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CHAPTER 1: INTRODUCTION

Overview
Over the past two decades, many countries around the world have experienced
substantial growth in their economies, with even faster growth in international
transactions, especially in the form of foreign direct investment (FDI).

The

share of net FDI in world GDP has grown five-fold through the eighties and the
nineties, making the causes and consequences of FDI and economic growth a
subject of ever-growing interest. This unprecedented growth of global FDI in
1990 around the world make FDI an important and vital component of
development strategy in both developed and developing nations and policies are
designed in order to stimulate inward flows. Infact, FDI provides a win win
situation to the host and the home countries. Both countries are directly
interested in inviting FDI, because they benefit a lot from such type of
investment. The home countries want to take the advantage of the vast markets
opened by industrial growth. On the other hand the host countries want to
acquire technological and managerial skills and supplement domestic savings
and foreign exchange. Moreover, the paucity of all types of resources viz.
financial, capital, entrepreneurship, technological know- how, skills and
practices, access to markets- abroad- in their economic development,
developing nations accepted FDI as a sole visible panacea for all their scarcities.
Further, the integration of global financial markets paves ways to this explosive
growth

of

FDI

around

the

This report attempts to make a contribution in this context.

HISTORICAL BACKGROUND
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globe.

FDI
One of the most striking developments during the last two decades is the
spectacular growth of FDI in the global economic landscape. This
unprecedented growth of global FDI in 1990 around the world make FDI an
important and vital component of development strategy in both developed and
developing nations and policies are designed in order to stimulate inward flows.
FDI to developing countries in the 1990s was the leading source of external
financing and has become a key component of national development strategies
for almost all the countries in the world as a vehicle for technology flows and an
important source of nondebt inflows for attaining competitive efficiency by
creating a meaningful network of global interconnections. FDI provide
opportunities to host countries to enhance their economic development and
opens new opportunities to home countries to optimize their earnings by
employing their resources. In the past decades, FDI was concerned only with
highly industrialized countries. US were the worlds largest recipient of FDI
during 2006 with an investment of 184 million. Now, during course of time,
FDI has become a vital part in every country more particularly with the
developing countries and thus its share is increasing year by year.

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Source:http://www.en.wikipedia.org/wiki/Foreign_direct_investment.Retrieved from Wikipedia)

In India, FDI has risen considerably in postreform period. The importance


and category of FDI has changed significantly since India has opened up its
economy. This has provided high prospects that FDI may serve up as a channel
to advanced economic growth. However, it turns out that the development
effects of FDI differ extensively across sectors. FDI is making significant
contribution in Indian manufacturing and service sector. FDI in India up to 100
percent is permitted on the automatic route in all manufacturing activities
subject to certain exceptions. In case of service sector, the flow of FDI in that
sector is boosting the growth of Indian economy. This sector is contributing the
large share in the growing GDP of India. This sector attracting a significant
portion of total FDI in Indian economy and it has shown especially in the
second decade (20002010) of economic reforms in India.FDI up to 51 percent
is also permitted in trading companies in India. India has also allowed FDI up to
100 percent in many manufacturing industries which are designated as small
scale industries. Another important area where FDI can play its role
significantly is the Indian retail sector which is promising one. FDI in Indian
retail is permitted in selective cases subject to restrictions.FDI is not yet
permitted in Multi Brand Retailing in India due to continuous opposition from
multiple political quarters.

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FDI IN RETAIL SECTOR


India has emerged as an attractive destination for retailing over the last
few years. The most noteworthy phase of the growth of the sector was between
2000-2006, when the revenues increased by about 93.5 per cent. This
encouraged international retailers to evaluate an entry into the Indian marketplace. For three consecutive years, India topped the list as the most favourable
destination of retailers such as Wal-mart, Carrefour and Tesco. The estimated
size of the retail industry in our nation is approximately $470 billion with an
annual compounded growth rate of 11 per cent. Incidentally, the share of
organized retail is relatively small at $26 billion which is just 6 per cent of the
total market compared to a typical share of 70-80 per cent in North America and
Western Europe and 20-30 per cent in the Far-East Asian Markets. Our share of
organized retailing is significantly lower than in other Asian Countries such as
China (20 per cent), Indonesia (30 per cent), Thailand (40 per cent), Malaysia
(55 per cent), and Taiwan (81 per cent).

