INTRODUCTION Before understanding the concept of retail, let us first go through few terminologies.

Market - Any system or place where parties are engaged in exchange of either

goods or services is called as market. The parties are often called as buyers and sellers. The seller offers his goods or services to the buyer who in return purchases it in exchange of money.

Goods - Tangible (things which can be seen and touched) physical products

which are transferred from a seller to the buyer (consumer) to fulfil the latter’s need are called as goods. What is Retail? The word Retail is, in fact, derived from the French word retailer, which means to cut off a piece or to break bulk. A retailer may be defined as a dealer or trader who repeatedly sells goods in small quantities. FDI is generally defined as “A form of long term international capital movement made for the purpose of productive activity and accompanied by the intention of managerial control or participation in the management of foreign firm.” Retail involves the sale of goods from a single point (malls, markets, department stores etc.) directly to the consumer in small quantities for his end use. In a layman’s language, retailing is nothing but transaction of goods between the seller and the end user as a single unit or in small quantities to satisfy the needs of the individual and for his direct consumption. Let us understand the concept with the help of an example. Tim wanted to purchase a mobile handset. He went to the nearby store and purchased one for himself. In the above case, Tim is the buyer who went to a fixed location (in this case the nearby store). He purchased a mobile handset (Quantity - One) to be used by him. An example of retail. The store from where Tim purchased the handset must have shown him several options for him to select one according to his budget and need. From where do you think the store owner (also called the retailer) purchased all the handsets? Here the manufacturers and the wholesalers come into the picture. The retailers purchase goods

in bulk quantities (huge numbers) to be sold to the end-users either directly from the manufacturers or through a wholesaler.
The Supply chain

Manufacturers .......... Wholesalers.......

Retailers................End User (Consumer)

 Manufacturers - Manufacturers are the ones who are involved in production of goods with the help of machines, labour and raw materials.
• Wholesaler - The wholesaler is the one who purchases the goods from the

manufacturers and sells to the retailers in large numbers but at a lower price. A wholesaler never sells goods directly to the end users.
• Retailer - A retailer comes at the end of the supply chain who sells the products

in small quantities to the end users as per their requirement and need. The end user goes to the retailer to buy the goods (products) in small quantities to satisfy his needs and demands. The complete process is also called as Shopping.

Shopping - The process of purchasing products by the consumer is called as

shopping. However there are certain cases where shopping does not always end in buying of products. Sometimes individuals do go for shopping but return home empty handed. Such a shopping is merely for fun and is called window shopping. In window shopping, individuals generally go to the market, check out various options and their prices but do not buy anything. This kind of shopping helps to break the monotony. In Retailing, presently 51 per cent FDI is allowed in single brand retail through the Government Approval route while 100 per cent FDI is allowed in the cash-and-carry (wholesale) formats under the Automatic route. Under the Government Approval route, proposal for FDI in ‘Single Brand Product Retailing’ are received in the Department of Industrial Policy and Promotion, Ministry of Commerce & Industry. Automatic route dispenses with the need of multiple approvals from Government and/or regulatory

agencies (Government of India or the RBI). Investors are required only to notify the concerned Regional offices of RBI within 30 days of receipt of inward remittances and file required documents with that office within 30 days of the issue of shares to foreign investors.  The sale of goods individually or in small quantities to the public to sell or be sold Retailing consists of the sale of goods or merchandise from a fixed location, such in small quantities to the public.  as a department store or kiosk, or by post, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery.  The sale of goods directly to the consumer; To sell at retail, or in small quantities directly to customers; To repeat or circulate (news or rumours) to others; Of, or relating to the sale of goods directly to the customer; In retail quantities, or at retail prices

To sell directly to the consumer, usually in small quantities in comparison with Any product for sale in a store or directly to a consumer. Trade in which a client buys or sells an over-the-counter stock through a brokerMerchants selling tangible goods in a face to face environment who normally use

the total level of sale.  

dealers.  conventional terminals and swipe transactions. DIVISION OF RETAIL INDUSTRY Retailing is one of the pillars of the economy in India and accounts for 35% of GDP.The retail industry is divided into organized and unorganized sectors. Over 12 million outlets operate in the country and only 4% of them being larger than 500 sq. ft. (46 m2) in size.




Organised retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporatebacked hypermarkets and retail chains, and also the privately owned large retail businesses. Organized retail segment has been growing at a blistering pace, exceeding all previous estimates.

