Impact of 100% FDI approval in multi-brand retail in India ____________________________________________________________

1. Introduction 1.1. Research Background With enormous development prospective, Indian retail business has been advertise d as one of the dawn segments. By 2015, as said by the Investment Commission of India, the retail segment would have developed to 660 billion dollar which is ne arly 3 times its present magnitude. On the other hand, regardless of the current developments in retailing and its enormous input to the economy, retailing is y et between the minimum grown segments and the development of planned retailing i s hugely sluggish paralleled to the leftover world. Foodstuff retail business is responsible for 63% of complete retail deals in the economy and therefore, is a n extremely big section of the overall economic action of our nation. It grasps a huge occupation prospective and therefore, fascinates the thoughtfulness of th e state and overseas main merchants. Improving the competence and enhancing the foodstuff retail deals would have a flowing influence on occupation and economic action in the countryside parts for the downgraded labors. Even deprived of any important participation of FDI, the company possessed segment in retailing is i ncreasing fiercely at a great proportion. Letting FDI in multi trademark retailing has freshly produced marvelous elation for few and terror for others. It is founded on the concept that it will expose sluices for overseas merchants to participate and will alteration the retail sce nery incessantly in India. The aspects that involved venture in India are steady economic strategies, obtainability of inexpensive and excellent human resources , and chances of new unfamiliar shops. Apart from these aspects, there are numer ous macroeconomic aspects that are probable to touch FDI in marketing in India. Employing the involvements of four other developing markets- China, Indonesia, B razil and Thailand, this study newspaper also inspects the association among FDI in marketing and numerous macroeconomic aspects in the analysis of writings. 1.2. Research Aim and Objectives The objective of the dissertation is to Discover if the native merchants and mom a nd pop will profit or be out of trade with the sanction of this FDI . Additionally founded on the study objective the investigation aims can be more p recisely itemized as: ? To examine how the arrival of FDI in retail in the nation will influence several investors ? To examine the solid tactical matters about the arrival of FDI in the In dian retail business ? To discover whether FDI in retail would benefit India Inc. to proficient ly incorporate its economy with that of the worldwide economy ? To examine the influence of latest step of the administration to let FDI in the multi-brand trade segment on agriculturalists, groups, mom & pop shops a nd agro-food segment ? To examine the option to use the back-end set-up, which will installed b y the overseas merchants

1.3. Research Question The research question which the current study work pursues to response is: What will be the Influence of 100% FDI in multi-brand retail on native retail ch ains mom and pop shops in India?

2. Literature Review 2.1. Indian Retail Sector: An Overview Mckinsey & Company (2007) researched that the Indian retail market extent is pro jected to be 450 billion US dollars. Retailing is responsible for 14 to 15% of i ts GDP and establishes as one of the highest five retail markets in the globe by economic value. Likewise with 1.2 billion persons, India is one of the quickest rising retail markets on the globe. Dikshit (2011) studied that India's retail and logistics business hires nearly 40 million native citizens. Proprietor opera ted minor stores forms India's retailing business. In 2010, nearly 5 percent of the business was formed by longer setup suitability shops and superstores with t heir attendance just in big urban hubs. Indian central administration refused fo reign direct investment (FDI) till 2011in multi-brand retail, therefore not lett ing any overseas sets from any possession in expediency stores, shops, or any re tail openings. Correspondingly, single-brand retail was restricted to fifty one percent possessions and had to experience an administrative handling. As stated by Economist (2012), market alterations in November 2011 offered for r etail invention and also presented antagonism with multi-brand merchants. Worldw ide leader like Carrefour, Walmart and Tesco and single brand leaders like IKEA, Nike, and Apple had not scheduled planned entrance into India. Sharma and Sahu (2012) examined that in January 2012; improvements for single-br and shops forced the obligation that they should get around 40 percent of their products from India. But their methods permitted worldwide merchants to be inven tive in Indian retail market with 100% possession. As per The Financial Times (2012), owing to the 40% obligation, IKEA proclaimed in January that it will not inaugurate shops in India faster. Fitch have faith i n that this obligation will suggestively postpone however might not avoid brand leaders from Europe, USA and Japan to inaugurate shops in India. There are several previous researches which have highlighted the character of GD P development, salary rate, trade rate, actual interest rates, price rises, and stock of FDI, domestic venture in fascinating FDI in retail into a nation. 