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Indias retailing industry is essentially owner manned small shops. In


2010, larger format convenience stores and supermarkets accounted for about 4
percent of the industry, and these were present only in large urban centres.
Indias retail and logistics industry employs about 40 million Indians (3.3% of
Indian population).Until 2011, Indian central government denied foreign direct
investment(FDI) in multi- brand retail ,forbidding foreign groups from any
ownership in supermarkets ,convenience stores or any retail outlets. Even
single-brand retail was limited to 51% ownership and a bureaucratic process.
The typical Indian retail shops are very small.Over14million outlets operate in
the country and only 4% of them being larger than 500 sq ft (46 m2) in size.
India has about 11 shop outlets for every 1000 people.

JUSTIFICATION
This topic has been chosen by the investigator as her project work as it
seemed her a burning topic. This topic hovered on the front page of every
newspaper, it was every news channels issue of discussion. Every newspaper
and every news channel came up with their variety of opinions, some with
positive and some with negative aspect of the issue i.e. FDI.This threw the
investigator into a dilemma. So, to come out of the dilemma and have a clear
and broader aspect of the issue with actual facts, this topic was chosen by her.
Also, the investigator thought this topic to be a unique one (as less no. of
college mates took this topic)

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IMPORTANCE OF THE STUDY


It is apparent from the above discussion that FDI is a predominant and
vital factor in influencing the contemporary process of global economic
development. The study attempts to analyze the important dimensions of FDI in
India. The study works out the trends and patterns and overall relationship
between FDI and Retail sector.

OBJECTIVES OF THE STUDY


The study covers the following objectives:
1. To present the current status of FDI in Indian retail along with

further

scope.
2. To analyze the rationality of allowing FDI in Indian retail with
special importance to multi brand retailing.
3. And thus evaluate the impact of FDI on the overall economic Growth of
the country and to indicate some measures that may be taken into
consideration as part of the policy making process.

METHODOLOGY
This paper attempted to highlight the implications of FDI in multibrand retailing along with general overview of FDI based on secondary
information gathered from diversified sources which include literature survey,
news paper articles and internet. Moreover, the present paper can be considered
as a review paper.

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Microsoft Office Word, Excel and Charts, mainly Column and Line
Graph, associated with it were used extensively for visual and better
understanding.

LITERATURE REVIEW
Some of the reviewed literature and case studies are stated below:
Sapna Hooda,a P.Hd student in her A Study Of FDI & Indian
Economy focused on the impact of FDI on various sectors and thus on overall
economy and on policies & managerial implications arising from this(potential)
impact with reference to various statistical data.
Pulkit Agarwal & Isha Tyagi through their case study on FDI in
Retail Sector presented various small but vital definitions and the present
scenario & impact of FDI on Retail Sector (both single and multi brand) .with
this they also highlighted the scope of FDI in Retail Sector in the future.
The Changing Face of Indian Retail by Prof.Kalyanasundaram, Department
Of Management Studies, Garden City College, Bangalore.
FDI in Multi-Brand Retailing -A Study on Indian Scenario by Parag Shil
,Prantik Roy, Assistant Professor, Department of Commerce, Assam University.

LIMITATIONS OF THE STUDY


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The assumption that FDI was the only cause for development of Indian
economy in the post liberalised period is debatable.
Lack of availability of data over a wide range of years limited the scope of
investigation.
Time limitation also acted as a hurdle to have in depth study of the topic.
As European Monetary Union was not formed before 1990, so this restricted the
investigator to analysis more number of years.
As the investigator is not a full time scholar, the study is narrowed down the
line.
My incapacity to conclude over the above topic of study due to its diverse
nature and relevance under different scenario.

CHAPTER
FRAMEWORK

2:

CONCEPTUAL

DEFINITION OF RETAIL
In 2004, The High Court of Delhi defined the term retail as a sale for
final consumption in contrast to a sale for further sale or processing (i.e.
wholesale) or a sale to the ultimate consumer.
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Thus, retailing can be said to be the interface between the producer and
the individual consumer buying for personal consumption. This excludes direct
interface between the manufacturer and institutional buyers such as the
government and other bulk customers.Retailing is the last link that connects the
individual consumer with the manufacturing and distribution chain. A retailer is
involved in the act of selling goods to the individual consumer at a margin of
profit.
DIVISION OF RETAIL INDUSTRY
The retail industry is mainly divided into:- 1) Organized

2) Unorganized

Retailing
Organized retailing refers to trading activities undertaken by licensed
retailers, that is, those who are registered for sales tax, income tax, etc. These
include the corporate-backed hypermarkets and retail chains, and also the
privately owned large retail businesses.
Unorganized retailing, on the other hand, refers to the traditional formats
of low-cost retailing, for example, the local kirana shops, owner manned
general stores, paan/beedishops, convenience stores, hand cart and pavement
vendors, etc.
The Indian retail sector is highly fragmented with 97 per cent of its
business being run by the unorganized retailers. The organized retail however is
at a very nascent stage. The sector is the largest source of employment after
agriculture, and has deep penetration into rural India generating more than 10
per cent of Indias GDP. The total retail market in India is estimated at US$ 470
Bn in 2011.The Food & Grocery segment is the largest retail category and
accounts for about 70% of the total retail market.