Unorganised 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/beedi shops, convenience stores, hand cart and pavement vendors, etc. Unorganized retailing is defined as an outlet run locally by the owner or caretaker of a shop that lacks technical and accounting standardization. The supply chain and sourcing are also done locally to meet local needs. Its organized counterpart may not obtain its supplies from local sources.

Figure No: 1.1- Difference between organised & unorganised Retailing


TYPES OF RETAILERS Consumers today can shop for goods and services in a wide variety of retail organizations. There are store retailers, non-store retailers and retail organizations. Speciality Store: Narrow product line with a deep assortment. A clothing store would be a single-line store; a men’s clothing store would be a limited-line store; and a men’s custom-shirt store would be a super speciality store Examples: Athlete’s Foot, The body shop Departmental store: Several products lines-typically clothing, home furnishings, and household goods-with each line operated as a separate department managed by specialist buyers or merchandisers Examples: Sears, JC Penney. Supermarket: Relatively large, low-cost, low-margin, high-volume, self-service operation designed to serve total needs for food, laundry and household products. Examples: Kroger, Food world, big bazaar. Convenience Store: Relatively small store located near residential area, open long hours, seven days a week and carrying a limited line of high-turnover convenience products at slightly higher prices, plus takeout sandwiches, coffee, soft drinks. Examples: 7-Eleven, Circle K. Discount Store: Standard merchandise sold at lower prices with lower margins and higher volumes. Discount retailing has moved into speciality merchandise stores, such as discount sporting-goods stores, electronics stores and bookstores. Examples: WalMart, Circuit city. Off-price retailer: Merchandise bought at less than regular wholesale prices and sold at less than retail; often leftover goods, overruns and irregulars. Examples: Sam’s club, Max clubs.


Superstore: About 35000 square feet of selling space traditionally aimed at meeting consumers’ total needs for routinely purchased food and nonfood items, plus services such as laundry, dry cleaning, shoe repair, check cashing, and bill paying. A new group called category killers carries a deep assortment in a particular category and a knowledgeable staff. Examples: IKEA, Home Depot. Catalogue Show room: Broad selection of high-mark-up, fast-moving, brand-name goods at discount prices. Customers order goods from a catalogue, and then pick these goods up at a merchandise pickup area in the store. Example: Service Merchandise. Levels of service: The wheel-of-retailing hypothesis explains one reason that new store types emerge. Conventional retail stores typically increase their services and raise their prices and less service. New store types meet widely different consumer preferences for service levels and specific services


RETAILING IN INDIA Retailing in India is gradually inching its way to becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behaviour, ushering in a revolution in shopping. Modern retail has entered India as seen in sprawling shopping centres, multi-storied malls and huge complexes offer shopping, entertainment and food all under one roof. By 2007, an estimated 50 million square feet of quality retail space will be available across India. This is in sharp contrast to the situation a decade ago. Then, there was not one shopping mall in India. Today, in Delhi, Mumbai and their suburbs, there are about 100 malls. Of the 700 new malls coming up all over India, 40 per cent are concentrated in the smaller cities. Organized retailing in small-town India is growing at a staggering 50-60 per cent a year compared to 35-40 per cent in the large cities. India's vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets. Traditional markets are making way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. Western-style malls have begun appearing in metros and second-rung cities alike, introducing the Indian consumer to an unparalleled shopping experience. As organized retailers carve out a bigger piece of the retail pie for themselves it’s an exciting time for the retail sector. With the growth of organized retailing estimated at 40 per cent (CAGR) over the next few years, Indian retailing is clearly at a tipping point. India is currently the ninth largest retail market in the world.


The Indian retailing sector is at an inflexion point where the growth of organized retail and growth in the consumption by Indians is going to adopt a higher growth trajectory. The Indian population is witnessing a significant change in its demographics. A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing working-women population and emerging opportunities in the services sector are going to be the key growth drivers of the organized retail sector. Initially, this was about Indian corporate houses rolling out malls and supermarkets, but with Wal-Mart coming into the Indian market, the era of the superstore is dawning. Unlike the kirana stores that served us for decades, this new breed of retail chains is heavily dependent on IT. Wal-Mart, the world’s largest retailer, and Bharti Enterprises have signed a Memorandum of Understanding (MoU) to explore business opportunities in the Indian retail Industry. This joint venture will mark the entry of Wal-Mart into the Indian retailing industry. THE INDIAN RETAIL INDUSTRY / MARKET As the contemporary retail sector in India is reflected in sprawling shopping centres, multiplex- malls and huge complexes offer shopping, entertainment and food all under one roof, the concept of shopping has altered in terms of format and consumer buying behaviour, ushering in a revolution in shopping in India. This has also contributed to large-scale investments in the real estate sector with major national and global players investing in developing the infrastructure and construction of the retailing business. The trends that are driving the growth of the retail sector in India are
• • • •

