...FDI in Retail India: Impact on Farmers, Consumers and Industry Nilesh Kate, Research Scholar Sinhgad Institute of Management and Computer Application, Pune nileshkate503@gmail.com 9096714133 ****************************************************************************** Abstract: The retail sector in India is expanding and modernizing rapidly in line with India's economic growth. It acts as a major catalyst in the development of a country through up-gradation of technology, managerial skills and capabilities in various sectors. Rise in purchasing power, growing consumerism and brand proliferation has led to retail modernization in India. The growing Indian market has attracted a number of foreign retailers and domestic corporate to invest in this sector. FDI in the retail can expand markets by reducing transaction and transformation costs of business through adoption of advanced supply chain and benefit consumers and suppliers (farmers). The overall retail market (organized and unorganized) is expected to grow at a compounded rate of 15% over the next 5 years from INR 23 trillion in 2011-12 to INR 47 trillion in 2016-17. Rising incomes will be the primary driver of this growth. Favorable demographics, increasing urbanization and nuclearisation of families are other factors which will drive retail consumption in India. Organized retail, which constituted a low 7% of total retail in 2011-12, is estimated to grow at a CAGR of 24% and attain a 10.2% share of total retail by...
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...Contents Introduction 3 Literature review 4 Research methodology 9 Analysis 11 Case study: Tata’s Croma 16 Findings 20 FDI in Retail in India 21 Growth drivers in India for retail sector 22 Discussion 23 FDI in INDIA SECTOR WISE 23 Conclusion 25 Bibliography 27 Introduction Foreign Direct Investment (FDI) is fund flow (inflow/outflow) between the countries wherein one gains benefit from their investment whereas another can exploit the opportunity to enhance the productivity and find out better position through performance. Foreign Direct Investment (FDI) is the flow of funds between countries wherein one country reaps benefits from the investments and the other can make the most of the opportunity to improve the productivity and stabilize their position through performance. The Dictionary of Economics has defined FDI as investment in an overseas country through the acquisition of a company there of an operation on a new site. In other words, the capital inflows from abroad that is invested in to improve the production capability of the economy. Two forms of FDI: * Inward FDI * Outward FDI FDI is an important factor for growth and development in both developed and developing countries. FDI has seen a spectacular growth in the last two decades globally. Policies are formulated in order to accelerate inward flows. FDI provides good opportunities and benefits for both the host and home countries in terms of investments. The “home” countries benefit...
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...Introduction Retailing in India is one of the pillars of its economy and accounts for 14 to 15% of its GDP The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value. India is one of the fastest growing retail markets in the world, with 1.2 billion people India's retailing industry is essentially owner manned small shops. In 2010, larger format convenience stores and supermarkets accounted for about 4% of the industry, and these were present only in large urban centers. India's retail and logistics industry employs about 40 million Indians. Until 2011, Indian central government denied foreign direct investment (FDI) in multibrand retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or any retail outlets. Even single-brand retail was limited to 51% ownership and a bureaucratic process. In November 2011, India's central government announced retail reforms for both multi-brand stores and single-brand stores. These market reforms paved the way for retail innovation and competition with multi-brand retailers such as Walmart, Carrefour and Tesco, as well single brand majors such as IKEA, Nike, and Apple. The announcement sparked intense activism, both in opposition and in support of the reforms. In December 2011, under pressure from the opposition, Indian government placed the retail reforms on hold till it reaches a consensus. In January 2012, India approved reforms for...
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...FDI IN RETAIL: BENEFICIAL OR DETRIMENTAL AND IT’S FUTURE AFFECT ON INDIAN ECONOMY BY HARJOT KAUR PARMAR (UGC NET, MBA, PGDM, BBA,) ABSTRACT FDI is a type of investment that involves the injection of foreign funds into an enterprise that operates in a different country of origin from the investor. Regardless of today’s crisis, India is considered as one of the most superlative place by foreign investors because of its increasing young population and rising disposable income among the middle class society, that is why large corporations like walmart are showing keen interest in initiating there retail operations in India. But mass round of discussions and debate has started after Government decision on 14 September 2012 allowing FDI in aviation up to 49%, in the broadcast sector up to 74%, in multi-brand retail up to 51% and in single-brand retail up to 100% with high level of disagreement and resistance from the opposition who believe that entry of Big Corporations in retail sector will badly effect the crores of retail shopkeepers and vendors resulting in depart of kirana stores, Whereas government is in favor and believe that it will generate large scale of employment, benefit both farmers as well as consumers and will help in reducing inflation. This research paper aim is to find why foreign investors are attracted towards India, find arguments in favor and against of FDI and what will be its effect on Indian economy in future, whether FDI will be favorable...