2.2. Growth drivers in India for retail sector The speed of development in retail in India is extremely quick as it is anticipa ted that it will produce up to 833 billion US dollars by the year 2013 and 1.5 t rillion US dollar by 2018 (at a CAGR of 10%). Concurrently, the customer expense s have also raised as in the previous four years, the customer expenses in India flowed to 80 percent. Likewise, the planned sector is likely to develop at a CA GR of 40% by the year 2013. Subsequent are the main aspects motivating development in retail business: risin g mediocre class salary, refining demand from village markets, youthful demograp hic outline (Mean age of an Indian property possessor has dropped to 27 from 40 years in the past decade), growing customer ambitions, housing roar, growing pay s and developments in real estate. Other aspects are rise in per capita returns, liberalization of the Indian economy and the arrival of dual income households. Customer favorites are refining as well and they are turning out to be quality aware and moving their buying conduct from the old-fashioned retail shops to big shopping malls. Rohilla and Bansal (2012) studied that several online shops are extremely availa ble and therefore, aid in producing cognizance regarding worldwide goods for dom estic markets. For instance, TV networks marketing goods-HomeShop18, India Today , and so on are growing in figures. Nearly 47% of the Indian populace is below t he age band of 20 years; and this may be rise up to 55% by 2015. This youthful p opulace is extremely tech-savvy paralleled to previous age bracket and see more

than 150 cable TV networks as well, and display extremely rich tendency to expen d. This aspect will hugely donate to the development of the retail segment in th e nearby time to come. 2.3. Advent of Foreign retailers in India Several worldwide merchants such as Walmart, Metro, Woolworth, Staples which des ired to setup and grasp few markets in India are at present attempting to influe nce on the guideline of 100% in currency and do wholesales way for multi-tradema rk retailing. Likewise merchants such as Debanham, Espirit, Zara, Mark & Spencer , Nokia, Hamleys etc. are impacting guidelines founded on 51% for single tradema rk retailing. Important overseas merchants occurrence is found in Clothing, Style , Amenity and foodstuff retailing employing either the permit or certifying way. Freshly several worldwide companies such as Amazon are making profits using onl ine retailing and therefore are aiming Indian customer by establishing associati on with supply chain businesses to supply goods to end consumer hence avoiding t he necessity to make bodily retail shops. To charm Indian customer to purchase t heir goods online, Crate and Barrel has introduced website specifically for Indi a. To aim Indian customer, alike attempts are anticipated by other top internati onal retailing leaders leveraging on 3G and smart phone applications, distribute d on internet, and social networks. Since retailing yet is a very domestic business (over 90%), the FDI in multi-tra demark retailing will just profit prevailing planned companies in reference of f ascinating overseas wealth and will not vary significantly the retail scenery in reference of setups propagations - helping clienteles, making enormous occupati on or venture in supply chain or back end venture as has been imagined in the st rategy. It is anticipated that several Trans-national merchants will use online way or e-commerce to fascinate Indian customer to begin with earlier to establis hing physical occurrence to examine the market. 