Low share of organized retailing Falling real estate prices Increase in disposable income and customer aspiration Increase in expenditure for luxury items (CHART)


Figure: 1.2- Distribution system of India Another credible factor in the prospects of the retail sector in India is the increase in the young working population. In India, hefty pay packets, nuclear families in urban areas, along with increasing working-women population and emerging opportunities in the services sector. These key factors have been the growth drivers of the organized retail sector in India which now boast of retailing almost all the preferences of life Apparel & Accessories, Appliances, Electronics, Cosmetics and Toiletries, Home & Office Products, Travel and Leisure and many more. With this the retail sector in India is witnessing rejuvenation as traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores.

The retailing configuration in India is fast developing as shopping malls are increasingly becoming familiar in large cities. When it comes to development of retail space specially the malls, the Tier II cities are no longer behind in the race. If development plans till 2007 is studied it shows the projection of 220 shopping malls, with 139 malls in metros and the remaining 81 in the Tier II cities. The government of states like Delhi and National Capital Region (NCR) are very upbeat about permitting the use of land for commercial development thus increasing the availability of land for retail space; thus making NCR render to 50% of the malls in India.


Figure:1.3- Retail space distribution in Delhi,NCR Retail: Major Developments and Investments After the US, Germany has also come up in full support of FDI in retail in India. Metro AG, one of the prominent German retail chains, has shown intentions to venture in Indian markets along with US' Wal-Mart and France's Carrefour. Cumulative FDI inflows in single-brand retail trading during April 2000 to September 2011 stood at US$ 44.45 million, according to the Department of Industrial Policy and Promotion (DIPP). Certain developments and investments that took place on the Indian retail canvas recently are discussed below•

Real estate major DLF's subsidiary DLF Brands has struck a deal with Chicago-

based Claire's Stores Inc to bring the latter to India and open its 75 stores over 2011-16. Claire's is a specialty retailer which targets young girls through over 3,000 stores globally.

French retail chain, Carrefour is on an expansion spree in India wherein it is about

to finalise lease deals across 10 to 12 sites in the country to open cash-and-carry (wholesale) outlets.

The world's largest retailer Wal-Mart will open an innovation lab in Bengaluru by

the end of 2011. The lab would be tasked to drive the US$ 422-billion company's next generation innovations that impact shopping behaviour among the customers.


US fast moving consumer good (FMCG) giant McCormick, that has recently

formed a joint venture (JV) with Indian basmati rice brand Kohinoor Foods, intends to tap Indian packaged food industry and achieve sales of US$ 85 million in the first year of operations in the country.

FMCG firm GSK Consumer Healthcare (GSKCH) has made a debut into Indian

breakfast cereal market by launching oats cereal under its flagship brand ‘Horlicks'. The breakfast cereal market in India is currently dominated by PepsiCo and Kellogg's.

Oral and dental hygiene products manufacturer Colgate Palmolive has decided to

invest Rs 200 crore (US$ 38.52 million) to establish a greenfield facility at an upcoming industrial estate in Sanand which is being developed by state-run Gujarat Industrial Development Corporation (GIDC). RECENT TRENDS

Retailing in India is witnessing a huge revamping exercise as can be seen in the India is rated the fifth most attractive emerging retail market: a potential Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) As per a report by KPMG the annual growth of department stores is estimated at Ranked second in a Global Retail Development Index of 30 developing countries Multiple drivers leading to a consumption boom: Favourable demographics Growth in income Increasing population of women Raising aspirations: Value added goods sales Food and apparel retailing key drivers of growth Organized retailing in India has been largely an urban



makes up 3 percent or US$ 6.4 billion


drawn up by AT Kearney.
• • • • • • •


Phenomenon with affluent classes and growing number of double-income More successful in cities in the south and west of India. Reasons range from Rural markets emerging as a huge opportunity for retailers reflected in the share


differences in consumer buying behaviour to cost of real estate and taxation laws.

of the rural market across most categories of consumption

Retailing is 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. A retailer is one who stocks the producer’s goods and is involved in the act of selling it to the individual consumer, at a margin of profit. As such, retailing is the last link that connects the individual consumer with the manufacturing and distribution chain. Mohan Guruswamy (2004) “Fdi in India’s retail sector more bad than good”? The retail industry in India is of late often being hailed as one of the sunrise sectors in the economy. AT Kearney, the well-known international management consultancy, recently identified India as the ‘second most attractive retail destination’ globally from among thirty emergent markets. It has made India the cause of a good deal of excitement and the cynosure of many foreign eyes.