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RETAIL MARKET CATEGORIES


CATEGORY

2011 ESTIMATES(IN US $Bn)

Food and grocery

325

Apparel

35

Jewellery and watches

25.6

Consumer Electronics & IT

22.7

Pharmacy

13.9

Furnishing and furniture

9.1

Restaurants & food Joints

8.8

Footwear

4.5

Beauty Services

1.3

Health Fitness Services

Others

23
TOTAL

470

Source: Technopak Analysis

DEFINITION OF FDI
FDI as defined in Dictionary of Economics (Graham Bannock et.al) is
investment in a foreign country through the acquisition of a local company or
the establishment there of an operation on a new (Greenfield) site. To put in
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simple words, FDI refers to capital inflows from abroad that is invested in or to
enhance the production capacity of the economy.

FDI POLICY WITH REGARDS TO RETAILING IN INDIA

It will be prudent to look into Press Note 4 of 2006 issued by DIPP and
consolidated FDI Policy issued in October 2010 which provide the sector
specific guidelines for FDI with regard to the conduct of trading activities.

a) FDI up to 100% for cash and carry wholesale trading and export

trading

allowed under the automatic route.


b) FDI up to 51 % with prior Government approval (i.e. FIPB) for retail trade of
Single Brand products, subject to Press Note 3 (2006 Series).
c) FDI is not permitted in Multi Brand Retailing in India.
ADVANTAGES OF FDI IN RETAIL SECTOR
Retailing is one of the worlds largest private industry. Liberalizations in
FDI have caused a massive restructuring in retail industry. The benefit of FDI in
retail industry superimposes its cost factors.
Cheaper production facilities:
FDI will ensure better operations in production cycle and distribution.
Due to economies of operation, production facilities will be available at a
cheaper rate thereby resulting in availability of variety products to the ultimate
consumers at a reasonable and lesser price.
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Availability of new technology:


FDI enables transfer of skills and technology from overseas and develops
the infrastructure of the domestic country. Greater managerial talent inflow from
other countries is made possible. Domestic consumers will benefit getting great
variety and quality products at all price points.
Long term cash liquidity:
FDI will provide necessary capital for setting up organized retail chain
stores. It is a long term investment because unlike equity capital, the physical
capital invested in the domestic company is not easily liquidated.
Lead driver for the countrys economic growth:
FDI would create a competition among the global investors, which would
ultimately ensure better and lower prices thus benefiting people in all sections
of the society. There would be an increase in the market growth and expansion.
It will increase retail employment and suppress untrained manpower and lack of
experience. It will ensure better managerial techniques and success. Higher
wages will be paid by the international companies. Urban consumers will be
exposed to international lifestyles.
FDI opens new doors for Franchising:
Restrictions on FDI are considered as trade barriers as they deny direct
market access to foreign firms. Retail giants who are at their wings, seeking
entry into foreign market look for other available alternatives. These restrictions
on the global retailers regarding the inflow of Foreign Direct Investment, leads
them towards acquiring the market entry through franchises. Thus, countries
which offer promising market potentialities for retail growth offers substantial
growth in the franchising sector as well.
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DISADVANTAGES OF FDI IN RETAIL SECTOR

According to the non-government cult, FDI will drain out the countrys
share of revenue to foreign countries which may cause negative impact on
Indias overall economy.

The domestic organized retail sector might not be competitive enough to


tackle international players and might lose its market share.

Many of the small business owners and workers from other functional
areas may lose their jobs, as lot of people are into unorganized retail business
such as small shops.
FDI IN INDIAN RETAIL
Liberalizations in FDI have caused a massive restructuring in retail
industry. The benefit of FDI in retail industry superimposes its cost factors.
Opening the retail industry to FDI will bring forth benefits in terms of advance
employment, organized retail stores, availability of quality products at a better
and cheaper price. It enables a countrys product or service to enter into the
global market, permitting FDI in retail sector may open several benefits to
farmers, consumers and the entire economy as well but it should not be one
countrys planned objective to hamper the economy of another country or to
create political unrest. The Government of India was initially very anxious of
allowing FDI in retail sector due to fear of job losses, procurement from
international market, Competition and loss of entrepreneurial opportunities but
over time, India had to open up the retail sector to FDI as per WTO

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pronouncement. The Government in a series of moves has opened up the retail


sector slowly to FDI.