2.4. Changing Indian retail landscape In the previous 8 years, Indian retailing landscape has totally altered as an ou tcome of huge company and overseas businesses controlling the planned retailing in top 15 metropolises. They target to construct a commercial and scalable comme rcial framework founded on native consumer know-how in every of the catchment. T hey have examined several planned methods regarding the setups, extent and marke ting blend founded on the catchment and clienteles they assist. Several Indian r etail leaders such as Croma, Reliance Digital, etc. have operated on making cond ensed size and minor setups such as Croma Zip to touch several focused sections in a commercial manner as expectations of big box being cost-effective in Indian landscape has verified incorrect. India is an extremely multifaceted and daring nation from a scalability viewpoint to assist the want of varied blend of clien teles founded on demographic differences. As the customer desires and purchasing conduct are very dissimilar for every catchment within metropolises, several se tups require to be sewed to assist dissimilar markets. However yet again in Indi a, it is hard to catch serious form of alike catchments within the alike towns w hich have been the knowledge of planned players functioning in India for previou s 8 years. As per to India Retail Report 2013, contemporary Retail has observed a important development in the previous some years with huge investments done by Indian commercial communities largely in foodstuff segment retailing. The marke t size has been projected to be 400 Billion US dollars market. By Franchisee/Joi nt Undertaking way, overseas retailer leaders and clothing trademarks presenting amenity trademarks have rooted themselves in India in the past some years. Some retailers have been scheming strategies to begin their Cash & Carry commerce to have a market occurrence and generate brand cognizance. Indian retail scenery h as altered from 2004 as the time world rose to the prospective of retailing in I ndia in a noteworthy manner. The market is yet disjointed controlled by minor st ores, the biggest chain of merchants on the globe from street Vendors to Amenity malls. The market extent is rising at 10% every year however 90% of it is disor ganized. The very varied conduct of Indian customer encourages native merchants to prosper. But, 70% of India is yet countryside and is short of appropriate str ucture. For any planned retailing to prosper metropolises are too congested and are short of satisfactorily constructed shopping malls, high street and mall pla

ces. Fresh town parts are forthcoming in towns deprived of appropriate design to craft satisfactory place for spending. The Mall dimensions in India are 50% in reference of space engaged as per the Global criterions of construction of any s hopping complex. The dealers and producers assist in confirming that retailing c ontinue disjointed as this safeguards the negotiating strength with them instead of with merchants as has been case with leading merchants (Wal-Mart, Tesco, Car refour, Best Buy etc.) Source: Images Retail Intelligence Services (IRIS) Research, India Retail Report 2013 Source: Images Retail Intelligence Services (IRIS) Research, India Retail Report 2013 2.5. Effects of FDI in retail on various Stakeholders 2.5.1. Impact on Farming Communities From the beginning of 1990s, a superstore rebellion has been seen in evolving na tions. So as to touch the bulk market, superstores have at present advanced past the mediocre- and high-class customers. This procedure touches both old-fashioned merchants, and the wholesale, handling , and farm segments within the foodstuff structure. In regard to excellence, pri ces, bulk, stability and profitable performs, superstores need additional from d ealers when they update their obtaining structures. Superstores impact dealers i n a largest technique for food-processing units, as few 80% of matters retailed by superstores include treated, staple, or semi-treated goods. Therefore superst ores are incidentally impacting the agriculturalists by processors which permit on the demands done on them by their retail customers. Superstores therefore aid agriculturalists with exercise, recognition, gear, etc when they are not capable to source from big-scale or mediocre-scale agricultur alists, and minor agriculturalists fell short of the much desirable possessions. Experimental examination displays that agriculturalists incline to receive from 20 to 50% extra in net terms at time they move in superstore networks. For insta nce, net turnover is 33 39% advanced between superstore network contributors assoc iated to customary markets contributors between tomato agriculturalists in Indon esia together with serving the farm worker to get advantage. 2.5.2. Support for retail reforms In the course of December 2011, a national level review was done and a bulk of c ustomers and agriculturalists contributed thru ten key towns in the nation to as sist the retail improvements. As per 90% of customers, FDI in retail will provid e a broader variety of products and will drop down costs as well. Nearly 78% of agriculturalists mentioned by multi-format shops, they will get improved costs f or their yield. Marketing assets will be required to encourage sales through man ifold networks, as they may have to take lesser profits for better capacities. T his point was acknowledged by approximately 75% of the merchants. 