fdi, retail, fdi in retail

1. FDI IN RETAIL SECTOR
BY:
ANKIT CHAWLA
(1211310007)

2. CONTENTS
• FDI
• Retail
• FDI Policy in India
• FDI Policy with Regard to Retailing in India
• Entry Options for Foreign Players prior to FDI Policy
• FDI in Single and Multi-brand
• Foreign Investor‟s concern regarding FDI Policy in India
• Concerns for the Government for only Partially Allowing FDI in Retail Sector
• Benefits to different groups
• Limitations of the Present Setup
• Prerequisites before allowing FDI in Multi-brand Retail and lifting cap of Single Brand retail
• Opinion and Reactions of different groups and individuals

3. FDI
FDI is an investment to acquire long-term interest in
enterprises operating outside of the economy of the
investor.
FDI is a source of external finance which means that
countries with limited amounts of capital can receive
finance beyond national borders from wealthier
countries.
FDI is considered to be considered an ingredient in
economic growth.

4. INTERNATIONAL MONETARY
FUND
“foreign direct investment, commonly
known as FDI, "refers to an investment
made to acquire lasting or long-term interest
in enterprises operating outside of the
economy of the investor.”

5. HISTORY OF FDI
• Started at the time of East India Company of Britain.
• After world war II, Japanese companies entered
Indian Market.
• UK was the most dominant investor in India.
• In 1965, MNC‟s of foreign allowed to set collaborated
investors in India
• In 1980, Government set Foreign Investment Board
and Foreign Exchange Regulation Act.

6. HISTORY CONTINUED
• In early nineties, Indian economy faced severe Balance of Crisis. Dr.
Manmohan Singh with the help of World Bank and IMF introduced the
macro-economic stabilization and structural adjustment programme .As a
result of these of these reforms India open its door to FDI inflows .
• Then Foreign Investment Promotion Board is established

7. FDI INFLOWS IN INDIA (FROM
1948-2010)

8. FDI FLOW IN INDIA (1948-2010)

9. WHY FDI
• Raising the level of investment
• Upgrading the Technology
• Exploitation of Natural Resources
• Development of Basic Economic Infrastructure
• Improvement of Export Competitiveness
• Improvement in BOP
• Benefit to Customer
• Revenue to Government

10. WHAT IS RETAILING?
Retailing is the interface between the producer
and the individual consumer, buying for
personal consumption. It is the last link that
connects the consumer with the manufacturing
and distribution chains.

11. INDIA IN RETAIL SECTOR
• India is the fifth largest retail market globally.
• Retail contributes to 15% of India’s GDP.
• India has highest retail density in the world with 15 million outlets.
• It provides employment to 40 million Indians (3.3 % of Indian
Population)
• Retailors such as Nike, Wall-mart, IKEA, Apple etc.

12. DIVISION OF RETAIL INDUSTRY
O r g a n i ze d R e t a i l i n g U n o r g a n i ze d R e t a i l i n g
Organized retailing refers to trading Unorganized retailing, on the other
activities undertaken by licensed han, refers to the traditional formats
retailers, that is, those who are registered of low-cost retailing, for
for sales tax, income tax, etc. These example, the local kirana
include the corporate-backed
shops, owner manned general
hypermarkets and retail chains, and also
the privately owned large retail stores, paan/beedi
businesses. shops, convenience stores, hand cart
and pavement vendors, etc.
Only 5% of the total retail share. 95% of the total retail share.

13. FDI POLICY IN INDIA
• FDI permitted in almost all activities
• Up-to 100% FDI allowed in manufacturing
• Most FDI allowed on the ‘automatic route’
• Liberal policy for foreign technology collaboration
• Policy supported by a legal framework
• National treatment to investment
• Investment being constantly reviewed and liberalized
• Policy is independently to be liberal and progressive.

14. ENTRY OPTIONS FOR
FOREIGNERS
• Franchise Agreements
• Cash and Carry Wholesale Trading
• Strategic Licensing Agreements
• Manufacturing and Wholly Owned Subsidiaries

15. FDI IN SINGLE BRAND
• Single brand retail is one in which a single item is sold across all outlets.
Such as Reebok, Titan, Puma etc.
• Policy Before 2011
• FDI up to 51 %, with prior Government approval, is allowed in retail
trade of single brand products, subject to the following conditions:
• FDI up to 51 % would be allowed, with prior Government approval, for
retail trade of Single Brand Products;
• Products to be sold should be of a „Single Brand‟ only.
• Products should be sold under the same brand internationally.
• „Single Brand‟ product-retailing would cover only products which are
branded during manufacturing.

16. THE CHANGE:
The Government finally has permitted 100 percent FDI in Single brand retail under
the government approval route subject to certain conditions. Some of the stipulated
conditions are:
(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’. .