Stephan J. Goetz and Hema Swami Nathan (August 2004) “Wal-Mart and Rural Poverty” In this study it has been expressed by author that the fast growth of the organized retail sector experienced in India over the last few years has been based upon the consumption demand of the rich and upper middle classes, whose disposable incomes have risen considerably. Technological up gradation has also accompanied this growth in organized retail. Thus the growth in organised retail sector making job loss inevitable. Therefore the Government has to go beyond a narrow focus on the need to satisfy the consumption demand of the upper classes (whose numbers are often overestimated in India) for luxury goods of all varieties and take into account the negative impact of FDI on employment in the different segments of the retail trade sector. At a time when organized retail in India is growing at a fast pace anyway and there is no dearth of indigenous capital, the entry of foreign capital which would accelerate the concentration of business in organized retail causing job loss at a massive scale is unwarranted. Mohan Guruswamy & Kamal Sharma (February 2006) “FDI in Retail –II Inviting more trouble?” In this study it has come to know that without industrialization our country would become a post-industrial society. The workforce of India is 422 million large and the organized sector only employs 27 million. Therefore, it is clear that the self-employed retail sector is a safety valve that allows people the opportunity to fend for themselves when the government fails to create jobs. The CPAS (Centre for policy alternatives) study also argued that the two facts, i.e. that the unorganized Retail sector of small and medium retailers employs over 40 million; and that we have 11 retail outlets for every 1000 people, suggests a considerable element of ‘forced employment’ in this sector. Arpita Mukherjee, Divya Stija & Tanu M Goyal ICRIER policy series (August 2006) “Impact of the retail Fdi policy on Indian consumer and the way forward” In this study it has been specify that the large Indian consumer base has attracted towards many global retailers. More over Economic development rise in purchasing power and brand proliferation has led to retail modernisation in India. Various store and non-store formats have evolved. In 2010, the Indian retail market was valued at $435 billion of which the share of modern retail was 7 per cent. The sector is expected to grow to $535 billion by 2013 with the share of modern retail at 10 per cent. In 2007,

India was ranked the twelfth largest consumer market and it is expected to be the fifthlargest consumer market by 2025. The growing Indian market has attracted a number of foreign retailers and domestic corporates to invest in this sector. Although FDI is not allowed in multi-brand retail, foreign retailers have entered the Indian market through other routes such as franchising. Ignoring the Fdi in multi brand retailing it is still a decision for entry of Fdi in single brand retail. V.N Prasad & Perumal Koshy (2010) “FDI in Multi- brand Retail Trading: MSE Sector Need Level Playing Field” This article is an attempt to address some of the issues that might come up if FDI in multi-brand retailing is permitted and to suggest possible measures that the government may consider prior to initiating this step in order to safeguard the interests of Indian MSEs, retail small and micro enterprises and also the informal sector enterprises. We do recognise that large, domestic or FDI-funded, can’t evict altogether MSE retailers from the scene, but there would be some causalities, depriving of that may or even more persons of economic activity and thus income. The DIPP Discussion Paper contains several interesting proposals and suggestions, such as reservation of jobs for rural youth; sourcing a certain percentage of products from SMEs; stipulation of a certain percentage of FDI towards ‘building up of back-end infrastructure, logistics or agro processing, resulting in better price realisation for farmers and creation of new job opportunities; and limiting their siting in towns with certain size of population. There is a reasonable amount of literature available on FDI in India, although it is by no means abundant in the specific area of Retail. Current policy is in a state of flux; hence a review of literature on the latest policy proposals and arguments for and against changing policy will be the back-bone of this study. It will enable accurate and relevant questions to be formulated for the proposed survey questionnaire and provide a good background understanding of the likely causes of any patterns and trends that may be revealed by the survey.



On the basis of review of literature the need of study arises: • With this study we will come to know about the current scenario of Indian retail

industry. • India. • This study will help to ascertain the pros & cons of FDI in retailing after knowing It will help to a researcher to know the reasons of increasing investment of FDI in

the customers perceptions.


There are many areas that have been highlighted as requiring further research during this study. Each individual argument for and against almost requires an entire research project to itself so as to delve further into the complexities of each specific scenario. Consumerism is an area that is worthy of further research so as to ascertain whether there is any correlation between changes in consumer dynamics and the emergence of organized retail in specific 'verticals'. It would be Interesting to investigate how this might impact foreign investment in the retail sector in India.