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...Effect on Local Businesses in Retailing Sector (India) Contents Abstract 1 Introduction 2 Literature Review 2 Effect of MNC’s into Indian Retail Market 5 Advantages 5 Disadvantages 7 Hypothesis 8 Conceptual Model 8 Conclusion 10 References 10 Abstract Globalization paved the way for entrepreneurs to expand their wings beyond their respective counties. MNCs exploit the business opportunities in other countries based on the FDI policies in those countries. This has both advantages and disadvantages to the target country. The MNCs have their impact on the economy and people of countries in which they operate business. This paper focuses on the impact of MNCs on local businesses in retail sector in India. The report review existing literature which provides insights into FDI policies in India, the level of FDI allowed by Indian government with respect to single –brand and multi-brand foreign companies, the advantages, opportunities, risks, threats and disadvantages of allowing MNCs into retailing sector in India. Introduction Retailing is the business taking up by individuals or families in India. Generally mom and pop kind of businesses operate in retail sector. The retail sector has tremendous growth in India. Moreover retailing is a profitable business in India. Since India is the country with huge population, naturally it is the correct destination to foreign investors to get profits from the market. India has been traditionally depending on the small...
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...SYMBIOSIS CENTRE FOR MANAGEMENT STUDIES Theme: - “Issues and Challenges in Retail Sector and Foreign Direct Investment India and across the World” FDI AND RETAIL TOGETHER: An Overview By Rakesh Soni (11bbl114@nirmauni.ac.in) PH. NO- 8690976530 Peeyush Purohit (11bbl091@nirmauni.ac.in) PH. NO- 7597907007 INSTITUTE OF LAW NIRMA UNIVERSITY AHMEDABAD INTRODUCTION INDIAN RETAIL MARKET Retailing can be defined as a business activity, which offers products or services in small quantities to ultimate consumers, at a place where consumers prefer to buy. India is one of the largest emerging markets, with a population of over one billion. India is one of the largest economies in the world in terms of purchasing power and has a strong middle class base of 300 million. Around 70 per cent of the total households in India (188 million) reside in the rural areas, where mostly traditional retail outlets, commonly called “kirana” stores exist. These are unorganized, operated by single person and runs on the basis of consumer familiarity with the owner. However, recently organized retailing has become more popular in big cities in India and most of the metropolitan cities and other big cities are flooded by modern organized retail stores. India’s growing retail boom is a success story. With strong fundamentals developing in the Indian economy in the liberalized environment since 1991 with changes in income levels, lifestyles, taste & habits...
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...in/2011/12/detailed-analysis-fdi-good-or-bad-for.html Detailed Analysis FDI Good or Bad for India Who will benefit in India if FDI is allowed in Multi Brand this is Kirana Business Few days back the Union Cabinet of India overcame years of indecision to allow up to 51% FDI in multi-brand retail. Government also increased the FDI limit in single-brand retail to 100% from 51% Government says it will benefit India. Traders fear the move. Opposition parties oppose the move as they know they will benefit if they support the traders. No one is touching the real issues and accepting the truth that today or tomorrow FDI, big global corporations will enter into India directly or indirectly. Today world is becoming a global village. Foreign Investment in India is governed by the FDI policy announced by the Government of India and the provision of the Foreign Exchange Management Act (FEMA) 1999. The foreign investors are free to invest in India, except few sectors/activities, where prior approval from the RBI or Foreign Investment Promotion Board (‘FIPB’) is required. In franchising and commission agents’ services, FDI (unless otherwise prohibited) is allowed with the approval of the Reserve Bank of India under the Foreign Exchange Management Act. Examples of Such Business - Pizza Hut or Nike or Spencer 100% FDI is allowed in wholesale trading. Wholesalers do the business with the Retailers. Wholesalers never do business with Consumers. Few days back central government of India, Congress...
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...Government Policy, Fiscal Deficit and Infrastructure. Emergence of FDI in Retail in India FDI in single brand retail was first introduced in 2006 and it was first in 2010 that the idea of FDI in multi-brand retail was proposed by the government as a step to boost the economy of the country. The Indian Retail industry is being seen as a concrete pillar to boost the economy. Currently the retail industry accounts to 14-15 % of the GDP and employs 6-7%of the total nation’s population. It is expected to reach 16-18% of the total market within the next five years. At the time when FDI in single brand retail was introduced in 2006 the limit was set to 49% ownership rights but in the fiscal year 2011-12 government of India agreed to reform its policy on the single brand retails and increased the ownership rights to 100%. Also in 2012, the Indian government allowed FDI in multi-brand retail in which the company has 51% ownership. Following are some of the points of proposed FDI in retail: * Minimum investment to be done is $100 million. * 50% of the investment should be done in improving the back end infrastructure. * 30% of all raw materials have to be procured from the small and medium enterprises ( this rule has been recently reformed as government has made exception for IKEA). * Permission to set retail stores only in cities with a minimum population of 10 lakhs. * Government has the first right to procure material from the farmers. Political Opposition: ...
