Cabinet decision on FDI In Retail


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  • The probability that Walmart would wreak a US-style havoc in India is minimal. There are several reasons for this argument. First is the buying pattern of consumers in India vis-a-vis that of the US. Citizens in the US buy most of their monthly goods in bulk. At home, they have appropriate storage facilities to store this bulk due to consistent electricity supply. In India, that's not the case. E.g., you can hardly buy vegetables for more that 4-5 days as there is a constant problem of electricity cuts. Secondly, stores like Walmart are always situated on the outskirts of a city/town. Good roads coupled with a car with every family enables the consumers to go to these stores once a month and buy in bulk. However, in India, the per capita car ownership is extremely low. With the congestion increasing, it's highly unlikely that we'll reach the levels of the US in car ownership. So the purchase by those families which don't own cars will always be very less. Moreover, Indian businesses have a relationship element attached to them. The next-door retailer would know about your preferences and buying behaviour better than Walmart and hence, in face of this slight competition, would strive to provide you with better goods and services. All in all, given the scenario, it is a win-win proposition for everyone.
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  • There are lot of side effects.

    1. Millions of middle class vendors who have small shops and get regular income from it have to close their shops. This will be mainly due to increase in land value and less business as people will be heading towards big shops with huge discount and marketing.

    2. Once these companies feel that small vendor threat is no more they will increase the price as per their requirements.

    3. If govt is concerned about storage it should make decisions to do it rather than depending on other FDI to do their work.
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  • very informative always had respect for congress and yet it is grown more now...!!
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  • wonderful.. i support this
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  • it is the welcome sign for farmers and indian economy... being a agricultural depended country govt must boost up farmers through that they can improve our economy and add india in the list developed countries...... and at the same time this is bonanza for consumer they can get quality items with fixed rate
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Cabinet decision on FDI In Retail