FDI IN INDIAN RETAIL - FURTHER SCOPE


Major findings:
Despite the numerous obstacles that existing players and new market
entrants have to deal with, the Indian retail market bristles with abundant
promise. According to Global Retail Development, Index (GRDI) reports
published by the leading US based consulting group, AT Kearney in June 2010,
India is the 3rd most attractive retail market for global retailers among the
largest emerging markets.The report also highlights the well documented fact
that organized retail constitutes a mere 5% of the total annual revenues
generated, hence providing a tremendous window of opportunity for both
domestic and international retailers to tap into a burgeoning albeit fragmented
market. Indias retail industry is estimated to be worth approximately US
$411.28 billion and is still growing, expected to reach US $804.06 billion in
2015 As part of the economic liberalization process set in place by the Industrial
policy of 1991, the Indian Government has opened the retail sector to FDI
slowly through a series of steps excepting FDI in multi- brand retailing, which
has so far been prohibited in India.
FDI IN MULTI-BRAND RETAILING
Retailing is one of the worlds largest private industries. Permitting FDI
in retail sector of any country will call for many opportunities. FDI in multi
brand retail implies that a retail store with a foreign investment can sell
multiple-brands under one roof. Despite many issues which are against of
allowing FDI in multi-brand retailing, It will ensure adequate flow of capital
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into host country in a manner likely to promote the welfare of all sections of
people of society, Particularly farmers, and consumers as well.

FDI IN INDIAN MULTI-BRAND RETAIL RATIONALE


The rationale for allowing FDI in multi-brand retail trade may be set out
as follows:
1. Allowing FDI in multi brand retail trade will benefit consumers and
farmers, and will also aim at bringing down inflation. Farmers, in this case, may
be protected from the domination of intermediaries who dominate the interface
between the manufacturers or producers and consumers in most cases and major
part of the share of profit is eaten by those middlemen causing loss to the
farmers. Further, consumers will get variety of products at cheaper prices and
will have more choice to get international brands at one place.
2. Allowing international retailer such as Wal-Mart and Carrefour, which have
already set up whole sale operations in the country, to set up multi-brand retail
stores will assist in keeping commodity prices under control, will cut waste, as
big players will build backend infrastructure.
3. Public Distribution System is expected to be improved through allowing FDI
in retail trade.
4. FDI in retail trade, if permitted, then more foreign companies will come and
new infrastructure will build. Banking Sector will grow consequently as money
required to build infrastructure would be provided by banks.
5. Lack of infrastructure (e.g., cold storages) in the retailing chain has been one
of the big issues for years which have led the process to an incompetent market
mechanism. FDI might help India over come such issues by channelizing the
resources in the right manner.
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6. Permitting FDI in retail trade will open huge job opportunities. Estimate says
it will touch not less than 80 lakh Jobs.
7. Allowing FDI in multi-brand retail will contribute to foreign currency reserve
and narrow the current account deficit as well. Further, Competition within the
host country sector is a critical driver of improvements in sector performance as
a result of FDI. FDIs potential for impact can be greater because of the
combination of scale, capital, and global capabilities which allow MNCs to
close existing large productivity gaps more aggressively. FDI can be a powerful
catalyst to spur competition in industries characterized by low competition and
poor productivity such as retail industry due to the current scenario of low
competition and poor productivity.

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CHAPTER 3:CASE STUDy,ANALYSIS


