FDI IN RETAIL SECTOR

POST & PRE EFFECTS

Anil Kumar Singh Monika Garg Kamaldeep Saluja

FDI : Introduction
Foreign direct investment (FDI) :- It refers to the net inflows of
investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.

Comprises :
1. 2. 3. 1. 2. 3. Equity capital Other long-term capital Short-term capital Participation in management Joint-venture Transfer of technology and expertise

Purpose :

FDI : Types

Inward Foreign Direct Investment

Outward Foreign Direct Investment

Net FDI & Stock of FDI

FDI : Investors
An Individual A group of related individuals An incorporated or unincorporated entity A public company or private company A group of related enterprises A government body An estate (law), trust or other social institution Any combination of the above

FDI : Methods
By incorporating a wholly owned subsidiary Company by acquiring shares in an associated enterprise Through a merger or an acquisition of an unrelated/related enterprise Participating in an equity joint venture with another investor/ enterprise

FDI : India Background

In 1990 the total FDI was $1 Billion. 2nd Most attractive place for FDI after China. The sectors which attracted higher inflows were :
1. 2. 3. 4. Services Telecommunication Construction activities Computer software & hardware

Recession affects - FDI in 2010 was $24.2 billion, a significant decrease from both 2008 and 2009. WalMart has termed India s decision to allow 51% FDI in multi-brand retail as a first important step .

FDI : Indian Scenario

Retailing in India is one of the pillars of its economy and accounts for about 15% of its GDP. Indian retail market is estimated to be US$ 450 billion. One of the top five retail markets in the world by economic value. Organized retail composed to 4% Unorganized retail composed to 96 % FDI investments
1. 2. Single Brand Outlets 51% Multi-brand Outlet 0 %

Organized Retailing : India

Owned by any private body, organization or government entity.

SUPER MARKET

HYPER MARKET

RETAIL CHAIN

Unorganized Retailing : India

Owned by only Private Entity.

KIRANA STORE

COVENIENCE STORE

PAVEMENT VENDOR KIOSK

GENERAL STORE

Should India allow FDI in retail sector ? Single brand outlet (100%) Multi brand outlet (51%)

FDI in Retail : Pros

Direct benefit to Farmers Reduction in Food Inflation Earning of Forex Huge Employment Benefits - 10 million jobs in the next three Drop in Food Wastage

FDI in Retail : Pros

Better Consumer Choice Benefit to Kirana Stores Creation of backend Infrastructure More Purchase from SMEs Overall growth

FDI in Retail : Cons

Retail Entrepreneurs will disappear

Difficult distribution system

High price competition

FDI in Retail : Cons

Basic industry does not need FDI

Kind of Outsourcing

Exploitation of resources

Natural and Human

Thank You