2. FDI in Retail Policy Perspectives.Retail Sector An Overview.FDI Policy in Retail - Opportunities & Challenges.Emerging Human Resource Challenges.What lies ahead ?Issues for Discussion 3. FDIInRetailPolicyPerspective 4. An investment is.. The commitment of money or capital to purchase financial instruments or assets in order to gain profitable returns. 5. An investment becomes foreign investment when..Foreign Investment through Investment done by citizens and government of one country (home country) invest in industries of another country (host country).Foreign Direct InvestmentsForeign Institutional Investors 6. FDI Routes Automatic RouteGovernmentNo permission required Approval /License required. 7. FDI Policy Initiatives1991- FDI allowed selectively up to 51% in priority sectors.1997-FDI allowed up to 100% in sectors like mining, manufacturing. 8. 2000-06 FDI allowed up to 100% in specified sectors.FDI limits increased.Procedures further simplifiedThe top 3 Indian Regions attracting the highest FDI. Mumbai, Delhi and Karnataka. Account for nearly 62% of the total FDI. 9. Modes of FDI 10. Introduction to Modern Retail 11. FDI Policy in Indian Retail Sector 12. 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. 13. Comparison of FDI Inflow. 15. RetailIndustry : An Overview 16. Indian Retail SectorGRDI Position : 3rdSize : $ 400 billionGrowth Rate : 13%GDP contribution : 12%Major sector : Food and GroceryEmployment : 2nd largest industry (35.06 million)Types: Organized ( 5%) Unorganized ( 95%) 17. Emerging TrendsCorporates 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. 18. Major Indian Retailers : Categories 19. Segmentation 20. One of the world's largest industries exceeding US$ 9 trillion.Dominated by developed countries.47 global fortune companies & 25 of Asia's top 200 companies are retailers.US, EU & Japan constitute 80% of world retail sales.Retail Sector at Global Level 21. Retailtrade in Europe employs 15% of the Europeanworkforce (3 million firms and 13 million workers). The worlds population is poised to expand 50% by 2050. The world currently comprises of 78% poor, 11% middle income and 11% rich. 22. Contribution Of Retail Industry to GDP of Various Economies 24. OrganisedvsUnorganised Retail at Global Level 25. Emerging Concepts 26. Opportunity Analysis and Strategies in Retail Globally 27. India Vs. China 28. FDIPolicy in retailopportunities 29. What Are Global Retailers Saying? 30. DemographicsINDIAA large emerging market .Increase in disposable income of a family. 70 mn Indians salary of $18,000.Rise to 140 mn by 2011.Consumer spending power increased by 75% in last 3 years.The per capita income in 20092010 has more than doubled to US$ 849 from US$ 348 in 200001. 31. Characteristics of Indian MarketSource: McKinsey&Company 32. Consumer Class ShiftIncrease in consumer class.Consumer class will grow from 50 million at present to 583 million by 2025.With more than 23 million people taking their place among the worlds wealthiest citizens. 33. Consumer BehaviourWide 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 34. Consumption BoomSource: McKinsey&Company 36. Easy CreditEasy consumer credit.EMI & loan via credit cards -- easy for Indian consumers to afford expensive products.For instance, Casas Bahias- Brazil. Note: BOP C.K.Prahalad. 37. Employment GenerationEmployment generation.Second-largest employer after agriculture.Retail trade employing 35.06 million.Wholesale trade generating an additional employment of 5.48 million.Additional 1.6 mn jobs . 38. Better use of resources and goods.Wastage andTechnologyTechnology Storage problems will be resolved.Efficient logistics, production, and distribution channels.Digital records. 39. Infrastructure 40. Rural MarketRural market.Robust Consumption.70% Indian households. 2/5 of the countrys total consumption pie.Accounts to 45% of GDP. 41. Fiscal GrowthFDI in Retail sector will resolve problems regarding foreign exchange in India.Evergreen NeedThe life-long basic needs will keep on driving the Retail Industry. 42. Let the liberalisation be in steps rather than being a leap. 43. FDI PolicyinRETAILCHALLENGES 44. Challenges 45. Major challenge faced by Organized retail sector: In Retail, over 70 per cent of the labor force in both sectors combined (organized and unorganized) is either illiterate or educated below the primary level.Labor LawsLack of Skilled Workforce 46. A strong competition from mom and pop shops:-Easily accessible & approachable.Provide services like Free home delivery and goods on credit.They change consumer focus.COMPETITION 48. Problem of Real Estate 49. Organized Retail Formats in India 51. Market power is in hands of unorganized retail.Potential of Indian Market is US$ 200 billion whereas India is just earning its 3%.Market Power 52. Absence of Developed supply chain 53. ShrinkageIn India every year there is pilferage of US$ 65 billion whereas in USA it is just 1-2%.Lack of Logistic Infrastructure Due to lack of proper storage infrastructure post-harvest losses of farm produce is Rs. 1 trillion cr. annually. 