&FINDINGS
CASE STUDIES OF SINGLE RETAIL
MARKET
CASE STUDY COCA COLA

Coca cola was the first international soft drinks brand to enter in 900
crores soft drink market of India in early 1970s. Indian market was dominated
by domestic brands, with Limca being the largest selling brand. Cola was the
largest selling flavour with market share of 40%, Lemon drinks 31% and orange
drinks only 19%. Untill1977, Coca-cola was the leading soft drink brand in
India. But due to norms set by the Foreign Exchange Regulation Act (FERA),
Coca-cola left India and did not return till 1993.
RBI's move on Foreign Equity Regulation
In 1974, Multinationals operating in low priority areas like consumer
goods were asked by RBI (under FERA) to step down equity to 40% either
through equity dilution or through equity sale.
Non-strategic category of foreign companies
Coke, which operated in India through a branch office, submitted its plan
for stepping down equity to the RBI. It offered to hold 40%
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equity in its bottling and distribution units, but refused to step down equity in its
technical and administrative unit.
Coke at Logger Heads with the Indian Government
Since this was not in line with FERA, which permitted not more than a 40
% holding in all operations, Coke was asked to comply properly with the new
norms. Coke decided to windup its operations in India, but quit making
allegations that the Indian Government was forcing it to share its secret formula
for making its concentrate.
Blame game in a Bad Blood
The Indian Government slapped its counter charges and accused the
parent of bleeding profits and repatriating large sums of funds abroad (as
administrative charges) even when the Indian operations were posting losses.
Further, there were allegations of Coke abusing import licenses- against which it
imported the concentrate- all of which resulted in bad blood between the two
parties.
Coke Exists India
In 1977, Coke left India and did not return for nearly two decades. By
which time, the economic situation had undergone a major transformation.
More importantly, the particular provision in FERA had been diluted
completely.
Coke re enters India
Coke factored in all these issues at the time of its re-entry. In its
application to India's Foreign Promotion Board (FIPB) in 1997, it voluntarily
offered to divest 49% in favour of the Indian public through an IPO at the end
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of three years. This was despite the fact that the FDI norms for the soft drink
sector did not require mandatory divestment of stake and nobody was forcing it
to do so.
A Healthy Growth to the Indian Economy
After re entry, Coca-cola India has made significant investment to build
and continually consolidate its business in the country, including new
production facilities, waste water treatment plants, distribution systems and
marketing channels .Coca-cola India is among the countrys top international
investors, having invested more than USD 1 billion in India in the first decade,
and further pledged another USD 100million in 2003 for its operations. Cocacola directly employs approximately 6,000 people and indirectly creates
employment for more than 125,000 people in related industries through its vast
procurement, supply and distribution system. The success story of Coca-cola
attracted other investors to invest in India which resulted in competition in
Indian soft drink market.

STATISTICAL DATA/ FACT SHEET


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Here are some stats and facts that capture Coca Cola in India.

From 1993 to 2003, Coca Cola invested more than US $ 1 Billion in India
Coca Cola achieved 39% Volume growth and 23% industrial growth

reaching a breakeven profitability in the region in 2002.


Coca cola has more than 23 company-owned bottling operations.
Coca cola has more than 25 franchisee-owned bottling operations.
Coca cola employs approximately 8000 local people.
Coca cola indirectly creates employment for more than 1 lakh 50 thousand
people in India

Source:Frontline,pbs.org

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CASE STUDY OF MULTI BRAND


RETAILING
Wal-Mart in India

WAL-MARTS FIRST SHOP IN INDIA


In December 2006, Wal-Mart Inc. believed that by the year 2015, 35% of
Indias retail sales could be from chain stores . This was a radical increase from
the prevailing 2%. In May 2009, Wal-Mart was ready to open its first store in
India. The reason for Wal-Marts entry in India was clear The Indian middle
class . The worlds biggest retailer had been silently working on its strategy for
India for around two years. Mom-and-pop stores and traditional distribution
networks dominated the $375 billion Indian retail market. Wal-Marts first
outlet was set to launch in the city of Amritsar, Punjab in North India. The first
store air-conditioned and built over 50,000 sq. ft. was on the outskirts of the
city, Amritsar. The store employed 200 locals and was likely create 500 indirect
jobs. In the first few weeks itself, the company had managed to sign on close to
35,000 members. However, the debut outlet was not to carry the familiar WalMart brand.

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CASE UPDATES/SNIPPETS/CURRENT STATUS

50:50 joint venture: In India, Wal-Mart has a 50:50 joint venture with
Bharti Enterprises in the wholesale cash-and-carry segment.
Direct Farm Program: Multinational retail giant, Wal-Marts Direct Farm
Program in India is a partnership with 110 small and marginal farmers near
Ludhiana in Punjab where it encourages cultivation of safe, high-quality,
seasonal vegetables. Farmers are advised at every stage of cultivation by field
agronomists. Farmers learn about nursery management, transplanting, nutrient
management, as well as harvest and post-harvest practices.

Wal-Mart India in 2010: In 2010, Bharti-Wal-Mart plans to launch seven


Best Price Modern Wholesale Cash-And-Carry stores across India. These stores
will be 100,000 sq ft in size and each store will involve an investment of $6-7
million.

Sourcing from India: Wal-Mart has a large sourcing business in India.


The retail major sources goods worth $125 million a year from Punjab. In 2010,
Wal-Mart is planning to increase sourcing from India to strengthen its global
business.