OBJECTIVES OF THE STUDY “He who studies books alone will know how things ought to be, and he who studies man will know how they are.” Charles Caleb Colton • • • To know the awareness level of customers towards FDI in retailing in India. To know the perception of customers towards new proposals of government To know the role of government in promoting FDI in Retail stores in India.

towards FDI in retailing in India.


RESEARCH METHODOLOGY Research Methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. Research design As the aim of the research in this project is to know the perception of supermarket retailers in regard to foreign direct investment in retailing & to study the role of government in promoting the FDI in retailing so in this case Exploratory & Descriptive Research is used to seek insights into general nature of problem. Sampling design A Sample Design is a definite plan for obtaining a sample from a given population. Universe

Sampling universe is the largest entity to be described, of which the sample is a part. In this research. Sampling universe is all those persons who are use to go hypermarkets for shopping. Sample size Sample size refers to the number of items to be selected from the universe to constitute a sample. Due to constraints like time and money, the sample size selected for the research is one hundred customers of retail outlets in Jalandhar. Sampling technique The sampling technique used is the convenience sampling where in those respondents is chosen who could be contacted easily & conveniently because of limiting time for the survey. SOURCES OF DATA Data collection The data will be collected by both primary as well as secondary sources. Primary data Primary data are that which are collected afresh and happens to be actual in character. So a structured interview method will be used to collect primary data by the way of survey through Questionnaire. Secondary data Secondary data refers to the information, which has already been collected. So, the sources of secondary information will include websites, journals, & books etc. Data Analysis Technique: Statistical technique through which data is analysed is factor analysis. It helps in determining the number of factors which affect the acceptance level of customers

regarding new proposals of government in FDI in retailing. Apart from using factor analysis pie charts & Bar graphs have been used to analyse the data.

Just back from first frenzied shopping experience in the UK, a four year old everinquisitive daughter asked to her father, “Why do we not have a Harrods in Delhi? Shopping there is so much fun!” Simple question for a four-year-old, but not so simple for her father to explain. As per the current regulatory regime, retail trading (except under single-brand product retailing — FDI up to 51 per cent, under the Government route) is prohibited in India. Simply put, for a company to be able to get foreign funding, products sold by it to the general public should only be of a ‘single-brand’; this condition being in addition to a few other conditions to be adhered to. That explains why we do not have a Harrods in Delhi. India being a signatory to World Trade Organisation’s General Agreement on Trade in Services, which include wholesale and retailing services, had to open up the retail trade

sector to foreign investment. There were initial reservations towards opening up of retail sector arising from fear of job losses, procurement from international market, competition and loss of entrepreneurial opportunities. However, the government in a series of moves has opened up the retail sector slowly to Foreign Direct Investment (“FDI”). In 1997, FDI in cash and carry (wholesale) with 100 percent ownership was allowed under the Government approval route. It was brought under the automatic route in 2006. 51 percent investment in a single brand retail outlet was also permitted in 2006. FDI in Multi-Brand retailing is prohibited in India. It can be said that the advantages of allowing unrestrained FDI in the retail sector evidently outweigh the disadvantages attached to it and the same can be deduced from the examples of successful experiments in countries like Thailand and China; where too the issue of allowing FDI in the retail sector was first met with incessant protests, but later turned out to be one of the most promising political and economic decisions of their governments and led not only to the commendable rise in the level of employment but also led to the enormous development of their country’s GDP.

Foreign Investment

Foreign Portfolio Investment Investment

Foreign Direct Investment

Foreign Enterprise

Foreign Portfolio Investment  The Foreign

Exchange Management Act 2000 defines Foreign Portfolio Investment as buying and selling of shares, convertible debentures of Indian companies, and units of domestic mutual funds at any of the Indian stock exchanges





holding of securities such as foreign stocks, bonds, or other financial assets ,none of which entails active management or control of the securities issues by the investor,  In 1992, India opened Since then ,FPI has India is more

