Fdi Dataa

INTRODUCTION TO FDI INDIAN RETAIL SECTOR
1.1 ABSTRACT
Indian retail industry is one of the sunrise sectors with huge growth potential.
According to the Investment Commission of India, the retail sector is expected to
grow almost three times its current levels to S660 billion by 2015- However, in
spite of the recent developments in retailing and its immense contribution to the
economy, retailing continues to be the least evolved industries and the growth of
organized retailing in India has been much slower as compared to rest of the
world. Undoubtedly, this dismal situation of the retail sector, despite the ongoing
wave of incessant liberalization and globalization stems from the absence of an
FDI encouraging policy in the Indian retail sector. In this context, the present
paper attempts to analyze the strategic issues concerning the influx of foreign
direct investment in the Indian retail industry. Moreover, with the latest move of
the government to allow FDI in the multiband retailing sector, the paper analyses
the effects of these changes on farmers and the agri-food sector. findings of the
study point out that FDI in retail would undoubtedly enable India Inc. to integrate
its economy with that of the global economy. Thus, as a matter-of-fact FDI in the
buzzing Indian retail sector should not just be freely allowed but should be
significantly encouraged.
1.2 INTRODUCTION
As per the current regulatory regime, retail trading (except under single-brand
product retailing FDI up to 51 percent, under the Government route) is prohibited
in India. Simply put, for a company to be able to get foreign funding, products
sold by it to the general public should only be of a _single-brand'; this condition
'is in addition to a few other conditions to be adhered to. India being a signatory
to World Trade Organizations General Agreement on Trade in Services, which
includes wholesale and retailing services, had to open up the retail trade sector to
foreign investment. There were initial reservations towards opening up of retail
sector arising from fear of job losses, procurement from the international market,
competition, and loss of entrepreneurial opportunities. However, the government
in a series of moves has opened up the retail sector slowly to Foreign Direct
Investment (—FDI). In 1997, EDI in cash and carry (wholesale) with 100%
ownership was allowed under the Government approval route. It was brought
under the automatic route in 2006. 51 % investment in a single-brand retail
outlet was also permitted in 2006.FDI in multi-Brand retailing is
prohibited in India.
5
STRUCTURE OF THE INDIAN RETAIL SECTOR
Definition of Retail
2004, The High Court of Delhi defined the term retail as a sale for final
consumption in contrast to a sale for further sale or processing (i.e., wholesale).
A sale 10 is the ultimate consumer.
Thus, retailing can be said to be the interface between the producer and the
individual consumer buying for personal consumption. This excludes direct
interface between the manufacturer and institutional buyers such as the
government and other bulk customers. Retailing is the last link that connects the
individual consumer with the manufacturing and distribution chain. A retailer
is involved in the act of selling goods to the individual consumer at a margin of
profit. The retail industry is mainly divided into - l) Organized and
2) Unorganized Retailing trading activities are undertaken by licensed retailers, that
is, those who are registered for sales tax, income tax, etc. These include the corporate-
backed hypermarkets and retail chains, and also the privately owned large retail
businesses.
on the other Brand refers to the traditional formats of low-cost retailing, for example,
the local Kirana shops, owner-manned general stores, pan/BEEDI shops, convenience
stores, hand Craft and pavement vendors, etc.
The Indian retail sector is highly fragmented with 97 percent of its business being
run by unorganized retailers. Organized retail however is at a very nascent stage.
The sector is the largest source of employment after agriculture and has deep
penetration into rural India generating more than 10 percent of India's GDP.
ADVANTAGES OF CONVENTIONAL AND MODERN ORGANIZED RETAIL REFORMS
Conventional Or Analysis Modern Or analyzed
l. Large Bargaining Power I. Low operating cost and overheads
2. Proximity to consumers 2. Range and variety of goods

3. Long operating hours,
strong customer relations, 3. Long operating hours, and quality
convenience and hygiene. assurance (brand-related and
durability).
6
Growth And Evolution of the Indian Retail Sector
The Indian Retail Industry is the largest retail destination and the second most attractive
market for investment in the globe after Vietnam as reported by AT Kearney's seventh
annual Globe Retail Development Index (GRDI), in 2008. The growing popularity of
Indian Retail sector has resulted in growing awareness of quality products and brands.
As a whole Indian retail has made life convenient, easy, quick and affordable- Indian
retail sector specially organized retail is growing rapidly, with customer spending
growing in an unprecedented manner. It is undergoing metamorphosis- Till 1980 retail
continued in the form of Kirana’s is unorganized retailing. Later in 1990s branded retail
outlet like Food World, Nilgiris and local retail outlets like Apna Bazaar carne into
existence. Now big players like Reliance, Tata's, Bharti, ITC and other reputed
companies have entered into organized retail business.
The multinationals with 51% opening of FDI in single brand retail has led to direct
entrance of companies like Nike, Reebok, Metro etc. or through joint ventures like
Wal-Mart with Bharti, Tata with Tesco etc.-
Evolution of retail sector can be seen in the share of

organized sector in 2007 was 7.5% of the total retail
market. Organized retail business in India is very small
but has tremendous scope- The total in 2005 stood at $225
billion, accounting for about of GDP. In this total market,
the organized retail accounts for only SS billion of total
revenue. According to A T Kearney, the organized
retailing is expected to be more than $23 billion revenue
by 2010.
The retail industry in India is currently growing at a great
pace and is expected to go up to 'USS 833 billion by the
year 2013. It is further expected to reach USS 1.3 trillion
by the year2018 at a CAGR of 10%. As the country has
got a high growth rate, the consumer spending has also
gone up and is also expected to go up further in the future.
In the last four years, the consumer spending in India
climbed up to 75%-
As a result, the Indian retail industry is expected to grow further in the future days. By the year
2013, the organized sector is also expected to grow at a CAGR of 40%. The key factors that
drive growth in retail industry are young demographic profile, increasing consumer aspirations,
growing middle class incomes and improving demand from rural markets. Also, rising incomes
and improvements in infrastructure are enlarging consumer markets and accelerating the
convergence of consumer tastes. Liberalization of the Indian economy, increase in spending
per capita income and the advent of dual income families also help in the growth of retail sector.
Moreover, consumer preference for shopping in new environs, availability of quality real estate
and mall management practices and a shill in consumer demand to foreign brands like
McDonalds, Sony, Panasonics etc. also contributes to the spiral of growth in this sector.
bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb
bbbbb 7

Fdi Dataa

Uploaded by

Copyright:

Available Formats

Fdi Dataa

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Fdi Dataa

Uploaded by

Copyright:

Available Formats

INTRODUCTION TO FDI INDIAN RETAIL SECTOR

ADVANTAGES OF CONVENTIONAL AND MODERN ORGANIZED RETAIL REFORMS

Conventional Or Analysis Modern Or analyzed

l. Large Bargaining Power I. Low operating cost and overheads

2. Proximity to consumers 2. Range and variety of goods

Evolution of retail sector can be seen in the share of

You might also like