17. MULTI BRAND RETAIL IN INDIA
• Marketing of similar and competing products by the same firm under different and unrelated brands.
For example: walmart, big bazar, tesco etc.
• FDI in multi brand retail was not permitted in India. However, the Government of India proposed
some policy changes in late 2011. they are as follows..
• A decision has been taken by the Government to permit FDI in all products, in a
• calibrated manner, subject to the following conditions:
•FDI in Multi Brand Retail Trade (MBRT) may be permitted up to 51%, with Government approval;
•Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and
meat products, may be unbranded.
•Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million.
•At least 50% of total FDI brought in shall be invested in 'back-end infrastructure’.
• Back-end infrastructure will include investment made towards processing, manufacturing,
distribution, design improvement, quality control, packaging, logistics, storage, ware -house,
agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be
counted for purposes of backend infrastructure.

18. •At least 30% of the procurement of manufactured/ processed products 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.
•Self-certification by the company, to ensure compliance of the condition at
serial nos. (iii), (iv) and (v) above, which could be cross-checked as and when
required.
• Accordingly, the investors to maintain accounts, duly certified by statutory
auditors.
•Retail sales locations 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;
•Government will have the first right to procurement of agricultural products

19. BENEFITS
• Direct benefit to Farmers
• Reduction in Food Inflation
• Earning of For-ex
• Huge Employment Benefits
• Drop in Food Wastage
• Better Consumer Choice
• Benefit to Kirana Stores
• Creation of backend Infrastructure
• More Purchase from SMEs

20. LIMITATION TO THE PRESENT
SETUP
• Infrastructure
• Intermediaries dominate the value chain
• Improper Public Distribution System
• No global reach

21. OPINIONS AND REACTIONS
In the last few months, there has been significant discussion on permitting
Foreign Direct Investment (“FDI”) in Multi-Brand Retail Trading. As part of that
process, the Department of Industrial Policy and Promotion (“DIPP”) released a
discussion paper on “Foreign Direct Investment (FDI) in Multi-Brand Retail
Trading” (“Discussion Paper”) and invited views on the same. The Confederation
of Indian Industry (“CII”) had responded to the Discussion Paper earlier
(attached as Annexure 1 is a copy of the response for your reference). In addition
to the views set out in the attached response, this note seeks to outline CII
perspective on key issues relating to FDI in retail trading sector based on certain
recent press reports on the recommended proposal of the DIPP, while
highlighting the need to adopt a different approach for food and non-food sector.
By : Greeta Varughese
[Senior Director]
Special Initiatives (SI) - CO
Confederation of Indian Industry

22. I believe that union government's policy to allow foreign direct investment in retail
business is destructive for the country, because it won't bring technology...only foreign
money will be invested in Indian markets.
By: K N Govindacharya
Former BJP Ideologue
People reject FDI in Retail in the Public Hearing organized by East Delhi Municipal
Corporation: Trade Unions, Street Vendors Associations, RWAs & Civil Society
expressed their opinion: 98% voted against FDI in Retail in the opinion poll;
Respecting Peoples verdict EDMC will not grant trade licences to FDI Retailers
By: Annupurna MIsra
Mayor, EDMC

23. I think the advocates of FDI have probably put too much emphasis on it. India is
really in a different position than a small, developing country. It is different in two
ways. First, you have a large pool of entrepreneurs and they are globally savvy. They
have access to global technology and they have a lot of wealth. So, if there were large
returns to large-scale supermarkets, the domestic industry would have supplied it. They
are supplying to some extent. It is possible that more competition would spur growth
but not having access to FDI is not an impediment in India. I think you have to ask
the question - the way to get access to technology to run a supermarket in other ways.
A store like Wal-Mart has developed a supply chain in China that is able to procure
many goods at lower prices than others because of the huge buying power they have
and will use that power then to bring Chinese goods to India to displace Indian
production. So the worry is not so much about the displacement of the small retail
store but displacement further down the supply chain. So that is what I am worried
about. There are other two other issues also I would worry about. Some of the profits
of the companies like Wal-Mart come from free riding on our society. They don't
provide healthcare benefits to their workers and they assume that the husbands or
wives of the workers get healthcare benefits from their other employees or they get
money through some other mechanism. In the US, the salary is so low, it is difficult for
them to pay for it. They might not be a good employer. So the question is to bring in
the Indian context the firms that are not good employers.
By: Shobhan Saxsena
Editor
Sunday Times of India