  3. 3. EXISTING POLICY <ul><li>FDI In Multi Brand Retail Trading (MBRT) Is Prohibited. </li></ul><ul><li>FDI, Up To 51%, In The Single Brand Retail Trading (SBRT) Sector, Is Permitted, Under The Government/FIPB Route. </li></ul>
  4. 4. RATIONALE FOR LIBERALIZATION Leveraging foreign investment in supply chain infrastructure
  5. 5. RATIONALE FOR LIBERALIZATION Lack Of Investment In The Logistics Of Retail Chain Creating Inefficiencies In The Food Supply Chain.
  6. 6. RATIONALE FOR LIBERALIZATION 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 5386 Stand-alone Cold Storages, Having A Total Capacity Of 23.6 Million MT, 80% Of This Is Used Only For Potatoes.
  7. 7. RATIONALE FOR LIBERALIZATION Lack Of Adequate Storage Facilities Cause Heavy Losses To Farmers In Terms Of Wastage In Quality 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 Rs.1 Trillion Per Annum, 57 Per Cent Of Which Is Due To Avoidable Wastage And The Rest Due To Avoidable Costs Of Storage And Commissions.
  8. 8. RATIONALE FOR LIBERALIZATION   As Per Some Industry Estimates, 35-40% Of Fruits And Vegetables And Nearly 10% Of Food Grains In India Are Wasted. 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.
  9. 9. RATIONALE FOR LIBERALIZATION Indian Farmer Realizes Only 1/3 rd  Of The Total Price Paid By The Final Consumer As Against 2/3 rd  With Higher Degree Of Retail.  A World Bank Study Of 2007 Demonstrates That The Average Price A Farmer Receives For Horticulture Produce Is Barely 12 To 15% Of What Is Paid At The Retail Outlet.
  10. 10. RATIONALE FOR LIBERALIZATION An 11th Plan Working Group Has Estimated a Total Investment Of Rs. 64,312 Crores In Agricultural Infrastructure. A Storage Capacity Gap Of 35 Million Tonnes Has Been Assessed, Requiring An Estimated Investment Of Rs. 7,687 Crores During The 11th Plan.
  11. 11. SUPPLY CHAIN EFFICIENCIES Foreign Retail Majors Have Gained Decades Of Experience, Technologies And Management Practices Which Will Ensure Supply Chain Efficiencies.
  12. 12. IMPACT ON FOOD INFLATION The opening up of Multi Brand Retail will also have a salutary impact on food inflation as it would contribute to savings to the food which perishes on account of inadequate infrastructure.
  13. 13. PRICES FOR THE FARMERS In the present dispensation, there is a complex chain of procurement involving several middlemen. FDI in retail will create the enabling environment which will ensure direct procurement, at least of horticultural produce from farmers to enable them secure remunerative price
  14. 14. EMPLOYMENT OPPORTUNITIES Huge Investments In The Retail Sector Will See Gainful Employment Opportunities In Agro-processing, Sorting, Marketing, Logistic Management And The Front-end Retail Business.
  15. 15. EMPLOYMENT OPPORTUNITIES   Industry Estimates Suggest Employment Of One Person Per 350-400 Sq.Ft Of Retail Space, About 1.5 Million Jobs Will Be Created In The Front-end Alone In The Next 5 Years . 
  16. 16. EMPLOYMENT OPPORTUNITIES Assuming that 10% extra people are required for the back-end, the direct employment generated by the organized retail sector in India over the coming 5 years will be close to 1.7 million jobs
  17. 17. EMPLOYMENT OPPORTUNITIES Indirect Employment Generated On The Supply Chain To Feed This Retail Business Will Add Millions Of Jobs.       
  19. 19. FDI POLICY IN OTHER COUNTRIES Brazil , Argentina , Singapore & Chile allow 100% FDI in retail sector while Malaysia permits FDI to a certain limit.
  20. 20. CABINET DECISION FDI In Multi Brand Retail Trade (MBRT) May Be  Permitted Up To 51%, With Government Approval
  21. 21. CABINET DECISION Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded . 
  22. 22. CABINET DECISION   Minimum Amount To Be Brought In, As FDI, By The Foreign Investor, Would Be US $ 100 Million
  23. 23. CABINET DECISION At Least 50% Of Total FDI Brought In Shall Be Invested In 'Backend Infrastructure'
  24. 24. CABINET DECISION At least 30% of the procurement of manufactured/ processed products shall be sourced from 'small industries'
  25. 25. CABINET DECISION   Retail sales locations may be set up only in cities with a population of more than 10 lakh as per 2011 Census only 53 cities qualify for FDI in multi-brand retail out of nearly 8000 towns   and cities  
  26. 26. CABINET DECISION The FDI In Multi-brand Retail Is Being Opened In 53 Cities Only With Population Of 1 Million And For The Rest Of The Country, Current Policy Regime Will Apply
  27. 27. CABINET DECISION Government will have the first right to procurement of agricultural products
  28. 28. CONDITIONS   FDI in single brand retail trading may be permitted up to 100% with Government approval
  29. 29. CONDITIONS   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
  30. 30. CONDITIONS   ‘ Single Brand’ Product-retailing Would Cover Only Products Which Are Branded During Manufacturing .
  31. 31. CONDITIONS The foreign investor should be the owner of the brand.
  32. 32. CONDITIONS   In respect of proposals involving FDI beyond 51%, 30% sourcing would mandatorily have to be done from SMEs/ village and cottage industries artisans and craftsmen.
  33. 33. Condition of 30% sourcing from small scale sector   This condition will ensure that our SME sector, including artisans, craftsman, handicraft and cottage industry benefits, especially in sectors like textiles, gems and jewellery, leather and jute.
  34. 34. Rationale for enhancing FDI ceiling to 100% in single brand retail trading In the last 5 years, under the current regime of 51% FDI in single brand retail, foreign direct investment of only US$ 44.45 million have been received, constituting barely 0.03% of total FDI inflows. 
  35. 35. Rationale for enhancing FDI ceiling to 100% in single brand retail trading Globally, single brand retail follow a business model of 100% ownership and global majors have been reluctant to establish their presence in a restrictive policy environment. 
  36. 36. Rationale for enhancing FDI ceiling to 100% in single brand retail trading The current cap of 51% confers a right to pass all ordinary resolutions, while enhancing cap to 100% will confer full ownership and control.   
  37. 37. For More : Web conference by Hon’able Minister
  38. 38. JAI HIND