2.5.3. Farmer groups Proclaiming their assistance for improvements in retail, Indian agriculturalist associations have the subsequent view: a) Shriram Gadhve of All India Vegetable Growers Association (AIVGA) gives his assistance for the reason that at present, broker s commission mediators profi t at the price of agriculturalists and the retail improvement should be concentr ating on countryside zones so that agriculturalists are helped. b) Bharat Krishak Samaj, an agriculturalist association having larger than 75,000 associates also gives it assistance to retail improvement. They studied t hat a monopoly happens among several clusters like traders, commission mediators existing at the sabzi mandis and the minor grocery shops c) The cluster has asked the administration that it should be compulsory fo r prearranged merchants to avoid the broker s monopoly and India's sabzi mandi sal e structure and purchase around eighty percent of their yield straight from agri culturalists. d) As stated by Prakash Thakur, the chairman of the People for Environment

Horticulture &Livelihood of Himachal Pradesh, FDI in retail will assist in const ructing storage hubs that will decrease the amount of brokers, rise market admit tance, and improve profits to agriculturalists. He provides his assistance to FD I in retail by further setting up the point that very fragile fruits have a grea t demand and are not capable to get in the market. e) As stated by Suryamurthy, in an editorial in The Telegraph, in the exist ing structure the agriculturalist is being subjugated and their clusters across India do not assist current position and pursue retail improvements. As said by him They get just one third of the customer bill whereas rest is expended as comm issions by brokers and retailers . Mean value agriculturalists get is hardly 12 to 15% for fragile cultivation yield. 2.6. Impact on Traditional Mom and Pop Stores With the arrival of main planned retail companies in India, the presence of cust omary mom and pop stores is in doubt. Though, there could be a mutual-existence. The extent, difficulty and variety of retail business is an enormous benefit for the minor companies in India, But ma ximum of planned retailers have inaugurated stores in the Urban, Tier 1 and Tier 2 cities. Motives to avoid the liberalization of the FDI standards for Indian r etail are: a) Harmful influence by the entrance of international retail leader: As the se merchants have progressive competences of measure and setup as well as being money rich, this may lead to the loss of professions for persons in the Indian d isorganized segment. b) Improved working competences of the planned companies: Lesser goods rate s by international leader may hinder the income boundaries of the disorganized c ompanies. Multi-trademark retail, if allowable, can change the retail segment in the subse quent noteworthy techniques: i. Firstly, the structured companies are projected to carry in the plentiful nec essary investment which will aid the local merchants that don t have the means to survive throughout financial letdown. ii. Real Estate assistance stretched to expand the backend procedures would allo w to remove great expenditures like that and improve the supply chain working pr oductivity. iii. FDI in multi-trademark retail would by no means risk the careers of persons working in the disorganized retail segment. In contrast, it would result in the formation of lots of works as huge infrastructure abilities would be required t o take care to the altering life requirements of the city Indian who is strong o n assigning the throwaway revenue to planned retailing such as big box shops acc ompanied by the domestic departmental shops. These shops would be able to retain their position because of their exclusive features of expediency, nearness and services in retaining clienteles. Too, these would be more noticeable in the Tie r-II and Tier-III metropolises where the planned superstores would experience it difficult to position them. 2.7. Analysis of Impact of FDI in Retail on Macroeconomic factors for other coun tries The countries evaluated under are alike to India in reference of demographics an d many macro-financial aspects. An all-inclusive research has been conducted to assess the influence of FDI in retail mainly in retail in subsequent nations. China China established its open door policy in the feature of FDI in retail so as to take a change from a preparation to a market economy as Deng Xiaoping on one occ asion mentioned; improvement in China is as overpass the river by sensing the peb bles on the riverbed . Concurrently, china has certainly made the solitary biggest input to worldwide poverty lessening of any nation in the previous 20 years. Subsequent has been the sequence of actions in regard to FDI in retail in china: i. FDI in retailing was permitted in China for the first time in 1992 only. Over seas possession was firstly limited to 49%. In December 2004 the administration haul up all the limitations on FDI in Retail .

