example food processing unit, cold chains, etc.)
However, other segments such as Apparel, Beauty & Wellness and Consumer Electronics have limited
requirements in the backend. Further, as per the policy, land cost and rentals that might be incurred for
warehousing are not included in the definition of backend infrastructure.
Hence, meeting this policy constraint would be a challenge for any player in the retail segment other than
Mass Grocery.
Fig: Backend Infrastructure of major Retail segments
Apparel
Mass
Grocery
Beauty &
Wellness
Consumer
Electronics
Manufacturing
Do not have their
own manufacturing
units
Warehousing
Own warehouses in
different regions of
India
Many existing retail
chains own
processing centers for
private label brands
Do not own
manufacturing units,
except few stores
such as eyewear
Some products of
other manufacturers
Own distribution
centers with cross
dock facility and cold
chains etc
Own warehouses in
different regions of
India
Own warehouses in
different regions of
India
IT
Possess IT
infrastructure for
Inventory
Management
Possess IT
infrastructure for
Inventory
Management
Companies have
centralized database
management
Logistics
Outsourced to third
parties
Possess IT
infrastructure for
Inventory
Management
Either outsourced or
company owned
Own subsidiaries for their
logistics (For example
Future Supply chain and
Reliance Supply)
Outsourced to third
parties
Source: Deloitte 2013
8.6. Impact of regulation – 30% of sourcing from ‗small‘ industries
This policy constraint implies that retailers should have at least 30% sales from private label brands or
unbranded products sourced from small industries. Existing Mass Grocery retailers in India source many
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