54. CorruptionIn terms of corruption India stands at 85th position. Because of paper work, corruption is present along the entire supply chain. Additional IntermediariesIn India, there are additional 2-3 intermediaries as compared to USA. They dominate the value chain.They flout mandi norms & their pricing lacks transparency. 55. Technology Hurdle India is still in developing stage in installing and managing an effective IT system especially in rural areas which hampers the overall growth of organized retail sector. 56. Banks are reluctant to finance retailers because of falling demand of organized retailers in India as it has witnessed failure of many stores like Spencer's, Subhiksha, etc.Problem in Raising Funds 57. Taxation laws in India favors only small retail businesses.Implementation of non- uniform VAT across states.Octroi and entry tax in some states.Taxation & Stringent Approvals 58. No Automatic Approval for FDI- Only 51% FDI is allowed to one brand shops in Indian retail sector.Complications in issuance of licenses like a hypermarket in Mumbai must apply for 29 unique licenses & then when it has to come up with second store it has to apply for same 29 licenses all over again. 59. Inflation Effect on Indian Retail Industry 60. EMERGINGHUMANRESOURCECHALLENGES 61. Present ScenarioIndian 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. 62. Value Chain & Core ProcessesBack End OperationsFront End OperationsStore OperationsMerchandisingLogistics & DistributionsMarketingProcurement/ PurchaseCorporate Services 63. Functional Distribution of Employment in Retail 64. Distribution of Human Resource by Education Level 65. Profile RequiredMBA Graduates with 5-10years of ExperienceGraduates with 2- 5years of ExperienceGraduates/ 12th Pass/ 10th PassGraduates/ 12th Pass/ 10th Pass 66. Skill Requirements &Skill Gaps 67. Associates& Executives 69. Senior Manager & Manager 71. Factors Leading to Difference in Skill Intensity Across Retail SegmentsComplexity/Technical Nature of ProductLevel of Customer InvolvementStore CharacteristicsNature of Supply ChainChanges in the Product Nature/ TypePrice Segment(Luxury, Mass market etc.Intensity of Skill Requirement 72. IssuesDemandCommunication Skills Multi TaskingSupplyLimited Retail Training Opportunities Higher Level Skills 73. Current Training/Education Infrastructure The Retailers Association of India (RAI) - Diploma and Degree Programs in Retailing - Bharti Retail and Vishal Retail - 5,000 trained persons 74. Projected Industry Size 75. Skill PyramidLevel 4Level 3Level 2Level 1 76. What lies ahead? 77. NSSO Concerns On Opening Up Of FDIEmployment. Unfair competition.Under- developed organized retail sector. 78. FDI can be a powerful catalyst to spur competition in the retail industry.It can bring about:Supply Chain ImprovementInvestment in TechnologyManpower and Skill developmentEfficient Small and Medium Scale IndustriesIncrease in exportsFDI In Retail- A Policy Perspective, - FICCI and ICICI 79. Future Investments 80. Major Retail Players Entering Into India 81. Benefits Envisaged To Agriculture Through The Opening Of FDIInvestment into warehouse and cold storage chain will result in significant efficiency on supply chain.Farmers benefited through direct marketing and contract farming programme. Improves farm production through modern techniques.Increasing availability of low interest credit for farmers. 82. Future Predictions In the last four year, the consumer spending in India climbed up to 75%. By the year 2013, the organized sector is also expected to grow at a CAGR of 40%.The total number of shopping malls is expected to expand at a CAGR of over 18.9 per cent by 2015. 83. RecommendationsThe 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. 84. ?????To develop our rural sector ,should conditionalitys 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? 85. Urban migrationOpportunity to urban and rural unemployedAlternative incentive schemes 86. Road MapIndustry experts predict that the next phase of growth in the retail sector will emerge from the rural markets. By 2012 the rural retail market is projected to have a total of more than 50 per cent market share. Apparel, along with food and grocery, will lead organised retailing in India.(RNCOS) 87. What additional steps should be taken to protect small retailers? Should an exclusive legal and regulatory framework be established to protect their interests?????? 88. National legal framework cannot be effective.Hamper growth in retail sector. Incentives directly to benefit small retailers. 89. Restrict the number of stores that can be operated in a city. Allow access to the small retailers to the stores through special windows.Recommendations 90. Thank You