Wal-mart Labs in Bangalore : In addition to its R&D centre in the Silicon


Valley, Wal-Mart plans to set up another facility in Bangalore, India (expected
to be set up by Dec 2011) with about 100 developers to work on technologies
and solutions for Wal-Marts global e-commerce business.
YES TO WAL-MART- REASONS
1. Wal-Mart is worlds largest corporation and it enjoys high status and
recognition, its status and recognition would help Wall-Mart in dealing
effectively with locals in India.
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2. Its distribution centre and logistics capabilities are key strengths adding
unmatched value to its entire value chain.
3. It has immense buying power when dealing with Suppliers.
4. Wal-mart's focused strategy for human resource management will allow the
company to hire and retain the needed workers in India.
5. Its cross-docking and effective inventory management gives cost advantage
to sustain its Every Day Low Price Strategy.
6. As majority of target customers are price conscious in India its low price &
customer focus would help Wall-Mart to establishing and building loyalty.
7. Access to largest retail market worth $590 billion with only 2%
of organized retail.
8. One of the fastest growing economies with growing middle class.
9. Potential for merger and acquisition of local retail chain can make Wall-Mart
in a dominant player in Indian retail market.
10. Wall-Mart can diversify from large super centres to local mall based sites.
NO TO FDI IN RETAIL SECTOR THROUGH WALL-MART
WALMARTS OVERTURES
It is one thing to permit FDI in manufacturing (or high priority
technology content sectors), as was done in 1991, and quite another to think that
FDI will be a panacea for all the countrys ills. Has the Government factored in
the very large trading population, who may not be aware of the possible damage
to their livelihood?
What has the experience been with Wal-mart in the country of origin and
abroad? FDI comes with big promises of promoting employment. The entry of
the trading giant, Wal-mart, led to the closure of 40,000 US factories between
2001 and 2007, resulting in throwing millions of people out of their jobs.
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It is in these years that imports from China to US tripled in value from $9


billion to $27 billion! According to the US Census, between 1992 and 2007, the
number of independent retailers fell by more than 60,000.
As Wal-marts business continued to grow and the stores began to expand,
communities lost their local retailers and there was less demand for services
such as accounting and graphics design. Less advertising revenue for local
media outlets also resulted in fewer accounts for local banks.
The classic example is the story of destruction of Iowa. In 1983, Wal-mart
opened its first store in the State. Since then, several other retail stores were
forced to close shutters.
The growth of Wal-mart has resulted in decreased wages, the shrinking middleclass and increase in working poor. The savings due to shopping at Wal-mart
cannot compensate for the loss of job opportunities and income. There are wellresearched articles suggesting that the US is being transformed from a
technologically-advanced manufacturing economy to a mere consuming
economy on account of higher imports.
Wal-mart has ensured that the American family would not be able to afford
shopping anywhere else. Right now, the average family of four spends
approximately $4,000 a year at Wal-mart. This year, the Walton family (owners
of Wal-mart) will be able to pocket billions in dividends from their holdings.
The bargaining power of the global trading giant with the Governments is so
high that it eventually puts pressure on State finances, through tax-breaks,
effective outsourcing models to kill production jobs, and demands for increased
investment in social initiatives by Governments due to job displacements.

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HASTY DECISION

Wal-mart faced allegations of bribery that helped it set up stores much


ahead of its competitors within Mexico. This resulted in violation of Mexican
law and the US Foreign Corrupt Practices Act. Thorough investigations were
not carried out due to technicalities in the law of limitation and to avoid further
adverse publicity to Wal-mart.

There are studies that to show that giant trading corporations such as Walmart contribute to poverty, which could prove costly in a country such as India
with dense population with diverse base.

One strong argument put forward is the possible savings to the


consuming public. Perhaps, in the absence of FDI in retail, a section of
affordable consumers is paying more. But that does not mean the displacement
of small-time traders is a desirable development. Opening up India to overseas
trading giants on an exaggerated perception of benefits of foreign investment is
not such a wise policy decision.

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STATISTICAL DATA/ FACT SHEET


Here are some stats and facts that capture Wal-Mart's size and scale.

100 million: The number of people who shop at Wal-Mart's 3400 American
stores every week.

50 million: The amount of square footage Wal-Mart plans to add this year,
including 50-55 new Wal-Mart stores, 220-230 new Supercenters, 35-40 new
Sam's Club and 130-140 new international stores.

1.2 million: The number of Wal-Mart associates in the U.S. Any full- or parttime Wal-Mart employee, up to and including the CEO, is considered an
"associate," in Wal-Mart parlance. Internationally, Wal-Mart employs an
additional 330,000 associates.

600,000: The number of new employees Wal-Mart hires each year. The
company's turnover rate is 44 percent -- close to the retail industry average.

1979: The year Wal-Mart's sales first top $1 billion.

