FDI in Retail - Information For People


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Background Material on Cabinet Decision on the FDI in Retail

FDI in Retail - Information For People

  3. 3. EXISTING POLICY-FDI In Multi Brand Retail Trading (MBRT)Is Prohibited.- FDI, Up To 51%, In The Single BrandRetail Trading (SBRT) Sector, Is Permitted,Under The Government/FIPB Route.
  4. 4. RATIONALE FOR LIBERALIZATIONLeveraging foreign investmentin supply chain infrastructure
  5. 5. RATIONALE FOR LIBERALIZATIONLack Of Investment In TheLogistics Of Retail Chain CreatingInefficiencies In The Food SupplyChain.
  6. 6. RATIONALE FOR LIBERALIZATIONThough India Is The Second Largest Producer OfFruits And Vegetables (About 200 Million MT),It Has A Very Limited Integrated Cold-chainInfrastructure, With Only 5386 Stand-alone ColdStorages, Having A Total Capacity Of 23.6 MillionMT, 80% Of This Is Used Only For Potatoes.
  7. 7. RATIONALE FOR LIBERALIZATIONLack Of Adequate Storage Facilities Cause HeavyLosses To Farmers In Terms Of Wastage In Quality OfProduce In General, And Of Fruits And Vegetables InParticular. Post-harvest Losses Of Farm Produce,Especially Of Fruits, Vegetables And OtherPerishables, Have Been Estimated To Be Over Rs.1Trillion Per Annum, 57 Per Cent Of Which Is Due ToAvoidable Wastage And The Rest Due To AvoidableCosts Of Storage And Commissions.
  8. 8. RATIONALE FOR LIBERALIZATIONAs Per Some Industry Estimates, 35-40% OfFruits And Vegetables And Nearly 10% Of FoodGrains In India Are Wasted. Though FDI IsPermitted In Cold-chain To The Extent Of 100%,Through The Automatic Route. In The AbsenceOf FDI In Front-end Retail, Investment Flows IntoThis Sector Have Been Insignificant.
  9. 9. RATIONALE FOR LIBERALIZATIONIndian Farmer Realizes Only 1/3rd Of The TotalPrice Paid By The Final Consumer As Against2/3rd With Higher Degree Of Retail. A World BankStudy Of 2007 Demonstrates That The AveragePrice A Farmer Receives For Horticulture ProduceIs Barely 12 To 15% Of What Is Paid At The RetailOutlet.
  10. 10. RATIONALE FOR LIBERALIZATIONAn 11th Plan Working Group Has Estimated aTotal Investment Of Rs. 64,312 Crores InAgricultural Infrastructure. A Storage CapacityGap Of 35 Million Tonnes Has BeenAssessed, Requiring An Estimated InvestmentOf Rs. 7,687 Crores During The 11th Plan.
  11. 11. SUPPLY CHAIN EFFICIENCIESForeign Retail Majors Have GainedDecades Of Experience,Technologies And ManagementPractices Which Will Ensure SupplyChain Efficiencies.
  12. 12. IMPACT ON FOOD INFLATIONThe opening up of Multi Brand Retail willalso have a salutary impact on foodinflation as it would contribute to savingsto the food which perishes on account ofinadequate infrastructure.
  13. 13. PRICES FOR THE FARMERSIn the present dispensation, there is a complexchain of procurement involving severalmiddlemen. FDI in retail will create the enablingenvironment which will ensure direct procurement,at least of horticultural produce from farmers toenable them secure remunerative price
  14. 14. EMPLOYMENT OPPORTUNITIESHuge Investments In The Retail Sector WillSee Gainful Employment Opportunities InAgro-processing, Sorting, Marketing, LogisticManagement And The Front-end RetailBusiness.
  15. 15. EMPLOYMENT OPPORTUNITIESIndustry Estimates Suggest Employment OfOne Person Per 350-400 Sq.Ft Of RetailSpace, About 1.5 Million Jobs Will BeCreated In The Front-end Alone In The Next 5Years.
  16. 16. EMPLOYMENT OPPORTUNITIESAssuming that 10% extra people arerequired for the back-end, the directemployment generated by the organizedretail sector in India over the coming 5years will be close to 1.7 million jobs
  17. 17. EMPLOYMENT OPPORTUNITIESIndirect Employment Generated OnThe Supply Chain To Feed ThisRetail Business Will Add Millions Of Jobs.
  19. 19. FDI POLICY IN OTHER COUNTRIESBrazil, Argentina, Singapore &Chile allow 100% FDI in retail sectorwhile Malaysia permits FDI to acertain limit.