iii. About occupation in the retail and wholesale profession, it amplified from approximately 4% of the overall work force in 1992 to nearly 7% in 2001. Among 1 996 and 2001, amount of customary retailers amplified by nearly 30% as well. iv. Once liberalization of its retail segment, subsequent variations happened (C II-PwC, 2008): a. Above 600 superstores were inaugurated among 1996 and 2001 b. The quantity of minor shops amplified from 1.9 million to over 2.5 million c. From 28 million persons to 54 million persons, occupation in the retail ampli fied from 1992 to 2001. d. GDP development has been at 8% on a mean after the presentation of FDI in Ret ail v. China s increase rate reduced to -0.8% and -1.4% in 1998 and 1999 individually. Currently after 20 years, rise rate is at 2% instead of 14.6% and 24.2% in 1993 and 1994. vi. The price of imports and exports has amplified closely from the time when th e FDI was introduced in retail. Likewise the Chinese Yuan began dissing in regar d to dollar later to1992. vii. The entire FDI arrival & discharge in retail has also amplified considerabl y later to the introduction of FDI in retail resulting in amplified business sin cerity. Thailand Subsequent is the system of measures in regard to FDI in retail in Thailand: i. FDI in Retail was presented in 1997 in Thailand. Though, several harmful impa cts of FDI in retail were witnessed. It allows 100% overseas equity, with no res triction on the amount of shops. ii. As stated by a Report of Mukherjee and Patel (2005): a. Wet market and minor domestic possessed grocery shops subjugated the Thai Ret ail business. b. Afterwards the Asian letdown in 1997, the entrance ban on distant companies w as detached. Shortly, the overseas companies amplified and industrialized their actions considerably. Finally, maximum of the native companies had to shut down their trade. iii. Though, there were also sure affirmative impacts: a. Growth of planned retailing and a fresh spending terminus called Thailand; b. Motivated agro-food treating trade and improved the shipments iv. Influence on macroeconomic aspects: a. GDP development rate of Thailand dropped to -10.5% in 1998 because of the clo sing down of native merchants. b. Redundancy rate stayed less. c. Increase rate also continued at 0.3% d. The honesty pointer touched its extreme in 2002. e. FDI arrivals amplified to 7,314,804,931 in 1998. Indonesia Contemporary retail was presented in Indonesia in the 1990s and largely engaged local networks. FDI in retail resulted in the multi-nationalization and quick al liance of the superstore segments in such emerging nations. i. Presently, Indonesia lets 100% overseas equity in retail trade, with totally no restriction on the amount of shops. ii. In 1958, the top network Matahari began as a minor store, extended into a ne twork of general shops, and was at that time in 1997, taken up by a top banking and infrastructure corporation, Lippo Group. Among 2002 and 2006, Matahari sales doubled, turning out to a billion-dollar network. iii. Influence on macroeconomic aspects a. A depth financial decline in 1997-98 resulting in inflation of 80% in the cou rse of the middle of 1997. b. The GDP development too jumped to -13% c. Presented an extensive variety of official improvements and readdressed finan cial strategy for upholding cost and exchange rate constancy. Finally, cost cons tancy was restored. d. There was a growing impact of FDI in retail on the entire FDI influxes in ret

ail. But, FDI outflows in retail had fallen after 1994. e. Besides, exports & imports & the actual exchange rate continued steady. FDI is an important tool, which is required for the economic development of a co untry.The Indian retail sector is one of the fastest growing sectors in the coun try and hence is catching the attention of many International retailers like Wal -Mart, Tesco, and Carrefour etc. Even though there is a restriction in this FDI all these foreign players are slowly and strategically planning their entry into the Industry by one way or another. Currently 100% FDI in single brand retail i s allowed, while in multi-brand retail only 51% is allowed. Hence companies like Wal-Mart have a Joint venture with local companies like Bharti Ind. Allowing FD I in a sector doesn t only help that sector alone but it helps in improving the va rious sectors of an economy through financial resources, technology and innovati ve methods and thus improves the overall productivity in those sectors. In the r ecent years many local business houses like Tata s, Birla s, Reliance etc. have ente red the retail industry as they have realized its future potential growth. A wel l-known management consultancy company called AT Kearney says that according to the Global Retail Development Index (GRDI) India ranks fifth after countries lik e Brazil, Chile, China, and Uruguay. Retail industry in 2011-12contributed to 8% of the total GDP and currently employees 7% of the total workforce (Agriculture is the only other Industry that employees more). The retail industry is definit ely a sunrise Industry and is one of the main pillars of the Indian Economy. Ret ail Industry in India is of two types i.e. Organized and unorganized retail. Ind ia has two types of unorganized retail, first is the big unorganized retailers w ho serve wealthier customers and the second are the smaller retailers who serve the more poor consumers. The Retail Sector had seen some major transformation in the late 1990 s, as the retail industry in India is mostly unorganized but gradua lly started getting more organized and attractive. As