FDI IN RETAIL

AND TELECOM
SECTOR
HIREN GAJERA-21 PALLAVI SINGH-34
JAISHANKAR PATEL-22 PARTH NAGAR-35
JALAL ANSAR-23 PRIYANKA-37
JISHA PILLAI-24 PUSHPA PATEL-38
FDI IN INDIA
• FDI in India is permitted as under the following
forms of investments:
– financial collaborations;
– joint ventures and technical collaborations;
– capital markets via Euro issues;
– and private placements or preferential allotments.
• There are two ways for Foreign Direct Investment in
India:
– The Automatic Route for most of the sectors
– Except few sectors/activities, where prior approval from
the Reserve Bank of India (‘RBI’) or Foreign Investment
Promotion Board (‘FIPB’) would be required.

• The foreign investors planning to set of business in India

have two options, either to set up a separate corporate entity
in India, i.e. incorporating an Indian company or through
unincorporated entity, i.e. Branch Office of the foreign entity.
Foreign
Investment
Promotion Board
•(FIPB)
Only agency dealing with matters relating to FDI as
well as promoting investment into the country.

• Empowered Board in the office of the Prime

Minister.

• It is chaired by Secretary Industry (Department of

Industrial Policy & Promotion).
Functions of
FIPB:
• To quickly approve the foreign investment proposals.

• To review the foreign direct investment polices

• To look over the implementation of the various proposals that have been
approved by it.

• Activities that encourage FDI into the country by establishing contact with
international companies and inviting them to invest.

• To communicate with government, non- government, and Industry Bodies

to increase the flow of FDI.

• To communicate with the Foreign Investment Promotion Council that has

been set up in the Industry Ministry.

• To identify the various sectors that require FDI.

• For starting a new project, a number of industrial
approvals/clearances are required from different
authorities such as Pollution Control Board, Chief
Inspector of Factories, Electricity Board, Municipal
Corporations, etc.
Foreign Exchange
Management Act
(FEMA)
• The Parliament has enacted the Foreign Exchange
Management Act, 1999.

• The object of the Act is to consolidate and amend the law

relating to foreign exchange

• Facilitating external trade and payments

• Promoting the orderly development and maintenance of

foreign exchange market in India.

• It applies to the whole of India and also to all branches,

offices and agencies outside India owned or controlled by a
person resident in India.
Foreign Investment
Implementation Authority
(FIIA)
• The FIIA was set up to facilitate quick
translation of Foreign Direct Investment (FDI)
approvals into implementation by :
– Providing a pro-active one stop after care service
to foreign investors
– Help them obtain necessary approvals
– Sorting their operational problems.
• Top Investing Countries:
2. MAURITIUS - 44.64%
3. U.S.A. - 9.10%
4. U.K.- 7.56%

• Sectors Attracting Highest FDI Equity Inflows:

7. SERVICES SECTOR – 20.15%
8. COMPUTE SOFTWARE & HARDWARE -15.34%
9. TELECOM- 7.80%
PRESENT
SCENARIO
PRESENT
SCENARIO
• India ranked no1 in GLOBAL RETAIL DEVELOPMENT
INDEX for the consumer market’s potential and
attractiveness.

• Per capita income on PPP basis has risen 70% since 1998 to
around $4360 and expected to double by 2014.

• Total organized sector contributes only 3% and expected to

be 13% by 2010.

• Retail contributes 10-11% of GDP and employs 4crore

people.
MAJOR PLAYERS
• Hypermarket
Big Bazaar
Giants
Shoprite
Star
• Department store
Lifestyle
Pantaloons
Piramyds
Shoppers Stop
Trent
• Entertainment
Fame Adlabs
Fun Republic
Inox
PVR
TYPES OF FDI
• Four ways for foreign retailers to enter India

• Franchising (Nike, addidas)

• Whole selling (Wal-Mart)
• Licensing
• Setting manufacturing base
Guidelines of setting
FDI
IMPACT OF FDI
• Cheap product for consumer because of
competition.

• Bad impact on small and unorganized retailers.

• Sectors like infrastructure, real-estate and

entertainment got boomed.
• Technology Transfers.
• Improves the countries infrastructure
BHARTI-
WALLMART
• Bharti and wall-mart private limited was established.

• Joint venture for wholesale cash-&-carry and back end

supply chain management.

• Both hold 50:50 stake.

• They will serve kirana stores and restaurants.

• The supply chain will link farmers and retailers directly.

• They faced problems due to opposition of left parties.