up its economy and allowed foreign portfolio investment in its domestic stock market  emerged as a major source of private capital inflow in this country  dependent upon FPI than FDI as a source of foreign investment.  During 1992 -2005 more than 50 percent of foreign investment in India came from FPI. Foreign Investment Enterprise Any one of a number of legal structures under which a company can participate in the foreign economy. FIEs tend to have tight government regulation at nearly every important business juncture, which limits the efficiency at which any foreign company can profit from foreign ventures as well as the amount of control that a foreign parent has over the FIE. Foreign Direct Investment These three letters stand for foreign direct investment. The simplest explanation of FDI would be a direct investment by a corporation in a commercial venture in another country. A key to separating this action from involvement in other ventures in a foreign country is that the business enterprise operates completely outside the economy of the corporation’s home country. The investing corporation must control 10 percent or more of the voting power of the new venture. It refers to an investment made by a foreign individual or a company in the productive capacity of another country. It can be considered as the movement of capital across national frontiers in a manner that allows the investor to have a control over the investment. Firms that provide FDI are referred to as MNCs. The investors can invest in existing industries/business or can promote new

industries. There can be two types of FDI- inward and outward. The cumulative of two, results in net FDI inflow. FDI is freely allowed in all the sectors except a few sectors, though in certain sectors FDI is not allowed beyond a ceiling. Why is FDI needed? FDI plays a major role in developing countries like India. They act as a long term source of capital as well as a source of advanced and developed technologies. The investors also bring along best global practices of management. As large amount of capital comes in through these investments more and more industries are set up. This helps in increasing employment. FDI also helps in promoting international trade. This investment is a non-debt, non-volatile investment and returns received on these are generally spent on the host country itself thus helping in the development of the country. Some of the sectors that attract high FDI inflows in India are the hotel and tourism industry, insurance sector, telecommunication, real estate, retail, power, drugs, financial services, infrastructure and pollution control etc. FDI is not permitted in the following sectors:
• • • •

Railways Atomic energy Defence Coal and lignite

An investor has to take a decision regarding the following aspects while investing:

Exchange Rate - The stronger the foreign currency is in comparison to that of the

host country, lesser will be the amount of investment required. In other words, depreciation of currency in the host country will lead to more investments.

Market Size - This refers to the GDP growth. Developing and emerging countries

are more likely to attract investments.


Infrastructure - Investors will invest in a country if they think that the country Tax regime - MNCs are subject to tax in both the parent as well as host country.

has suitable infrastructure to support the business.

The host country which attempts to reduce this double taxation of MNCs will attract more FDI.

Labour market conditions - The educational levels of the labour as well as the Financial and economic stability Political stability

wage rates also play a major role in determining the flow of FDI.
• •

Following are some of the sectors in our country which attract massive FDI investments: Retail Sector This industry accounts for 13% of country’s GDP. Retail outlets acts as an interface between the producers and the consumers of a good. Indian government liberalized FDI in 2005 in this sector to 100%, thus enabling foreign investors to set up retail companies in India. Retail industry is divided into organised and unorganised sectors. Organised sectors include hypermarkets and retail chains whereas unorganised sector include local kirana shops (mom and pop stores). The latter is more prevalent in India. Due to massive development taking place, organised sector is increasing its foothold in the country. Since advanced technology and management structure is used with foreign investments the price of the goods in the organised retail industry falls and productivity of the firm increases. Today modern retail outlets provide everything from basic amenities to luxury goods. They also provide consumer with a wide variety. They have become the one-stop shop for customers. This trend is destroying the sales of unorganised retail sector. Therefore on one hand FDI helps in reducing prices of the manufactured goods and on the other, it is rendering our unorganized retail sector paralyzed. The government has recently made it mandatory for foreign investors in multi-brand retail

sector to do their bulk sourcing from small farmers. With this move government is preventing wipe-out of shopkeepers and small retailers. Manufacturing Sector Government has allowed 100% FDI in this sector except in defence industry and cigarette manufacturing. Foreign investments in this sector will help in employment of semi-skilled labour by providing them with access to developed technology. Real Estate, Construction Development and Tourism Any country’s growth and development is determined by its infrastructure. Due to increasing population and migration of people from rural to urban areas, the real estate sector is booming. Tourism industry is one of the major earners of foreign exchange for the country. It has a huge potential for our economy. It is also one of the major sectors in employment. Large amount of investments are needed to build roads, bridges, infrastructure so as to promote overall economic development of the country. Power Sector Power is considered most crucial sector for development. Since public sector alone was not able to meet the demands, investments from private and foreign investors was encouraged. Power generation, transmission and distribution are main areas of consideration. India has a vast scope of development in hydel power, nuclear power, solar power, thermal energy as well as in wind energy. Renewable sources of energy require vast amount of investments for research and development. According to history the United States was the leader in the FDI activity dating back as far as the end of World War II. Businesses from other nations have taken up the flag of FDI, including many who were not in a financial position to do so just a few years ago.