of 2009 the share of organ ized retail in India was only 4% as compared to other South Asian countries like China (20%), Thailand (40%), Indonesia (30%) and Vietnam (22%). Thus this shows that there is a lot of scope for organized retail to grow. India currently has the largest retail density in the world with approximately 1 1 shops per 1000, with a total of 12 million retail shops throughout the country catering to 209 million households. However allowing FDI in retail has always b een a very controversial issue. The current ruling UPA government is promoting 1 00% FDI in multi-brand retail while the opposition BJP is against it as they say it will ruin the livelihoods of many people who own mom and pop stores, Kirana stor es and many people who are employed in these stores will also loose their jobs. On the other hand the UPA says that India is at a time where it needs foreign in vestment as it has a current account deficit and they say that there is no subst antial proof that it will adversely impact the unorganized and organized local r etailers. In an Article called FDI in multi-brand retail: issue and implications on the In dian Economy by Lina M., Ruksna B., and Simi S. in the Pacific Business review I nternational Journal (volume 5 issue 5) the new FDI policy would be beneficial t o local retailers as well as foreign retailers. Because they are in partnership the foreign retailers get local know-how and market knowledge and their Indian c ounterparts will gain from global best management practices and technological kn ow-how. The main aim of the policy is to create a friendly business environment for everyone to work in. The government of India takes into consideration the sa fety measures required, as they are concerned about the local retailers and the fear of monopolization of the domestic market by the global retail giants. The n ew policy states that 30% of the manufactured and processed products must be obt ained from local SSI units, which do not have an investment of more than $1 mill ion in plant and machinery (Department of Industrial Policy and Promotion Statis tics, 2012). Mandeep (2009) analyzed the situation of the entry of these global retailers and came to the conclusion that FDI brings with it technological knowhow, well-integrated supply chains, standards and quality products.

In a show of good faith the Bharti-Walmart JV has opened training and developmen t centers in Amritsar, Delhi and Bangalore to prepare local rural youth for reta il jobs, (Federation of Indian Chambers of Commerce and Industry report, 2010). In another article called Foreign Direct investment in Indian retail sector: str ategic issues and implications by author Amisha A. it is mentioned that the Inve stment commission in July 2006 allowed 49% in multi-brand FDI as they opined tha t the FDI would improve supply chain problems, generate large scale employment a nd the local players could adopt best of the operational practices from these co mpanies. As the MNC s are increasing their operations the regional players are also improvi ng their strategy, operations and supply chain to counter the international play ers. It is further mentioned that small shop owners would not be that deeply or barel y be affected as they still would remain in business owing to their convenient l ocation near societies and since they provide a personal touch and home delivery etc. it would not affect them much. The Indian council for Research on International Economic Relations (ICRIER) dra fted a report, which said that FDI should be opened up over 3-5 years so local p layers, have time to gear up. It suggests that based on the growth of the sector it should eventually be increased to 100%. The FDI in multi-brand retail would allow local players to capitalize on the MNC s supply chains and distribution netw orks. In a Scholarly essay by Girish k. Nair/Harish k. Nair it is mentioned that even though there are various reasons for fear of allowing FDI like fear of monopoly, price rise, local organized retailers who only constitute 4-5% of the retail ma rket will be crushed and many mom and pop stores would be jobless etc. These are reasons feared by all. However there are logical arguments as well that support the FDI as India has a homogenous market and has a hierarchy of markets caterin g to all classes of society with different incomes and tastes. Hence the small r etailers/mom and pop stores would survive. Entry of branded products will not af fect the vast market for unbranded products as vast majority of the people lay i n the low-level income zone. It is more cost effective for customers to buy prod ucts from their neighborhood stores as they also give home delivery, and stock o nly preferred goods by customers. Hence these shops can easily survive. It is also mentioned that international retailers will bring with them technolog y and management know-how that will impact India s entire retail sector. Author Kamaladevi B. in the Business Intelligence journal has mentioned that bec ause of the worry of many local retailers and small shop owners the government h as been carefully examining the long-term implications of FDI in multi-brand ret ail. She mentions that the traditional small retailers have various strengths li ke credit sales to customers, timely delivery, home delivery, sale of loose item s etc. This has helped them not only to compete against organized retail but als o flourish. According a report by the ICRIER study (M.joseph and N.Soundararajan , 2009) has shown that hardly 1.7% of small shops have closed down due to compet