24. Supreme Court
The Supreme Court on Oct 15 refused to stay the Centre's decision to allow Foreign Direct
Investment (FDI) in retail sector. A bench of justices R M Lodha and A R
Dave, however, said that the policy suffers from "curable" irregularity of want of legal
sanction and asked the RBI to amend the Foreign Exchange Management Act (FEMA)
regulations to allow implementation of the government's policy.
The bench said the RBI should have amended the FEMA regulations before the
implementation of FDI policy and asked the banking regulator to take steps to remove the
lacunae in the way of giving a final shape to the policy.
The court observed that the regulations should have been amended before the Centre
issued the notification, but clarified that the irregularity can now be cured with RBI
amending FEMA regulation. "At least it can be said that it is an irregularity that is curable
and as soon as amendment is brought, it would be cured," the bench said.
During the argument, the court said the policy cannot be stayed just because of this
irregularity. Attorney General G E Vahanvati submitted that he would talk to the RBI
Governor to take immediate steps for bringing amendment in the FEMA regulations. The
bench after hearing his submission adjourned the matter for further hearing on November
5.
The court was hearing a PIL filed by lawyer M L Sharma, who has said that RBI's nod was
missing from the Centre's policy allowing FDI in retail sector.
By: R M Lodha and A R Dave
Bench of Judges
Supreme Court

25. STRIKE AGAINST FDI IN RETAIL
Call on 20th September for a nationwide strike (Bharat Bandh) by trade unions
of street vendors, small traders, and most of the political parties from left to
right and including of parties within the Govt. and parties supporting the
Govt. was historical. Millions of retailers and thousands of trade associations
observed the bandh demanding rollback of FDI in multi-brand retail. All
major markets were closed throughout India. Public transport was off the
roads and colleges, schools, offices and transport services remain shut in most
part of India. Trains were blocked by political activists of BJP, SP and CPI
(ML) in many places including Bihar, Uttar Pradesh, West Bengal, Orissa and
Jharkhand. The station Master of Patna Railway Station was locked. The
impact of the strike was also seen in states of the North East. The bandh was
total in Manipur. Banks, markets, shops and educational institutions were
closed, with government offices recording low attendance in Meghalaya.
Railway, road and others services were heavily impacted in Jharkhand. Most
colleges reported only 20-50% attendance in Mumbai.

26. Small Farmers will get better pay for their production; Currently on 10-25% of
amount is paid to farmer than market selling price. Wastage of Food production is
controlled to huge extent as the biggies will be able to get the cold storage of high
volume. Tax is paid to govt, whereas local kiranas won‟t pay the proper tax. Choice
for customers, as there will be lot of options. Low prices offered to customers due
to Heavy competition. Immediate employment in real estate and retail sectors.
Quality fruits and vegetables without chemicals. Expiry date issued on each
product. Export of Indian products to other countries. Global access to
technology in retail sector and many more ....One of the best chances to see better
India.
By : Easyday Store Manager
Sirsa
FDI will ensure better operations in production cycle and distribution. Due to
economies of operation, production facilities will be available at a cheaper rate
thereby resulting in availability of variety products to the ultimate consumers at a
reasonable and lesser price.
By: Pradeep Madaan
Lecturer
Govt Senior Secondary School
Sirsa

27. FDI in retail has both a negative and positive impact on economy of India.
Positive aspects is it helps to boost the growth of economy by increasing
foreign investment, availability of goods in less prices and helps towards
better infrastructure. Negative part is it leads to unemployment or we can say
it destructs the general kirana business and their livelihood too. India business
goes to foreign hands, so it may increase the danger of economy failure.
By: Ms. Shweta Sharma
Asst. Professor
JCD Vidyapeeth
Sirsa

28. FDI AT DUSSEHRA
Mythology touched by a tinge of modernism isn‟t a bad idea for creativity.
The modern day demon in Indore is an effigy of „FDI Ravan‟ which will be
burnt on Dussehra evening. Jaipur, like every year, is all geared up to celebrate
Dussehra in the brightest magnificence. "The tallest effigy of 120 feet is
erected by us at the Central Spine in Vidhyadhar Nagar. We are planning to
make it a delightful evening for the devotees," said a member of the
organising committee at Vidhyadhar Nagar. Pune celebrates this day in a
different way altogether. As the traditional practice, Apta leaves that represent
gold are exchanged by people. During Dussehra people worship the Shami
and in Maharashtra, they exchange leaves of the Apta tree (also known as
Sonpatta). In some parts of south India, the leaves of the Shami are soaked in
water until the day before Diwali when people bathe with this water.
BY: Aryani Banerjee
Correspondent
India TV

29. One thing that concerns me is the influx of cheap / low-cost products from
China, Mexico.. etc, which would kill the manufacturers in India. While one could
talk about healthy competition, some countries may be able to produce cheaply
purely on the basis of currency exchange rate and cheap labour environment
(violating human rights). Would we actually be supporting something we need to
condemn, by purchasing from Walmarts and other FDI sponsored outlets?
By: J C Chawla
Branch Manager
Punjab National Bank
Sirsa
There is a lot to be said for big retail to come to India, but we cannot simply be
taken in and mimic something which is being pushed down our throats because
those who make the policy appear to not have the faintest clue on how retail really
works in India.
By: Mohamud Yunus
Professor, Punajabi University
Patiala

30. THANK
YOU