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FDI

IN
RETAIL SECTOR
An investment is..

The commitment of money or


capital to purchase financial
instruments or assets in order to
gain profitable returns.
An investment becomes foreign
investment when..
Foreign
Investment done by citizens and Investment
government of one country (home through
country) invest in industries of
another country (host country).

Foreign Foreign
Direct Institutional
Investments Investors
FDI Routes

Automatic Route Government

No permission required Approval /License required.


FDI Policy Initiatives

• 1991- FDI allowed selectively up to 51% in priority


sectors.

• 1997-FDI allowed up to 100% in sectors like mining,


manufacturing.
• 2000-06 FDI allowed up to 100% in specified sectors.
FDI limits increased.
Procedures further simplified
• The top 3 Indian Regions attracting the highest FDI.
 Mumbai, Delhi and Karnataka.
 Account for nearly 62% of the total FDI.
FDI Policy in Indian Retail Sector

Single Brand
Retailing
• 51%

Cash and
Carry Model
• 100%
Why Global Retailers Look Up to India?

Incentives attract FDI.


Market size and potential are sufficient inducers.
 Tax breaks, import duty exemptions, land and power
subsidies, and other enticements.
Emerging Trends
• Corporates are increasingly coming into this sector.
• Demand of branded goods on a large scale.
• Demand of new and varied products.
• High quality product is preferred .
• Varied window display.
• E-tailers increase the presence.
Emerging Concepts
FDI POLICY IN RETAIL
OPPORTUNITIES
Demographics
INDIA
•A large emerging market .
Increase in disposable income of a family.
70 mn Indians – salary of $18,000.
Rise to 140 mn by 2011.
Consumer spending power increased by 75% in
last 3 years.
The per capita income in 2009–2010 has more
than doubled to US$ 849 from US$ 348 in 2000–01.
Consumer Class Shift

•Increase in consumer class.


Consumer class will grow Upper class
from 50 million at present to
Middle class
583 million by 2025.
With more than 23 million
Lower class
people taking their place
among the world’s
wealthiest citizens.
Consumer Behaviour

•Wide demographics -- average age of 25 yrs.


•Brand consciousness.
60 % of population below age of 30.
Awareness through World Wide Web.
•Changing consumer mindset.
Focus shifting from low price to convenience, value
and a superior shopping experience.
•Small Basket Size Shaping of Consumption
Employment Generation

•Employment generation.
Second-largest employer after
agriculture. Additional
1.6 mn
Retail trade employing 35.06 million.
jobs .
Wholesale trade generating an additional
employment of 5.48 million.
Technology

•Technology  Better use of resources and


goods.
Wastage and Storage problems will be
resolved.
Efficient logistics, production, and
distribution channels.
Digital records.
Rural Market

•Rural market.
Robust Consumption.
70% Indian households.
2/5 of the country’s total consumption pie.
Accounts to 45% of GDP.
FDI
POLICY IN RETAIL
CHALLENGES
Challenges
SKILLED
WORKERS

INFLATION COMPETITION

REAL
TAXATION
ESTATE
POLICIES
PROBLEM

PROBLEM IN MARKET
RAISING POWER
FUNDS

SUPPLY CHAIN
MANAGEMENT
Present Scenario
• Indian retail sector :
Employs 8% (35 million)of the working population.
Could yield 12 to 15 million retail jobs in the coming
five years.
• Out of which organized segment is about 0.3 million.
• Retail sector grew at 9.4% on real terms & 15.4% on
nominal terms.
WHAT LIES AHEAD?
• Employment.
• Unfair competition.
• Under-developed organized retail sector.
‘FDI In Retail- A Policy Perspective’,
- 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
Future Investments

Pantaloon Timex India


Lifestyle plans Shoppers Stop will open
to have more has plans to Retail India
(PRIL) plans to another 52
than 50 stores invest Rs250 stores by
across India Crore to open invest US$
77.88 million March 2011
by 2012–13. 15 new taking its total
supermarkets to add up to
existing 2.4 store count to
in the coming 120
three years. million sq ft
retail space. .
Major Retail Players Entering Into
India
Recommendations
 The initial cap on investment could be pegged at 49%.

 FDI should be leveraged to create back-end infrastructure.

 FDI will be a powerful driver to 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?
 Urban migration

 Opportunity to urban and rural unemployed

 Alternative incentive schemes


 National legal framework cannot be effective.

 Hamper growth in retail sector.

 Incentives directly to benefit small retailers.


Thank You
 

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