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FDI- An Introduction Refers to the net inflows of investment to acquire a

lasting management interest in an enterpriseoperating in an economy other than that of theinvestor.

It is the sum of equity capital, reinvestment ofearnings, other long-term capital, and short-term

capital. It usually involves participation in management,

joint-venture, transfer of technology and expertise.

A measure of foreign ownership of productive assets.

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Retail Sector in India One of the pillars of Indian Economy: contributes

13% of GDP.

Over 12 million outlets operate in the country

India has the highest number of outlets per person(7 per thousand)

Indian retail space per capita is lowest at 2 sq.ft/

person. Only 4% outlets are bigger than 500 sq ft

Over 90% trade is conducted through independentlocal stores

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Organized & Unorganized Retail

Organized

Trading activitiesundertaken bylicensed retailers

Hypermarkets

Retail ChainsPrivately ownedstructured business

Growing at 35%anually

Unorganized

Traditional formatsof low-costretailing

Kirana stores

Owner managed

stores

Hand cart/pavement vendors

Growing at 6%anually

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FDI in Retail Sector

FDI in single-brand retailing was permitted in2006, 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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Effects of 100% FDI in Single Brand

Foreign players get local market knowledge

Indian companies can access global best management

practices and technology

Adequate flow of capital

Study shows that investment of big moneyin the retailsector would in the long run not harm interests of

small, traditional, retailers.

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FDI in Multi BrandFDI in Multi Brand retail implies that a retail store with a foreign

investment can sell multiple brands under one roof.

At present FDI is not permitted in Multi Brand Retailing in India.

But FDI in Cash and Carry wholesale trading is 100% allowedwhich involves building of a large distribution infrastructure toassist local manufactures. The wholesaler deals only with smaller

retailers and not consumers.

Opening it up will mean that global retailers (Wal-Mart,Carrefour, Tesco) can open stores offering a range of items

directly to consumers.

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Why Indian Market? Growth in working population

Rising disposable incomes

Changing consumer lifestyles

Development of rural markets

Reduce dependency on Chinese exports

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Need for FDI in Retail Sector

Increased Efficiency

Efficient and tested management practices

Economies of scale

Adoption of global best practices

Adoption of modern technology

The organized model adopted by organized retailers

may be adopted by other players gradually, leading tooverall efficient system.

Would lead to stability in prices by eliminating

hoarding and speculations.

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FDI- Good or Bad?

Arguments Against FDI

Wipe out the mom-pop stores

Displace labour in a labour-surplus society

Control over pricesArguments For FDI

Multiplier effect on generating jobs in allied sectors like construction,furnishing, hardware, food processing ,packing, management, data

processing, etc Readily available equity funds, Investment in technology

Development in supply chain infrastructure, reduced wastage

Improved quality

Increase in exports

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ChallengesSKILLED

WORKERS

COMPETITION

REAL

ESTATE

PROBLEM

MARKET

POWER

SUPPLY CHAIN

MANAGEMENT

PROBLEM IN

RAISING

FUNDS

TAXATION

POLICIES

INFLATION

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The Challenge

A strong competition from mom and pop shops:-

Easily accessible & approachable.

Provide services like Free home delivery and goods on

credit.

They change consumer focus.