The practice has grown significantly in the last couple of decades, to the point that FDI has generated quite a bit of opposition from groups such as labor unions. These organizations have expressed concern that investing at such a level in another country eliminates jobs. Legislation was introduced in the early 1970s that would have put an end to the tax incentives of FDI. But members of the Nixon administration, Congress and business interests rallied to make sure that this attack on their expansion plans was not successful. One key to understanding FDI is to get a mental picture of the global scale of corporations able to make such investment. A carefully planned FDI can provide a huge new market for the company, perhaps introducing products and services to an area where they have never been available. Not only that, but such an investment may also be more profitable if construction costs and labor costs are less in the host country. The definition of FDI originally meant that the investing corporation gained a significant number of shares (10 percent or more) of the new venture. In recent years, however, companies have been able to make a foreign direct investment that is actually long-term management control as opposed to direct investment in buildings and equipment. FDI growth has been a key factor in the “international” nature of business that many are familiar with in the 21st century. This growth has been facilitated by changes in regulations both in the originating country and in the country where the new installation is to be built.


Corporations from some of the countries that lead the world’s economy have found fertile soil for FDI in nations where commercial development was limited, if it existed at all. The dollars invested in such developing-country projects increased 40 times over in less than 30 years. The financial strength of the investing corporations has sometimes meant failure for smaller competitors in the target country. One of the reasons is that foreign direct investment in buildings and equipment still accounts for a vast majority of FDI activity. Corporations from the originating country gain a significant financial foothold in the host country. Even with this factor, host countries may welcome FDI because of the positive impact it has on the smaller economy.

HISTORICAL PROSPECTIVE OF FDI OVERVIEW It has been said that India has “one foot grounded in time-honoured traditions and the other fervently striding into the entrepreneurial 6 e-age”. India truly does embrace diversity with a passion like very few places in the world. This study is focused on the retail sector and the 'current' Foreign Direct Investment (FDI) position in India, and it therefore seems logical to start in reasonably recent times. Retailing can normally be defined as “the sale of goods or merchandise from a fixed location, such as a department

store or kiosk, or by post, in small or individual lots for direct 8 consumption by the purchaser.”

Before beginning however, let us briefly define 'Foreign Direct Investment', and 'Retailing', as they are the key focus of the entire study. Foreign Direct Investment can be defined as the “Acquisition or construction of physical capital by a firm from one (source) country in another (host) country.” Post-independence & pre-reform There were “half-hearted attempts made by the Rajiv Gandhi government in the mid1980s to selectively open the economy to foreign trade and relax import restrictions, which did not have the intended consequence of stimulating investment and eventually pushed the balance of payments out of gear. Export growth had turned negative and for the first time Indian industrial production recorded negative growth. “In 1990-91 the current account deficit was 3.1% and inflation was 12%. Things began to get out of hand and the government went to foreign lenders pledging gold held at the Reserve Bank of India (India's central bank) for short term loans so as to help get through the financial crisis. In 1990, just as China was beginning to become a popular place for investors, India was in the middle of economic agony after many years of over-zealous government control over economic activity, isolation and poorly managed fiscal policy. By half way through 1991, the Indian government was about to default on its foreign currency loans; and its foreign exchange reserves were so low that India only had enough dollars for two weeks' worth of imports.


Post-Reform The Indian National Congress with the support of the United Progressive Alliance have been in government since 2004 and were re-elected for a further term in May 2009. Although a more liberal approach to foreign investment in India has emerged in recent times, Kalirajan and Sankar (2003) argue that “low overall productivity of investment, excessive fragmentation of markets, shortage of invertible funds, and the poor infrastructure may pose significant problems to sustained higher economic growth… there is reason to believe that growth impulses from the first 21generation of reforms may have ebbed”. The Indian government has clearly recognized this, and in the Finance Minister's Budget Speech for 1999-2000, it was stressed that there was a need to debate and make decisions in relation to the next wave of reforms to be put in place to ensure India's economic strength and to make it “fully capable of competing successfully in the evolving world order”. The liberalizations subsequently introduced by the Finance Minister (Manmohan Singh) have clearly been successful. “Between 1991 and 2004, India's economy grew by an average of 6% a year. In 2005 and 2006 growth accelerated to over 8% and in 2007 it looked like it might be 3 well over 9%.”