ition from the organized retail sector. It was also found that after the entry o f organized retailers the unorganized retailers saw a decline in business only f or a while. This impact weakened over time. The rate of closure of unorganized s hops was 4.2% p.a, which is very low according to international standards. Similarly author Rajib Bhattacharyya in the Journal of humanities and social sci ences has also mentioned that many of these Mom and Pop stores have lower costs th at big retailers and can employ delivery boys to deliver goods which the custome rs can order over the phone. Even the informal system of customer credit helps t o retain customers. These are hard to quantify but play an important role for th ese stores. These local stores operate in a different environment and serve a di fferent category of customers and will always find different ways to retain cust omers. It is also mentioned that in the case of China that after it brought libe

ralization in the retail sector the number of Mom and Pop stores increased from 1. 9 million to 2.5 million. Over 600 hypermarts were opened between 1996 and 2001. The number of people employed in retail also doubled between 1992 and 2000. Eve n the organized retailers in India support the International competition and loo k at it as a blessing as they look forward to many JV s for expansion of capital a nd for expertise in supply chain management. In the International journal of Engineering and management research (vol.2, iss ue1 2012) Dr. Gaurav B. has mentioned that in a discussion held by Hindustan tim es which involved People from industry, traders and experts who were academician s said that the partnership opportunity which the government is providing (51% F DI in multi-brand retail) will help the Indian counterparts learn best practices and know-how to increase their profit. It is also mentioned that since a large chunk of the population roughly 800 million people live in villages and depend o n smaller unorganized retailers these smaller retailers will not be affected. Th ere is also a point mentioned in the Governments agreement that if the retailer ever breaches the contract then the retailer will be forced to stop operations a nd leave the country. Thus this puts a lot of fear in the MNC s, as they will have to strictly follow Government regulations. In the Research Journal of Management sciences Vol.1(1) August 2012 it is mentio ned that a study conducted by the ICRIER shows that the grocery stores form a pa rt of the Indian community life but needs to grow along with the demand as it wi ll not be able to handle the future demands of customers. Hence the organized re tail market needs to grow as well and is expected to grow at a rate of 45-50% pe r annum. This has already been happening in a few cities. The ICRIER has suggest ed the Government to have a nationwide uniform licensing policy to improve the s ector and to provide better access to cheap institutional credit to the grocery stores so that they can endure the competition. On the contrary to what has been mentioned above Author Dr. Deepali Moghe in her article Critical study of Foreign Direct investment in Indian retail with specia l reference to multi-brand retail sector mentions that local shopkeepers might fi nd it difficult to compete in the vicinity of big retailers. The prices she says will be determined by the big retailers and may wipe out the margin of the smal ler retailers due to predatory pricing strategy. There is also the fear that the MNC s would use their monopolistic power to increase and decrease prices. It may also lead to asymmetrical growth in many cities causing social discontent among people. She also says that the local organized retail sector still needs to deve lop. A report published by Deloitte in August 2010 states that catering to 35 states in India is like catering to 35 different countries leading to complexities in m erchandise and inventory management. Thus many MNC s will find it difficult to cop e with the tastes of the local consumers in each state. Hence a lot of MNC s have partnered with local retail firms to understand the mind of the Indian consumer. This in a way also gives advantages to the local Organized and unorganized reta il firms, as they are aware of their customer s tastes and preferences throughout the country. Thus MNC s will have to rely on their Indian counter parts to set a g ood foothold in the Indian market. A study done by the ICRIER on the Impact of organized retailing on the unorganize d sector -2008 states that many unorganized retailers in the vicinity of organized retailers experienced a decline in sales and profit during the initial years bu t as time passed the effect weakened. It states that there was no proper evidenc e of decline in overall employment due to the organized sector. According to reporter Alok Ray in the Business Line newspaper India is not a hom ogenous market. There exits a hierarchy of markets, which involves people of dif

