FDI IN RETAIL

RUPESH R CHAUBE

RETAILRetail – interface between producer and individual consumer for personal consumption.

Retailer - one who stocks the producer’s goods and is involved in the act of selling it to the individual consumer, at a margin of profit.

Indian Scenario

Retailing is the single largest component of the services sector in terms of contribution to GDP.

Its share in GDP is 14%.

INDIAN RETAIL SECTOR

• Only 5% of retail sale comes from organised retail sector.

• India is the 3rd most attractive destination for fdi in retail sector and size of the Indian retail will be 535 US dollar by2013.

Types

•Organized - trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. Eg: Corporate backed hypermarkets.

•Unorganized - 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.

Role of Retail in Indian Economy

– It is the backbone of Indian economy.

– A.T. Kearney - well-known international management consultant - India as the ‘second most attractive retail destination’ globally from among thirty emergent markets.

Foreign Investment

‘Foreign investment’ is investment in an enterprise by a Non-Resident irrespective of whether this involves new equity capital or re-investment of earnings. Foreign investment is of two kinds – (i) Foreign Direct Investment (FDI) and (ii) Foreign Portfolio Investment. (As per Consolidated FDI Policy April 1, 2010)

FDI in RetailCurrent Position:

•FDI is permitted only in single brand product retailing – 100%.

•In multi brand – FDI is 50% permitted.

Advantages of FDI in Retail•Greater Efficiency and improved living standards.•Greater integration into the Global economy.•Price Reduction.•Improved selection.•Greater output and domestic consumption.

Disadvantages of FDI in Retail

•Labour displacing.•Destroy traditional retail sector.

Impact of FDI in Retail in India

1. Consumers – access to some of the major global brands.

2. Improved quality and variety of products.

3. Increase competition and expand manufacturing.

Economic Survey 2010-11"Permitting FDI (foreign direct investment) in retail in a phased manner beginning with metros and incentivizing the existing retail shops to modernize could help address the concerns of farmers and consumers. FDI in retail may also help bring in technical know-how to set up efficient supply chains which could act as models of development."

Conclusion

All this promises to make the Indian retail market a real happening place in the days ahead while at the same time offering immense business opportunities to the domestic entrepreneurs. In fact, this is likely to transform the whole contours of the India market, making it a part of the overall global market.

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