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...Investment in Retail in India: Good or Bad? Name: Amit Rohilla*, Manoj Bansal** Official Address: *Department of Commerce, Gargi College (University of Delhi), Siri Fort Road, New Delhi-110049 ** Department of Commerce, R. K.S. D. (P. G.) College (E), (Kurukshetra University, Kurukshetra), Ambala Raod, Kaithal-136027 Email id: *rohilla_amit@yahoo.co.in; ** manoj.bansal.5686@facebook.com Phone/fax number of author(s): *+91-8860-82-8731; **+91-9812-39-4945 A brief biographical note of the author(s): Amit Rohilla [M. Com., MBA (Finance), M.Phil. (Finance)] is currently Assistant Professor of Commerce at the Gargi College, University of Delhi, Delhi. Earlier he has worked as a Lecturer in R.K.S.D. (P.G.) College, Kaithal (Haryana). He is an active researcher and a teacher with an experience of more than 4 years in commerce and management. He has four papers to his credit out of which one has been published in South Asian Journal of Marketing and Management Research (SAARJ). He has also attended five seminars and one workshop. His area of interest is Finance and Marketing. Electronic copy available at: http://ssrn.com/abstract=2163952 Title of the page: Foreign Direct Investment in Retail India: Good or Bad? Abstract: Indian retail industry is a sunrise sector and many global players are willing to enter this. Indian retail industry is one of the pillars of the Indian Economy. Since 1991, when the policy of the liberalization was introduced by the Indian Government, FDI has been...
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...India is in the midst of a retail boom. The sector witnessed significant transformation in the past decade from small-unorganized family-owned retail formats to organized retailing. Indian business houses and manufacturers are setting up retail formats while real estate companies and venture capitalist are investing in retail infrastructure. Many international brands have entered the market. With the growth in organized retailing, unorganized retailers are fast changing their business models. However, retailing is one of the few sectors where foreign direct investment (FDI) is not allowed at present. FDI in retail industry means that foreign companies in certain categories can sell products through their own retail shop in the country. At present, foreign direct investment (FDI) in pure retailing is not permitted under Indian law. Government of India has allowed FDI in retail of specific brand of products. Following this, foreign companies in certain categories can sell products through their own retail shops in the country. Concerns regarding Allowing FDI in Retail Sector It would lead to unfair competition and ultimately result in large-scale exit of domestic retailers, especially the small family managed outlets, leading to large scale displacement of persons employed in the retail sector. Further, as the manufacturing sector has not been growing fast enough, the persons displaced from the retail sector would not be absorbed there. Another concern is that the Indian...
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...Effect of FDI on Bilateral Trade Abstract Contemporary literature refers to trade and Foreign Direct Investment (FDI) as alternative strategies. The debate is mainly between two notions: (1) that FDI displaces trade, and (2) that FDI and trade complement each other. Literature on FDI talks about the effect of foreign investments on trade. Lipsey (2002) mentions that outward FDI may decrease or increase (or have no effect on) exports of home country. These effects depend largely on the competitiveness of the host country and the motives behind investment by the home country in the host country. This paper is aimed at studying the effect of FDI on bilateral trade as well as effect at the aggregate level especially in the developed-developing nation paradigm. Introduction Literature suggests that there are a number of motives on which FDI takes place across nations. Most of the firms in the developed countries will go for foreign investment once they fulfill their domestic market and they in order to grow will go to foreign market. In this case the main motive of a firm is to tap new markets. This entry of one firm in to a foreign market will create a bandwagon effect thorough which their competitors will also enter that market. Again, when the competition sets in the foreign market, companies will be forced to take cost reduction measures to achieve higher profits will look for other destinations which have lower cost of production and thus the motive will become efficiency...