$256 billion : Wal-Mart's sales in 2003. In the words of Wal-Mart CFO Tom
Schoewe, Wal-Mart's sales are equal to "one IBM, one Hewlett Packard, one
Dell computer, one Microsoft and one Cisco System -- and oh, by the way, after
that we got $2 billion left over."

35: The number of Wal-Mart Supercenters in China.

$15 billion: The amount of Chinese products Wal-Mart estimates it imports


each year; others suggest the number may be higher.

$120 billion: The U.S. trade deficit with China in 2003.

8 percent: The amount of total U.S. retail sales, excluding automobiles,


accounted for by Wal-Mart.

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$9.98: The average full-time hourly wage for a Wal-Mart employee. The
average full-time hourly wage in metro areas (defined as areas with a
population of 50,000 or more) is $10.38. In some urban areas it is higher: $11.03
in Chicago, $11.08 in San Francisco, and $11.20 in Austin.

Analysis/findings
DATA SOURCE, TOOLS-TECHNIQUES
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Below are various data accessed through various sources. Then with the
help of charts prepared, those data/ information were analysed.
Three parameters have been analysed, they are:
GDP GROWTH % ANNUAL
FDI-% OF GDP
GDI-% OF GDP
Based on the above three parameters ,few inferences have been drawn .

TABLE-1: GDP GROWTH % ANNUAL

Source: World Bank, 2000, World Development Indicators

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10

GDP GROWTH %(ANNUAL)

1995
2

1996
1997

-2

DEVELOPING COUNTRIES

TABLE-2: FDI-% OF GDP

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1998

Source: World Bank, 2000, World Development Indicators

10
9
8
7
6
5
4
FDI-% OF GDP

1995

1997

1996
1998

1
0

DEVELOPING COUNTRIES

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TABLE 3: GDI-% OF GDP

Source: World Bank, 2000, World Development Indicators


40
35
30
25
20

GDI-% OF GDP

1995

15

1996
1997

10

1998

5
0

DEVELOPING COUNTRIES

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TABLE-4:OVERALL BASIS-WORLD BASIS

Source: World Bank, 2000, World Development Indicators


*Non-availability forces to consider average of the data available

30

25

20

GDI-% of GDI

PERCENTAGE 15

FDI-% of GDP
GDP GROWTH %

10

0
1995

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1996

1997

1998

FINDINGS
From Table 1:
It has been found that among various region in the world East Asia
&Pacific and South Asia shows consistency throughout the period experiencing an
annual growth rates of at least 4.5-5% (except in 1998 East Asia faces negative
growth rate i.e (-)1.01%) which is far above the world average of 2.94%.
On the contrary, Europe & Central Asia experienced growth below world average.
While on one hand, Latin America , Middle East and Sub-Saharan Africa showed
an increasing and then decreasing growth rates.
On the other hand, the European Monetary union showed first decreasing and
then increasing growth rate.
From Table 2:
The FDI/GDP ratio was in no region above 4% throughout the whole
time period

covered. However, the trend is towards an increasing share of FDI-

to-GDP ratio during the 1990s in all the regions as well as on a worldwide scale .
From Table 3:
Since 1980 the aggregate GDI-GDP ratio has constantly lied above the
30% threshold for the countries in the East Asian &Pacific region . Th i s
m i g h t e x p l a i n t o a l a r ge e x t e n t t h i s regions success with respect to
attracting market-seeking FDI.
SSA lies in the opposite end of the spectrum, in the sense that this region has been
unable to mobilize enough domestic resources for the GDI, which since
the mid-1980s has lied below 20% of GDP and below the world average.
Europe& Central Asia has experienced a negative downward trend in
GDIs percentage share of GDP .
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Latin America has almost consistently lied just below the world average,
whereas the Middle-East and North Africa has lied just slightly above .
The above constant GDI-GDP ratio which is generally above 30% in East Asian &
Pacific Region during the period might explain to a large extent this regions
success with respect to attracting market-seeking FDI according to the survey
conducted by Christian Kingombe , International Labour Office

named

EMPLOYMENT EFFECT OF FDI ON HOST DEVELOPING COUNTRIESSURVEY & TRENDS


From Table 4:
On a general note, it can be analysed that GDP growth percentage and
FDI as a percentage of GDP has a positive relationship. Both show an upward
moving trend i.e. FDI as a percentage of GDP increases with the increase in GDP
growth percentage.
Though FDI as a percentage has been increasing since 1995 to 1998 butGDI as a
percentage of GDP has consistently hovered around 22%. Hence , we can
conclude increasing FDI had no impact on GDI.

