Fdi in retail assu

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Information about Fdi in retail assu

Published on March 11, 2014

Author: ArshadAhmad2

Source: slideshare.net




The Retail Sector 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. • India is the fifth largest retail market globally. • Retail contributes to 10% of India’s GDP. • India has highest retail density in the world with 15 million outlets.

India is a land of retail democracy! ORGANISED RETAIL SECTOR organized retailing refers to trading activities undertaken by licensed retailers, that is those who are registered for sales tax, income tax, etc. these include the corporate based hypermarkets and retail chains, and also the privately owned large retail business.  Only 5% of the total retail share. UNORGANISED RETAIL SECTOR unorganized retailing, on the other hand, refers to the traditional formats of low cost retailing, for example, the local kirana shops owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.  95% of the total retail share.

FOREIGN DIRECT INVESTMENT • An investment made by a company or entity based in one country, into a company or entity based in another country. Entities making direct investments typically have a significant degree of influence and control over the company into which the investment is made.

F.D.I. • investment in a foreign country through the acquisition of a local company or the establishment there of an operation on a new site. In short FDI refers to capital inflows from abroad that is invested in or to enhance the production capacity of the economy.

• In November 2011, India’s central Government announced retail reforms for Multi Brand Stores and Single Brand Stores. The announcement sparked intense activism. In July 2011 the GOI has recommended FDI in retail sector as – a) 100% in Single - Brand Retail. b) 51% in Multi - Brand Retail.

(a) FDI in “single-brand” retail Up to 100 percent FDI is permissible in single-brand retail conditions stipulate that: • (i) Only single-brand products are sold • (ii) Products are sold under the same brand internationally

(iii) Single-brand products include only those identified during manufacturing (iv) Any additional product categories to be sold under single-brand retail must first receive additional government approval. FDI in single-brand retail implies that a retail store with foreign investment can only sell one brand.


(b) FDI in “multi-brand” retail • FDI in multi-brand retail generally refers to selling multiple brands under one roof. Currently, this sector is limited to a maximum of 49 percent foreign equity participation.


Multi-Brand Retail FDI Policy in other countries FDI Limit Country 100% China 100% Thailand 100% Russia 100% Indonesia (Source: Times of India, 3rd December 2011)

EVOLUTION 1995 World Trade Organization’s General Agreement on Trade in Services, which includes both wholesale and retailing services came into effect. 1977 FDI in cash and carry (wholesale) with 100% rights allowed under government approval route. 2006 FDI in cash and carry (wholesale) brought under the automatic route. Up to 51% investment in a single brand retail permitted, subject to Press Note 3 (2006 Series). 2011 100% FDI in single brand retail permitted. 2012 51% FDI in multi-brand retail permitted.

FDI Share of organized sector in selected countries. • Country Share of organized Sector (%) • U. S. A. 85 • U. K. 80 • Japan 66 • Russia 36 • India 04 (Source: Planel Retail & Technopak Adviser Pvt. Ltd.)

Projected Size of the Organized Retail Industry • Year Increase in size (in crores) • 2008 965 • 2010 1728 • 2015 5610 • 2022 17368 Source :- Planel Retail & Technopak Adviser Pvt. Ltd.

BENEFITS OF FDI • Fast growing economy. • Highest shop density in the world. Customers will have access to greater variety of international quality branded goods. • Employment opportunities both direct and indirect have been increased. • Farmers get better prices for their products through improvement of value added food chain. • High growth rate in retail & wholesale trade. • Foreign capital inflows.

• Increase in disposal income and customer aspirations are important factors; increase too in expenditure for luxury items. • Large domestic market with an increasing middle class and potential customers with purchasing power. • The consumer get a better product at cheaper price, so consumers get value for their money. • Big market along with better technology and • branding with latest managerial skills.

MAJOR FACTS • Indian retail market worth 4 Trillion US$, that is ₹ 153lakh crore, •Expected Market share of Foreign Retailers 75% (in 2007 in U.K 93% of market share was held by multi branded shops) • Forecasted Profit 15% (please look at the Walmart Profits) •15% of ₹ 114.75 lakh crore is ₹ 17.3 lakh crore

• 51% of 17.3 (8.83 Lakh Crore) will be ripped- off from Indians by foreigners to their nations. • By 2014 market worth 9 Trillion US $. So around ₹17.5Lakh crore will not be circulated inside India and shared by tens and thousands of people, if we open this FDI flood gate

MAJOR CONTROVERSY • Global giants like WalMart will crush our unorganized retail sector.. (Which consists of around 12 million kirana stores in the country )

NEGATIVE ASPECTS OF FDI IN RETAIL 1.Will affect 50 million small merchants in India 2.Profit distribution and investment ratios are not fixed 3.An economically backward class person may suffer from price raise in future. 4.Retailer faces heavy loss of employment and profit 5.Workers safety and policies are not mentioned clearly 6.Inflation may be increased 7.Small farmers will not benefit by FDI policy 8.The rural India will remain deprived of the services of foreign players.

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