fdi retail in india
TRANSCRIPT
FDI Policies in the Retail Sector in India & its likely
impact
MANAGERIAL ECONOMICS
ContentFDI & its types
FDI in IndiaProcedure for entering in India through FDI
Sector wise presence and analysisFDI policies w.r.t. RETAIL sector by Govt. of India
International Retail Brands/cos. – Present in India through FDICos. In-Process to come in India
The outcomes of the policies – Advantages & DisadvantagesCase Study of Walmart & Tesco- Their challenges and our advantages
Study & Survey of Indian Consumers & Small & Medium Enterprises (SME) –shops and retailers
ConclusionBibliography
Foreign Direct Investment
Direct investment into the production
or business in a country by an individual or
company of another country
It includes:• Mergers and
Acquisitions• Building new
facilities• Reinvesting profits
earned from overseas operations
• Intra company loans
In regard to the GDP equation:
Y= C+I+G+(X-M)
I= Domestic + Foreign InvestmentFDI is the net inflow
of foreign investment i.e. Inflow - Outflow.
FDI TYPES
Horizontal FDI
Vertical FDI
Platform FDI
FDI In India• Foreign direct investment was introduced in India in
1991 under the Foreign Exchange Management Act(FEMA).
• A foreign company entering India through-wholesale cash and carrywholly-owned subsidiary in manufacturing,
licensing and distribution agreements joint ventures for each brand franchising and commission agents
Procedure For Receiving FDI in an Indian Company
• No prior approval of the Government or RBI required.
AUTOMATIC ROUTE
• Prior approval of the Government required by applying to the FIPB.
GOVERNMENT ROUTE
Sector wise PresenceAllowed
• Defence Sector- 26%• Insurance Sector- 49%• Telecom Services- 100%• Tea Plantations- 100%• Asset Reconstruction – 100%• Petroleum and natural gas- 49%• Commodity Exchange- 49%• Power Exchange- 49%• Stock Exchanges- 49%• Credit Information Companies-74%• Courier Services- 100%• Single Brand Retailing- 100%• Multi Brand Retailing- 51%
Prohibited • Atomic Energy• Lottery• Gambling and Betting• Chit fund• Nidhi Company• Agricultural and Plantation
activities(with exceptions)• Housing and Real Estate(with
exceptions)• Trading in Transferrable
Development Rights(TDRs)• Manufacture of cigars and cigarettes
of tobacco and tobacco substitutes
E-COMMERCE companies can engage only in B2B & not retail tradingTest Marketing of such items has approval for manufactures for period of two years
Existing International Retail companies
International Retail companies in-process to enter India
Advantages of FDI in Retail in India
Growth in Economy
Job Opportunities
Benefits to Farmers
Benefits to consumers
Lack of Infrastructure
Cheaper Production facilities
Availability of new technology
Long term cash liquidity
Conducive for the country’s economic growth
FDI opens up a new avenue for Franchising
Proper tax system
Minimum source of 30% of goods from Indian micro &small industries
Foreign countries create supply chain management in Indian market
Avoidance of food wastage and perishables
Disadvantages of FDI in Retail in India
Impact on the organised players
Limited Employment Generation
Fear of lowering of prices
Draining of Revenue to foreign countries
Fear of incompetitiveness
Monopoly of Supermarkets
Dilution of 30% sourcing policy
CASE STUDYWalmart
TESCO
• Largest public corporation by revenue in world with 1.3m employees
• JV with Bharti could give Wal Mart access to 8th largest retail market in world valued $320 billion.
• Plans to extend its cash and carry store presence to smaller cities
• Plans to continue to focus on its backend supply chain to minimize wastage and to improve operational efficiency.
• Plans to leverage the differences in culture, lifestyle, taste, and food preferences amongst the Indian consumers in an effort to penetrate the Indian market effectively.
Their Challenges-• Competitors: Future Group, RPG, Reliance Retails, Aditya Birla Group• Reliability on its own distribution system (30% back-end invt.)• Government policy may slow down growth
• Loss in Germany & South-Korea Next 5yrs- Reliance intends opening more stores (around 6,000) & Wal –Mart has planned 140 stores
• Cap of 25% on sales of cash-and-carry players to front-end retail companies owned by their Indian joint venture partners – Change in JV agreement ; Reduced Investment
Our Advantages-• The winning strategy- selling branded products at low cost.• Non dependence on any single vendor• Boost Employment• They pay producers more and charge consumers less.
• 3rd largest British multinational grocery and general merchandise retailer headquartered in England
• TESCO’s 50 per cent stake in Trent Hypermarket Ltd with$100 million
• Star Bazaar, Star Daily or Star Market in Maharashtra and Karnataka Trent Vice-Chairman Noel Tata
& Tesco CEO Philip Clarke
Their Challenges-• 50-50 partnership proposal to Foreign Investment
Promotion Board• Domestic sourcing norms • Restrictions on Products allowed for sale
Our Advantages-• Trent’s shares closed at Rs 1,066.55, UP 7%, on BSE.• Hypermarkets are to be converted to UK-branded
outlets.
Future of ‘mom and pop’ stores
Future of mom and pop stores
• Objective: To understand the competitive level of our SME retailers & receive general feedback
• Survey of 17 small and medium sized stores • Region: Navi Mumbai, Chembur, Bandra, Andheri
• Respondents: Shop owners & Store Managers
Are you aware about international supermarkets entering Indian retail market?
15
2
YESNO
Are you in favor of FDI in Retail Sector?
4
3.2
YESNO
Do you agree it will contribute to country’s growth?
(employment opportunities, farmers benefits, technological advancements, etc.)
89
YESNO
Do you think it will affect your business? If Yes, How?
YESNO
0
4
8
1212
1
58
What precautionary measures are you taking to maintain your business and keep it competitive?
0
2
4
6
88 8
3
5
Conclusion• Healthy competition for Indian Retail Giants-
Future Group, Aditya Birla, etc.• Cut-throat competition for small & medium
enterprises retailers• No concrete policies to safeguard the small &
medium enterprises retailers• Encouraging facet for regular shoppers
THANK YOU
Bibliography• www.investopedia.com• www.moneycontrol.com• www.livemint.com• www.bloomberg.com• http://articles.economics.indiatimes.com• www.wikipedia.org• The Wal –Mart Way : Don Soderquist• http://www.firstpost.com/business/all-you-need-to-k
now-about-the-tesco-tata-trent-deal-1293267.html?utm_source=ref_article