CHAPTER 4:CONCLUSION
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In one hand, it is clear that foreign companies will have ample scope to
go for FDI in Indian retail sector as it is promising one and allowing FDI in
multi-brand retail trade of India is expected to open many opportunities to the
Indian people, as mentioned earlier. On the other, there is a big question whether
it will benefit to one section of people at the cost of others. At this point, it is
very difficult to ensure these two view points through a particular study.
However, the Present study attempts to highlight some of the important issues
that may be taken care of before taking any decision with respect to such
strategic issue.
At first, it is very important to match the benefits that can be derived out of such
foreign investment with the losses that will cause to any section of people in the
country, if any.
Second, deciding the percentage of stake that will be allowed to foreign
companies if they invest in Indian multi-brand retail outlet. In this case, they
may be allowed minority stake that is to say, less than 50 percent.
Third, foreign investors may be imposed number of conditions while allowing
them to operate in India.
Fourth, foreign investors may be allowed to invest in Indian retail sector if it is
not backed by political interests of one Country.
Finally, the paper concludes by saying that FDI in multi-brand retail can be
permitted as long the interests of farmers and small traders are protected. There
will be no job losses. Further, it will not impose any condition on the present
economic structure.
LIMITATIONS
The assumption that FDI was the only cause for development of Indian
economy in the post liberalised period is debatable. No proper methods were
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available to segregate the effect of FDI to support the validity of this


assumption.
Lack of financial support constrained to travel around the Nation to collect data
and thus to depend on very scarce secondary data.
Lack of availability of data over a wide range of years limited the scope of
investigation.
Time limitation also acted as a hurdle to have in depth study of the topic. It was
not possible to explore all the factors related to the topic.
As European Monetary Union was not formed before 1990, so this restricted the
investigator to analysis more number of years.
As the investigator is not a full time scholar, the study is narrowed down the
line.
My incapacity to conclude over the above topic of study due to its diverse
nature and relevance under different scenario.

BIBLIOGRAPHY
Towards the completion of the project, various sites &public domains referred to are
given below:

http://www.indianmba.com
http://www.authorstream.com
http://www.indianresearchjournal.com
http://www.legalindia.com

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http://www.articlesphere.com/Article/The-Impact-of-FDI-onIndia---s-Manufacturing- Sector/247108
http://www.dipp.nic.in/english/Discuss_paper/DP_FDI_MultiBrand
RetailTrading_06July 2010.pdf
http://www.en.wikipedia.org/wiki/Foreign_direct_investment , FDI
in India. Retrieved from Wikipedia, the free encyclopaedia.
http://www.india-briefing.com/news/foreign-direct-investmentindias-single-multibrand-retail- 5232.html
http://www.youthkiawaaz.com/2011/08/fdi-in-multi-brand-retailing

in-india-crossing-the- rubicon
http:// www.financialexpress.com
http:// www.going-global.com
http:// www.iie.com
http:// www.oecd.org
http://www.integraluniversity.ac.in/net/journalsAndPublications
http://www.iariw.org/papers/2009/8b%20Kolli.pdf
http://www.ncaer.org/downloads/indianeconomy/services/q2aug0

7.pdf (NCAER economic stats)


http://www.ncaer.org/downloads/indianeconomy/forecast/q2aug0
7.pdf http://labour.nic.in/
http://www.tsmg.com/download/article/TSMG_Tata_Review

June_2006.pdf
http://siadipp.nic.in/policy/icrier_report_27052008.pdf
http://siadipp.nic.in/policy/changes/pn6_2009.pdf
http://www.edc.ca/english/docs/gindia_e.pdf
http://www.cds.edu/download_files/wp311.pdf
http://indiafdiwatch.org/fileadmin/WARNstorage/indiwm.pdf
http://indiafdiwatch.org/fileadmin/India_site/FDI_Broch_1_.pdf
http://www.bijapurkar.com/printerfriendly.php?

filename=ct_cons_india_better.htm
http://www.bijapurkar.com/indiamyland/indi_celebrating_diversity.
http://www.livemint.com/2009/06/08185249/Parliamentary-panelrecommends.html
http://www.financialexpress.com/news/Is-FDI-in-retail-a-deathknell-for-SMEs/138090/1
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http://www.indianrealtynews.com/category/retail-market/
http://bimtech-retail.com/downloads/FDI_RetailDude.pdf
http://bimtech-retail.com/downloads/Retail_Twist_RetailDude.pdf
http://bimtech-retail.com/downloads/RetailDude_Interview_1.pdf
http://indiafdiwatch.org/fileadmin/WARNstorage/indiwm.pdf

THANK YOU

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