FDI in retail explained in clear and simple terms. A simple way to understand this complex topic.

1. FDI IN
RETAIL
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2. What is FDI ?
FDI can be defined as a cross border investment,
where foreign assets are invested into the
organizations of the domestic market excluding the
investment in stock.
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3. What is FDI ?
FDI can be defined as a cross border investment,
where foreign assets are invested into the
organizations of the domestic market excluding the
investment in stock.
•For instance: An American company taking a
majority stake in a company in China.
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4. What is FDI ?
Foreign investment – Investment done by citizens and
government of one country (home country) invest in
industries of another country (host country).
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5. What is FDI ?
Foreign investment – Investment done by citizens and
government of one country (home country) invest in
industries of another country (host country).
Foreign Foreign
investment institutional
through investment
Foreign Direct
investment
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6. What is FDI ?
Foreign investment – Investment done by citizens and
government of one country (home country) invest in
industries of another country (host country).
Foreign Foreign
investment institutional
through investment
Automatic Route – No
permission required
Foreign Direct
investment Government Route – Approval/
license required
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7. MODES OF FDI
BY TARGET
BY MOTIVE
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8. MODES OF FDI
Mergers and Acquisitions
Horizontal FDI
BY TARGET Vertical FDI.
*Backward Vertical FDI
*Forward Vertical FDI
Resource-Seeking
Market-Seeking
BY MOTIVE Efficiency-Seeking
Strategic-Asset-Seeking
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9. FDI IN
RETAIL
IN INDIA
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10. The Broad Retail Sector In India
Organized Retail Unorganized Retail
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11. The Broad Retail Sector In India
Organized Retail Unorganized Retail
Organised retailing refers to Unorganised retailing, on the other
trading activities undertaken by hand, refers to the traditional formats of
licensed retailers, that is, those the retail industry involving example, the
who are registered for sales tax, local kirana shops the corner stores,
income tax, etc basically involving owner manned general stores,
the corporate-backed paan/beedi shops, convenience stores,
hypermarkets and retail chains, hand cart and pavement vendors, etc.
and also the privately owned The latter involves a large majority of
large retail businesses. the indian populace that is involved in
the retail industry
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12. FDI policy in Indian Retail Sector
Single brand retailing 51 % Allowed
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13. FDI policy in Indian Retail Sector
Single brand retailing 51 % Allowed
Cash and carry model 100 % Allowed
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14. FDI policy in Indian Retail Sector
Single brand retailing 51 % Allowed
But what
exactly
Cash and carry model 100 % Allowed does this
mean?
Multi-Brand Retail Not Allowed
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15. Single Brand Retail
Conditions for Single Brand Retail:
Should be a single brand
Should be sold under the same brand
internationally
It would only cover products branded during
manufacture
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16. Cash & Carry Model
Conditions for Single Brand Retail:
Cash and carry businesses accept only cash for
their product or services (provide the optimum price
but with minimal conveniences.)
Likewise, once products have been purchased, the
customer is responsible for carrying their products
away from the place of purchase. No cart assistance
services are offered, nor are credit cards or credit
accounts of any kind accepted
Cash and carry businesses often exist in a
warehouse, as is the nature of many wholesalers.
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17. Multi-Brand Retail
Conditions for Single Brand Retail:
Sale of multiple brands under one brand
Multi-brand retail comes in different formats like
supermarket, hypermarket, compact hyper and the
ubiquitous mall.
Proposal to allow foreign investments upto the tune
of 51% in this sector.
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18. What are global retailers say about their prospective markets???
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19. FDI in Retail: Challenges faced by Industry
SKILLED
WORKERS
INFLATION COMPETITION
TAXATION REAL ESTATE
POLICIES PROBLEM
MARKET
PROBLEM IN RAISING FUNDS POWER
SUPPLY CHAIN
MANAGEMENT
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20. ‘FDI In Retail- A Policy Perspective’,
- Opinion of FICCI and ICICI
FDI can be a powerful catalyst to spur competition in the retail industry.
* It can bring about:
* Supply Chain Improvement
* Investment in Technology
* Manpower and Skill development
* Efficient Small and Medium Scale Industries
* Increase in exports
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21. Pros for Allowing FDI in Retail
India’s local enterprises will potentially receive an upgradation with the import
of advanced technological and logistics management expertise from the foreign
entities.
The government has an opportunity to utilize the liberalization for achieving
certain of its own targets:
I. improve its infrastructure
II. access sophisticated technologies
III. generate employment for those keen to work in this sector
FDI would lead to a more comprehensive integration of India into the
worldwide market and, as such, it is imperative for the government to promote
this sector for the overall economic development and social welfare of the
country.
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22. Pros for Allowing FDI in Retail
Employment opportunities in agro-processing, sorting, marketing, logistics
management and front-end retail.
 10 million jobs to be created in the next three years in the retail sector.
 Policy mandates a minimum investment of $100 million with half the amount
being invested in back-end infrastructure, including cold chains, refrigeration,
transportation, packing, sorting and processing.
 Salutary impact on food inflation from efficiencies in supply chain.
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23. Benefits for Indian Agriculture from FDI in Retail
Investment into warehouse and cold storage chain will result in significant
efficiency on supply chain.
Farmers benefited through direct marketing and contract farming
programme.
Improves farm production through modern techniques.
 Increasing availability of low interest credit for farmers.
 Helps farmers secure remunerative prices by eliminating exploitative
middlemen.
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24. Cons of FDI in India
Move will lead to large-scale job losses.
Global retail giants will resort to predatory pricing to create monopoly
Jobs in the manufacturing sector will be lost because structured international
retail makes purchases internationally and not from domestic sources.
Opponents of the FDI feel that liberalization would jeopardize the unorganized
retail sector and would adversely affect the small retailers, farmers and
consumers and give rise to monopolies of large corporate houses which can
adversely affect the pricing and availability of goods.
They also contend that the retail sector in India is one of the 2 the chain of food
supply, from the farm where it is produced to the consumer major employment
providers and permitting FDI in this sector can displace the unorganized
retailers leading to loss of livelihood.
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25. What Lies Ahead?
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26. FDI Success story China
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27. How FDI is projected to effect the
Indian economy?
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28. GRDI Position : 3rd
Size : $ 400 billion
Growth Rate : 13%
GDP contribution : 12%
Major sector : Food and Grocery
Employment : 2nd largest industry
(35.06 million)
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29. Major Retail Players Entering Into India
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30. Future Predictions
Expected Growth
• In the last four year, the
1.4 CAGR 1.3 consumer spending in India
1.2
10%
climbed up to 75%.
1
• By the year 2013, the
0.83
organized sector is also
0.8
0.59 expected to grow at a CAGR of
0.6 40%.
0.35
0.4 • The total number of shopping
0.2 malls is expected to expand at
0 a CAGR of over 18.9 per cent
2008 2011 2013 2018 by 2015.
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31. The Politics of FDI
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32. Recommendations And Suggestions
To ponder over????
•Should the initial cap on investment could be pegged at 49%?
•Should FDI should be leveraged to create back-end infrastructure?
•Can FDI curb inflation?
•To develop our rural sector ,should conditionality’s be put on the FDI
funded chains relating to employment?
• For example, should we stipulate that at least 35% of the jobs in the
retail outlets should be reserved for the rural youth?
Some Difficult questions for which our policy makers
Need to find the answers.
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33. Thank You!
Hope you had a pleasant
learning experience.
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