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... Why is the Indian retail industry so inviting? Indian retail industry is so inviting because it is a developing site for global retailers and the profitability is declining in developed countries. Because of the indulgence of many small organizations, its existing retail system has been divided into various parts and this division is beneficial such as it is leading to lower prices of farmers and higher prices of the consumers. Furthermore, in order to maximize return on investment, the new rules of India for international trade are attractive for FDI across nations(Dey, 2007). 2. From a resource-based view, what are the unique resources and capabilities that multinational retailers such as Wal-Mart can bring to India? In India FDI on multi brand stores has been forbidden in 2011. But by considering today, multinational retailers can bring small trade stores, modern technology, new opportunities for labor, supermarkets of food service and global sourcing stores in order to enhance the size of economy. 3. From an institution-based view, why is the opening of this industry to FDI such a political issue? In India, a large of small organizations are working and surviving currently even with political issues and potential organizations who want to work there are losing in order to prevent them from influence of politics because they do not know what could be unfavorable for them. 4. ON ETHICS: If you were an elected government official in India, would you recommend...
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...FDI IN RETAIL SECTOR GOOD? · FDI means foreign direct investment. · All foreign retailers to own upto 51% in retail. · Government has presently 51% FDI in single brand retail. · Government of India proposed 100% FDI in single brand retail & 51% in multi-brand retail. · Presently multi-brand is largely in the unorganised sector, dominated by neighbourhood kirana stores. · Reports suggest around $15-20 billion could flow into the country over the next 10 years as a result of FDI in retail. · Presently the organised sector only accounts for 6% of the total retail in India. · Almost all developed countries have FDI, do we want to lag behiend. · It will generate many jobs in retail sector. · Will benefit the farmers. · Will provide them good prices for the crops. · Will eliminate the middlemen. · Will modernize the supply chain. · Will increase the competition in the retail market. · Access to larger financial resourses. · Can negotiate prices more aggresively from the manufacturers and pass on the benefits to the customers. · Better and tighter quality standards. · It will certanily make shopping a pleasant experience. · It may benefit even the kirana shops, they can buy from the supermarket and sell it to their respective customers. · Indian products may also enter global market. · Organised trade employes 5 lakh people & unorganised employs 4 crore. · Amongst the top 3 sectors of India which generates employment. · Looking at the example of US, we now know...
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...Foreign Direct Investment in Indian Retail Sector * Dr. A. Vinayagamoorthy,Ph.D., ** C. Sankar * Associate Professor, Department of Commerce, Periyar University, Salem-11. Tamil Nadu.E-Mail: avm_2007@yahoo.com ** Ph.D. Research Scholar, Department of Commerce, Periyar University, Salem-11. Tamil Nadu. E-Mail: sankar_4577@yahoo.com; sankarzee.c@gmail.com; Mobile No. (0)9566997631 Abstract FDI is a tool for economic growth through its strengthening of domestic capital, productivity and employment. FDI also plays a vital role in the up gradation of technology, skills and managerial capabilities in various sectors of the economy. The present paper attempts to analyze significance of the FDI Inflows in Indian retail sector since 1991 and relating the growth of retail sector FDI in generation of employment in terms of skilled and unskilled. Supporters of FDI in retail trade talk of how ultimately the consumer is benefited by both price reductions and improved selection, brought about by the technology and know-how of foreign players in the market. This in turn can lead to greater output and domestic consumption. Introduction The retail industry in India is of late often being hailed as one of the sunrise sectors in the economy. AT Kearney, the well-known international management consultancy, recently identified India as the ‘second most attractive retail destination’ globally from among thirty emergent markets. It has made India the cause of a good deal of excitement...
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...consumer expenditure 1.0 2010 2020E India consumption expenditure (USD trillion) 1.3 Consumer expenditure estimated to be USD3.6 trillion by 2020 vis-à-vis USD1.0 trillion in 2010 CAGR: 12.7% Indian retail one of the fastest growing markets in the world due to economic growth 0.5 Retail market in India to reach USD1.3 trillion by 2020 from USD0.5 trillion in 2012 2020E 2012 Indian retail market size (USD trillion) Favourable government policies to boost investor confidence and thereby investments across modern retail formats CAGR: 30.0% 27 2012 220 2020E Modern retail market to expand to USD220 billion by 2020 from USD27 billion in 2012 Indian modern retail market size (USD billion) Source: PWC, Economic Times, Aranca Research Notes: CAGR - Compound Annual Growth Rate, E - Estimate CAGR: 7.6% 100 Robust consumption, rural markets to augment FMCG market 12 2006 2025E FMCG market expected to increase to USD100 billion by 2025 from USD12 billion in 2006 FMCG market in India (USD billions) 67,100 CAGR: 19.6% Increasing participation from foreign and private players to boost retail infrastructure 11,192 Modern retail stores projected to reach 67,100 by 2016 from 11,192 in 2006 2016E 2006 Modern retail formats (store counts) 8,500 Rising number of tier-2 and tier3 cities to enhance supermarket space in the country CAGR: 32.8% 500 2006 2016E Supermarkets in India Source: indiaretailing.com, Aranca...
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