 Foreign Direct
Investment
IN TELECOMMUNICATIONS
SECTOR
FDI IN TELECOM
• History of telecommunications in India can be broadly divided
into two periods:
Pre liberalization period
Post liberalization period
• Department of telecommunications (DoT) under ministry of
Post & Telegraph (P&T) was the sole telecom service provider
before.
• Formation of New Telecom Policy (NTP) in 1994 was a major
step taken in liberalization of telecom services.
• It permitted DoT to issue licenses to private operators which
resulted in competition to the Government monopoly in the
field.
FDI IN TELECOM

• FDI in Telecom industry has gained pace since Government

opened cellular networks to private industry.
• India has attracted major inflow of FDI since August 1991.

• Indian telecom has grossed actual FDI worth Rs 9576.40

crore during the period starting from late 1991 to early 2003.
• It increased to Rs. 9950.94 in the year 2004.

• The interesting development is from 2005 to 2008 alone the

share of FDI in telecom is Rs.18787 crore giving a cumulative
amount of Rs. 28737 crore.
• Of the total FDI inflow in Telecom sector the major share has gone
towards investment in Cellular Network.

• Hutchison Whampoa had a 49 % stake in Hutchison telecom.

Verizon has 10% stake in Reliance telecom.

• Other foreign companies with similar stake in Indian companies

include AT&T Wireless, Cellnet and First Pacific.
FDI IN TELECOM
Channels through which FDI can enter in India

• First is the Automatic route under which companies

receiving FDI need to inform RBI within 30 days of
receipt of funds and issuance of shares to the foreign
investor.

• Second is for sectors which are not covered under the

automatic route, prior approval is needed from the FIPB.
FDI IN TELECOM
• There has been a hike in FDI in telecom recently. It has
increased from 49% to 74%.
• FDI up to 100% permitted in respect of the following telecom
services:
1) Internet Service Providers not providing gateways,
2) Electronic mail,
3) Voice mail .
• This move seems to be positive for the sector as it requires
investments of Rs 700 –900 million over the next 5 years.
• Countries like Europe, Korea, and Japan telecom are likely to
enter India, as India is seen as fastest growing telecom
market in world.
FDI IN TELECOM
• The increase in the FDI limit is expected to usher in a 20%
jump in foreign investments in the telecom sector within the
next 2 years from the current Rs10,000 crore.

• It has been decided to enhance FDI not only in cellular

networks but also in areas like:
Basic telecom,
Nat / intranet,
Public mobile,
Radio service etc.
FDI IN TELECOM
Effect of FDI in telecom
• Telecom service at Subsidized prices
• FDI inflows will allow multiple benefits such as technology transfer,
market access and organizational skills
• In India where 70% of population still resides in rural areas, there is
a dire need of infrastructure in telecom, which FDI can provide.
• Foreign currency flowing in the country
• More technological inflow, will improve voice & data quality
• Telecommunication facility at reasonable price, affordable to many
• In India where 70% of population still resides in rural areas, there is
a dire need of infrastructure in telecom, which FDI can provide.
FDI IN TELECOM
Major players in India
• In 23 Licensed Service Areas there are 12 Service Providers
are providing phone services which includes Two Public
Sector Operators are MTNL and BSNL.

• MTNL provides service in Delhi and Mumbai only.

• BSNL provides service in the remaining 21 LSAs

• There are six major Telecom players :

BSNL, Airtel,
Reliance, Vodafone,
Tata Tele & Idea, Spice.
FDI IN TELECOM
Case Study on
Vodafone
FDI IN TELECOM
Vodafone allowed majority stake
in HEL –Complex Proposal
• Vodafone, the largest mobile operator globally in
terms of revenue, had picked up a controlling stake
of 52 per cent in HEL at a total enterprise value of
more than $18 billion.

• A CONTROVERSY arose over the compliance

level of the minority stakeholders in HEL as the
equity holding norms in the telecom sector limit
foreign direct investment (FDI) up to a maximum of
74 per cent.
FDI IN TELECOM
Case Study on
Virgin Mobile
FDI IN
TELECOM

FRANCHISEE :Virgin Mobile Entered India with Tata Tie-Up

• Virgin Mobile is targeting the country's youth, aged between 15 and 30 years,
which are estimated to be around 400 million.

• Virgin Group doesn’t have its own network like Vodafone has, nor it
operates as an MVNO (mobile virtual network operator).

• It has a Revenue-Sharing Agreement with Tata for the use of the Virgin
Mobile brand. Tata will use its own brand for the mass market and the
Virgin brand for the niche youth market.

• Tata already offers mobile services in the country using CDMA (code
division multiple access) technology.

• India added close to 9 million [m] new mobile subscribers in January, taking the
total number of wireless subscribers to 242 million, according to the Telecom
Regulatory Authority of India (TRAI) in Delhi.