  20. 20. CABINET DECISIONFDI In Multi Brand Retail Trade(MBRT) May Be Permitted Up To51%, With Government Approval
  21. 21. The Chief Ministers of Delhi, Assam,Maharashtra, Andhra Pradesh,Rajasthan, Uttarakhand,Haryana,Manipur,Jammu & Kashmirand the Union Territory of Daman & Diuand Dadra and Nagar Haveli, haveexpressed support for the policy
  22. 22. Retail sales outlets may be set up in thoseStates which have agreed or agree infuture to allow FDI in Retail under thispolicy. The establishment of the retailsales outlets will be in compliance ofapplicable State laws/ regulations,suchas the Shops and Establishments Act etc.
  23. 23. CABINET DECISIONFresh agricultural produce, includingfruits, vegetables, flowers, grains,pulses, fresh poultry, fishery andmeat products, may be unbranded.
  24. 24. CABINET DECISION Minimum Amount To BeBrought In, As FDI, By TheForeign Investor, Would Be US$ 100 Million
  25. 25. CABINET DECISIONAt Least 50% Of Total FDIBrought In Shall Be Invested InBackend Infrastructure
  26. 26. CABINET DECISIONAt least 30% of theprocurement of manufactured/processed products shall besourced from small industries
  27. 27. CABINET DECISION Retail sales locations may be set uponly in cities with a population ofmore than 10 lakh as per 2011 Censusonly 53 cities qualify for FDI in multi-brand retail out of nearly 8000towns and cities
  28. 28. CABINET DECISIONThe FDI In Multi-brand Retail Is BeingOpened In 53 Cities Only WithPopulation Of 1 Million And For The RestOf The Country, Current PolicyRegime Will Apply
  29. 29. CABINET DECISIONRetail locations will be restricted toconforming areas as per theMaster/Zonal Plans of the concernedcities and provision will be made forrequisite facilities such as transportconnectivity and parking
  30. 30. CABINET DECISIONGovernment will have the firstright to procurement ofagricultural products
  31. 31. CABINET DECISIONA high-level group under the Minister ofConsumer Affairs may be constituted toexamine various issues concerninginternal trade and makerecommendations for internal tradereforms.
  32. 32. CONDITIONS FDI in single brand retailtrading may be permitted up to100% with Governmentapproval
  33. 33. CONDITIONSProducts Should Be Sold Under TheSame Brand Internationally I.E.Products Should Be Sold Under TheSame Brand In One Or MoreCountries Other Than India
  34. 34. CONDITIONS‘Single Brand’ Product-retailingWould Cover Only ProductsWhich Are Branded DuringManufacturing.
  35. 35. CONDITIONSThe foreign investor shouldbe the owner of the brand.
  36. 36. CONDITIONSIn respect of proposals involving FDIbeyond 51%, 30% sourcing wouldmandatorily have to be done fromSMEs/ village and cottage industriesartisans and craftsmen.
  37. 37. Condition of 30% sourcing from smallscale sector This condition will ensure that our SMEsector, including artisans, craftsman,handicraft and cottage industry benefits,especially in sectors like textiles, gemsand jewellery, leather and jute.
  38. 38. Rationale for enhancing FDI ceiling to100% in single brand retail tradingIn the last 5 years, under the current regime of51% FDI in single brand retail, foreign directinvestment of only US$ 44.45 million havebeen received, constituting barely 0.03% oftotal FDI inflows.
  39. 39. Rationale for enhancing FDI ceiling to100% in single brand retail tradingGlobally, single brand retail follow a businessmodel of 100% ownership and global majorshave been reluctant to establish theirpresence in a restrictive policy environment.
  40. 40. Rationale for enhancing FDI ceiling to100% in single brand retail tradingThe current cap of 51% confers a right to passall ordinary resolutions, while enhancing capto 100% will confer full ownership and control.
  41. 41. For More :http://pib.nic.in/newsite/erelease.aspx?relid=77619http://pib.nic.in/newsite/erelease.aspx?relid=87768Web conference by Hon’able Ministerhttp://pib.nic.in/newsite/webcastplay.aspx?webcastid=149
  42. 42. JAI HIND