Post on 06-Apr-2018
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FDI In Retail In IndiaBy
Mr. Sandip Kadam
RIMSR2010-12
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What is Retail?
In 2004, The High Court of Delhi defined the term
retail
sale for final consumption in contrast to a sale for
further sale or processing (i.e. wholesale).A sale to
the ultimate consumer
Retailing is the last link that connects the individual
consumer with
th
e manufacturing and distributionchain
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WHAT IS FDI?
Movement of capital
across national frontiers in
a manner that grants the
investor controlover theacquired asset.
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Retail Sector poised for phenomenal growth
Source: India Shopping Trends, 2011- Technopak
ORGANISED RETAIL EXPECTED TO GROW 35-40% CAGR
The Indian Retail
Sector, currently the
Fifth largest in theworld, is poised for
phenomenal growth
in the coming years
Size & Positioninthecurrent Scenario
Current Size & Future growth of OrganizedRetailin India
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The IndianRetail Landscape
Organized retail has grown from USD 2 Bn in 2002 to USD 37 Bntoday in a total ofUSD350 Bn
Impact on the consumer; low price and assured quality through supply chain efficiency
Impact on producers, farmers; direct sourcing from SMEs and farmers; providing
critical connect to market place
Investments in the range of USD 30+ Billion expected by 2011 in Retail and Supply
Chain
Scale: Size of organized retail likely to touch USD 70 billion by 2011
Employment: Over 850K direct jobs to be created in Retail in the next 5 years.
Source: India retail report 2009 by Images Retail, CII BCG report on Indias demographic dilemma Dec08
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FDI Policywith RegardtoRetailing in
India (Past)
FDI up to 100% for cash and carry wholesaletrading and export trading allowed under theautomatic route.
FDI up to 51 % with prior Governmentapproval (i.e. FIPB) for retail trade of SingleBrand products, subject to Press Note 3 (2006Series).
FDI not permitted in Multi Brand Retailing inIndia.
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Entry Options For Foreign Players Prior
To FDI In Retail
Franchise Agreements
Cash Carry wholesale Trading
Strategic Licensing Agreements
Manufacturing & wholly owned subsidiaries
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FDI in Retail Sector FDI in single-brand retailing was permitted in
2006, up to 51 per cent of ownership.
57 proposals out of 94 were approved.
FDI inflow of US$196.46 million under the
category of single brand retailing was received.
Retail stocks rose by as much as 5%.
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Whatdoes 51% FDI inmulti-brand
retailmean?
Minimum investment of $100 million.
50% of the investment is to be in backend infrastructuredevelopment.
30% of all raw material has be procured from India's small
and medium industries. Permission to set up malls only in cities with a minimum
population of 10 lakh.
Government has the first right to procure material from thefarmers.
Products should be sold under the same brandinternationally.
Foreign investor should be the owner of the brand.
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What does 100% FDI in Single Brand
Retailing means? Products to be sold should be of a single brand only.
Products should be sold under the same brandinternationally (i.e. products should be sold under thesame brand in one or more countries other than India).
Single brand product-retail trading would cover onlyproducts which are branded during manufacturing.
The foreign investor should be the owner of the brand.
In respect of proposals involving FDI beyond 51
percent, mandatory sourcing of at least 30 percent ofthe value of products sold would have to be done fromIndian small industries/village and cottage industries,artisans and craftsmen.
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Clause On 30% Sourcing From Indian
SMEs
luxury goods retailers will not be able tosource from India because they have tomaintain global standards for their brands
Mandatory sourcing will be in violation ofprovisions of GATT, the bilateral investmentprotection agreement (BIPA) India has signedwith 71 countries as well as theWorld TradeOrganization's Trade Related InvestmentMeasures (TRIMS)
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Benefits To The Aam Adami Development of markets will lead to better choices
Reduced prices
More EmploymentOpportunities
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Benefits to the government
Greater Per
Capita Income
Greater Consumer
Spending due to
economic boom
Increasing
Tax Paying
Population
Greater
Sourcing
From India
Reduced Tax
Evasion
GDP Growth
Increased Tax
Revenues
Greater
Exports
Employ
mentBenefits
to Govt.
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Present Condition Of Farmers
Farmers get only 10 to 15% of the price we
pay.
3-4 middlemen in between farmers andcustomers.
Huge post produce losses for farmers due to
inadequate facilities.
A poorly managed food supply infrastructure.
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Improvements by FDI in Retail Supply
Chain
FDI in retail will boost investment in infrastructurefrom the retail players, 3rd party supply chaincompanies as well as the Government
FDI in retail will make way for inflow of knowledgefrom international experts which can give boost to theoverall growth of the industry
It will reduce pre-harvest wastage/losses and thus helpcontrol food inflation
It will remove the middleman from the equation. It willreduce costs which in turn will reduce prices
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Key Issues
Modern retail would displace a large number ofjobs
Global retail chains would adopt predatory
pricing tactics to wipe out domestic competition(small retailers)
Once global retail chains are established, theywould be in a position to dictate prices for both
buying wholesale, and selling retail products Retailing itself cannot boost GDP. The growth in
manufacturing sector needs to be increased
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Penetration of top 20 International
Retailers
Norway 99%
Sweden 94%
Switzerland 88%
France 81%
UK 64%
Portugal 57%
If foreignretailerscouldcapture 20 % ofindian RetailMarket,something about 8 Million jobswill belost. Their
levelofefficiencymeantheyneedlessandlessof people
foreach 1000 croresof Turnover - Business Line April
2005
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FDI in Retail Inflation
??Inflation = fn (...) of
Crude Price
Excess Liquidity (Stimulus Package)
No unload (hoarding by Govt. )
Fragmented and lengthy value chain
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Wal-Mart in US
Every farmer has access to Computer
High levels of Commodity Trading
Condition of US farmers should be much
prosperous.Isnt it.. ??????
US -- Direct Support to Farmers
Why is US year after year giving indirect subsidies
to farmers ? Acc to a UNCTAD Report if the green box subsidy
is removed, the US Agriculture will collapse !!
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Supply Chain Improvement: Penny
Wise, Pound foolish
We are talking about reducing the Intermediariesin the System
Whowill betheintermediariesinnewsystem..
??
Big Corporates
Brand Ambassador
Large Power CNBC ReportsaysRetailwantstoincrease
advertisementexpense
closeto 1BN $,oncethenewnormsareapproved
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Results
High Real Estate Prices
Land Acquisition : Displacement of people
Cannot provide employment to semi-literatepeople
Form majority of population
Push
ing families below th
e poverty line The main purpose defeated if focus is on front
line instead of back end
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Conclusion
We should accept the FDI in retail, Because
1. Its wholesome package handled by the best
economic brains in the country
2. Society will take care of itself if malls areharmful they can not do business here they
will be thrown out.
3. We should not miss the bus like we have missed
the bus of industrial revolution due to infightingof small kingdoms , zamindhars and Nawabs all
over the India
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Th
ank you!!!