ferent incomes and tastes. The entry of branded goods effects the unbranded mark et only marginally in a vast poor country like India. It says that many corner s hops will have advantages, as malls will be miles away from residential areas an d travelling is a hassle in India due to congestion, hence people prefer conveni ence for daily products and order from the neighborhood stores. Similar to the above view a report by the Competition Commission of India stated that many local Mom and Pop stores have strong ties with the people of the neighb orhood they operate in and provide credit sales where people can pay after a mon th. And in Urban India where many people buy goods frequently and in small quant ities due to lack of storage space as well prefer the local shops for groceries. It also mentions that local Organized retail companies like Spencer s, Nilgiri s and ShopRite are waiting for approval in FDI as it will spur up competition and boo st the over all industry. The Times Of India newspaper conducted a study in November 2011 on the effects o f FDI and said that there is more good than harm being done by FDI approval. It says that in the short run there might be a reduction in jobs but these jobs wil l be redistributed and eventually the big retail chains will hire millions of pe ople in the long run. It also states that the drying up of local unorganized ret ailers in an exaggeration to prevent FDI in Retail by the opposition. As when do mestic big retailers opened up it did not affect any of the Kirana shops and even if the MNC S come they wont be affected because of the various benefits they offer . It also says that these big MNC s will be only in the outskirts of cities to kee p real estate investment low hence it is not possible for them to affect local s tores. It also says that regulating bodies like the competition commission will keep a check and prevent retailers from adopting predatory pricing strategies. In the International journal of business and management research it is mentioned that by allowing FDI the local retailers like Reliance, Tata s, Birla s, Godrej and Big Bazaar etc. have matured in their operations have the ability to compete th e MNC s and do not need protection. Even the Mom and Pop stores will co-exit as th ey both serve a different clientele. Even the common belief that malls will ruin the bazaar life is not necessarily true as even in Europe and China local Bazaa rs exit throughout the country and have flourished. An article released by Wharton school of the University of Pennsylvania states t hat when these MNC s come the organized local firms also invest in infrastructure and logistics and improve product standards. A study done by the Confederation of Indian Industry (CII) and Boston Consultanc y Group (BCG), which shows that the total retail Industry will grow to $1.25 tri llion by 2020. And that the organized retail will be only approximately 20.8% of the total industry revenue hence it is not possible that it can drive the remai ning 79% of the industry. The article further states that unlike in the U.S. in India and China people in rural, suburban and semi-suburban areas do not drive for miles and do bulk purch asing as they have lack of space. Hence ordering groceries from Mom and Pop stores is a common practice, which will not get disturbed. Another report released by Deloitte in January 2013 states that there are only 5 3 cities in India with a population of more than one million and of them there a re only 18 states that support FDI in retail. Also the fact that foreign retaile rs cannot use e-commerce to sell goods it gives the local players additional ben efit. The local players can also capitalize on the fact that they can open store s in any city. This proves to be a major competitive advantage for the organized domestic retailers and the local Mom and Pop stores who are looked as the stores next door for convenience and top-up shopping. Also the fact that these MNC s can acquire 51% in current local retailers these proves to be a benefit as some of t hese retailers are cash strapped. But none of these stores bought can breach the FDI laws stated above.

In relation to the above an article by the Economic Times stated that if any for eign retailer acquires stake in an existing retailer it would not count as a par t of the initial minimum investment of $100 million. This proved to be beneficia l to big retail giants like Reliance retail and some companies like Future group who are cash strapped might take a while to reap the benefits of this policy. S ome look at this as an advantage as the foreign retailers will take longer time to expand their operations. Even in the case of 50% investment in back end infra structure the companies have to build fresh capacities and not acquire existing ones. All these policies should prove to further develop the entire Industry. A report by the ICRA also states that even though there are various problems to be perceived in the case of the local retailers once the big foreign retailers h ave entered the locality this effect would not last for long and would eventuall y weaken over time. Thus in the medium to long term scenario there will be benef its as these foreign firms will acquire local organized retail firms which are c ash strapped invest in good back end infrastructure which will help the local pl ayers as well and control inflation of prices of goods.

References ? McKinsey and Company. May 2007. The Bird of Gold - The Rise of India's C onsumer Market. ? Mukherjee A., Patel N. (2005). FDI in Retail Sector: India. Report publi shed by Indian Council for Research on International Economic Relations (ICRIER) . ? Dikshit A. (2011). The Uneasy Compromise- Indian Retail. FDI in retail: More choices for Consumers. The Wall Street Journal. pp. 132-46. ? The Economist. (2012). Retailing in India Unshackling the chain stores. ? Sharma A., Sahu P. (2012). India Lifts Some Limits on Foreign Retailers. The Wall Street Journal. pp. 12-26. ? The Financial Times. (2012). Ikea shelves Indian retail market move. ? Rohilla A., Bansal M. (2011). Foreign Direct Investment in Retail in Ind ia: Good or Bad? Social Science Research Network.