1. Implication of FDI in Indian retail

2. Group No.1
• Sanoop Manoharan
• Neeraja Vijayan
• Shajina M V
• Mridula. C
• Sajila K P
• Pravija M
• Mithun T

3. FDI or Foreign Direct Investment
• A company from one country making a
physical investment into building a factory in
another country
• FDI has come to play a major role in the
internationalization of business

4. Implementation stages of FDI in India
Year stages
1995 World Trade Organization’s general agreement on Trade in
Services, which includes both wholesale and retaililng
services,came into effect
1997 FDI in cash and carry (wholesale) with 100% rights allowed under
the Govt. Approval route
2006 FDI in cash and carry brought under the automatic route
Up to 51% investment in single brand retail outlet permitted
2011 100 FDI in single brand retail permitted

5. RETAIL sector in India
•The Retail Industry is the sector of economy which is consisted
of
• individuals stores,
• commercial complexes,
•agencies,
•companies, and
•organizations, etc
•They involved in the business of selling or merchandizing
finished products or goods to the end-user consumers directly
and indirectly

6. • Indian retail sector today is valued at $450 billion, and is increasing
day by day due to its increasing middle class population and their
spending power.
• Indian retail sector has two parts: organized and unorganized
sector.
• Organized sector which forms around 20 -30 % in other countries .
• In India it forms only about 6% while rest is all unorganized
consisting of small retailers called as ‘kirana shops’, paan/beedi
wala, convenience stores, departmental stores, pavement vendors
etc.
• Organized retail consists of supermarkets, hypermarkets and
modern retail outlets, malls, exclusive brand outlets etc which are
located in urban areas or metros.

7. • India's growing economy(8% per year) opens
new and new opportunities to the foreign
investors
• Global Jurix, a full-fledged legal organization
prominent worldwide, provides all-
encompassing services and advice for most
lucrative and secured fdi in indian retail sector.

8. • Diverse foreign direct investment in indian retail is
greatly cherished by most of the major and leading
including
• Walmart (USA),
• Tesco (UK),
• Metro (Germany), and
• Carrefour (France)

10. FDI in Retail sector
• FDI in retail sector is not allowed, it is only allowed up to 51 % in
single brand and government is still considering the opinion of
allowing FDI in multi brand segment
• 100% FDI is allowed in cash and carry wholesale and export
trading, both wall mart and Carrefour have already entered in India
in this segment.
• Many big giants like Wall mart, Carrefour are waiting to earn their
fortune in continuously growing market.
• FDI in retail sector will have both positive and negative effect if
allowed. Both organized and unorganized sector will face adverse
competition from global players. Wal-Mart has a turnover of $256
billion and growing at an average of 12 -13 % annually. Average
size of its stores is 85000sq ft and average turnover is $51 million

11. Forms of FDI in Indian retailing
• Joint Ventures
• Franchising
• Sourcing of Supplies from small-scale sector
• Cash and Carry Operations
• Non-Store Formats

12. Challenges of FDI in Retailing
• Economies of scale:
– economies of scale and perfect cost cutting
– providing the consumer the best at lowest price
• Brand name:
– They bring with them world class products which
have high quality and a highly valued brand name.
– The domestic brands don’t have that charm and
attracting power as of global brands.

13. • Technology:
– Global players are highly advanced in technology.
– The tools, equipments, kind of warehouses they use, their way of
performing processes are highly advanced and cannot be compared
with those used by Indian retail firms,
– they provides better services and better quality products even in
categories like perishable food etc.
• Attract skilled employees:
– They believe in earning profits by cutting costs as much as possible
and at the same time are conscious towards career of their
employees.
– Attractive salary and high incentives can also attract skilled employees
towards global players which is also a threat for big Indian retail firms.

14. • Better infrastructure:
– Better storage facilities, better transportation medium and
high investment can pose another threat to Indian retail
firms which can hardly match the capabilities of giants on
their own.
• Joint ventures:
– Global players may not prefer to enter into joint ventures
with Indian firms and may also close down the existing
ventures in wholesale and single brand which may
adversely affect the Indian firms.
– This is possible when 100% FDI is allowed in multi-brand
retail.

15. Why they choose India………..?
• Liberalization of trade policy
• loosening of barriers and restrictions to the
foreign investment
• Another important reason is changing
consumer pattern
• Growing urban population

16. Indian Consumers are Changing…
Classification Annual household income 1995-96 2005-06 2009-10 (P)
(‘000)
Deprived <90 1,31,176 1,32,249 1,14,394
Aspirers 90-200 28,901 53,276 75,304
Seekers 200-500 3,881 13,183 22,268
Strivers 500-1,000 651 3,212 6,173
Near Rich 1,000-2,000 189 1,122 2,373
Clear Rich 2,000-5,000 63 454 1,037
Sheer Rich 5,000-10,000 11 103 255
Super Rich >10,000 5 52 141
Total 164,876 204,651 221,945
Source: NCAER (2005) and http://www.fadaweb.com/indian_mkt_05.htm
Note: These figures are given at 2001-02 prices., P - Projected

17. Trends of Urban population
45 Percentage of Urban Population
42
40 35
35 31
30 27
25
25 23
20
20 17.5 18
15
10
5
0
1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2010- 11 2020-21 2030-31
Percentage of Population

19. Why FDI is BAD…..?
• One of the conditions for this proposal is that
multi-brand companies should source at least
60% of their farm produce from small farmers.
– The justification is that this will give a boost to small
farmers but there is an inherent flaw in the argument
• The second argument is that this FDI will create
jobs.
– there is no specification regarding
• the kind of jobs it will create
• The kind of jobs that it will threaten, namely the small grocer
and kirana shops that is the hallmark of any Indian
neighborhood

20. • The model of multi-brand supermarkets is hardly
working nor is it sustainable.
– It involves
• massive supply chains ranging from remote corners of the
globe
• encourages consumerism, cheap produce and planned
obsolescence.
• India already struggles with massive
infrastructural problems with waste management
– what is the proposal to deal with the excessive
amounts of waste created by the FDI investment

21. • The multi-brand supermarket is a failed business model
even in those countries that pioneered them, notably
the United States.
• Indian government still fears that if FDI is allowed in
retail then unorganized sector will be affected very
badly and it will result in a large lot of unemployed
retailers
• youth which is employed in the supply chain, this
unemployed lot can’t be absorbed in manufacturing or
service sector which can ultimately push a large chunk
of population below poverty line

22. CONCLUSION
• If the Indian government is really serious about
encouraging small farmers, then they will be
rejecting GMO and making sure locally produced
organic food is more widely available.
• If the government is serious about creating jobs
then they should be focusing on improving
sectors within the country namely waste
management, agriculture and infrastructure
development.