About Foreign direct investment To put in simple words, FDI refers to capital inflows from abroad that is invested in or to enhance the production capacity of the economy. Foreign Investment in India is governed by the FDI policy announced by the Government of India and the provision of the Foreign Exchange Management Act (FEMA) 1999. The Reserve Bank of India ‘RBI’. In this regard had issued a notification, which contains the Foreign Exchange

Management (Transfer or issue of security by a person resident outside India) Regulations, 2000. This notification has been amended from time to time. The Ministry of Commerce and Industry, Government of India is the nodal agency for motoring and reviewing the FDI policy on continued basis and changes in sectorial policy/ sectorial equity cap. The FDI policy is notified through Press Notes by the Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion (DIPP). The foreign investors are free to invest in India, except few sectors/activities, where prior approval from the RBI or Foreign Investment Promotion Board (‘FIPB’) would be required. FDI Policy in regard to Retail industry It will be prudent to look into Press Note 4 of 2006 issued by DIPP (Department of industrial Policy & Promotion) 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 of Foreign investment promotion

board (FIPB) for retail trade of ‘Single Brand’ products. c) FDI is not permitted in Multi Brand Retailing in India.

The statement in Parliament is very clear and there was no mention of linking it to FDI into single-brand sector," the official said, referring to Finance Minister Pranab Mukherjee's statement in the Lok Sabha. "The decision to permit 51% FDI in multibrand retail will be suspended till a consensus is developed through consultations with various stakeholders," the minister had said after the all-party meeting that had been called to break the logjam in parliament. The department of industrial policy and promotion, or DIPP, is already finalising the press note to give effect to the November

25 cabinet decision to remove the cap of 51% foreign direct investment in single-brand retail, the official said. This will allow foreign retailers such as Marks & Spencer and Zara complete ownership of their Indian stores, besides facilitating the entry of others like Ikea and Gap that have been reluctant to form partnerships with domestic retailers to set up stores in the country. However, the official added, the government may introduce some riders to avoid repeat of the furore over easing of norms in multi-brand retail. "Some changes may be incorporated to avoid opposition of any kind. We do not want a repeat of the multibrand fiasco," the official said. These riders may be in addition to the stringent conditions already approved by the cabinet. Foreign investors are already required to own the brand they intend to retail, the brand must be present in other countries and the retailer must source 30% of the products to be retailed from small industry. The final policy may increase the local sourcing requirement from the current 30%, while specifying that the condition will not apply to high-tech goods that small industry cannot manufacture. The government has defined micro and small enterprises as those which have assets of less than 5 crore. India has kept the retail sector largely closed to outsiders to safeguard the livelihood of nearly 15 million small storeowners and only allows 51 percent foreign investment in single brand retail with prior Government permission. FDI is also allowed in the wholesale business. Single-brand retailers such as Louis Vuitton, Fendi, LLadro, Nike and Toyota can operate now on their own. Metro is already operating through the cash-and-carry wholesale mode. The policy makers continue to explore areas where FDI can be invited without hurting the interest of local retail community. Government is considering opening up of the for select sectors such as electronic goods, stationery, sports goods, and building equipment. Amidst huge political drama, the Indian Government finally decided to allow up to 51 percent FDI in multi- brand retail and 100 percent in single brand retail, subjecting to certain conditions but revoked it later due to political pressure. It could have been a welcome step in strengthening India’s FDI regime with making it in tune

with country’s needs. As per the Indian cabinet perspective , the FDI policy has been moving away from the license raj mentality of protection against imagined foreign dictators towards a more open, healthy and competitive environment. This policy would have provided a window for the world class retailer chains like Carrefour, Wal-Mart, etc. to set their foot in the booming Indian retail sector. The policy, if implemented, would have allowed multi-brand foreign retailers to set up their stores only in the cities having a population more than 10lacs, as per the 2011 census. The foreign investors would have been required to put 50% of total FDI in back end infrastructures inclusive of capital expenditure on the activities. The single brand retailers exceeding the limit of 51% would have needed to source a least of 30% of the products from the small industries. All compliance was through self-certification of the foreign retailers either for the backend investment or the procurement from small sectors. Entry Options for Foreign Players prior to FDI Policy Although prior to Jan 24, 2006, FDI was not authorised in retailing, most general players had been operating in the country. Some of entrance routes used by them have been discussed in sum as below:1. Franchise Agreements It is an easiest track to come in the Indian market. In franchising and commission agents’ services, FDI (unless otherwise prohibited) is allowed with the approval of the Reserve Bank of India (RBI) under the Foreign Exchange Management Act. This is a most usual mode for entrance of quick food bondage opposite a world. Apart from quick food bondage identical to Pizza Hut, players such as Lacoste, Mango, Nike as good as Marks as good as Spencer, have entered Indian marketplace by this route. 2. Cash And Carry Wholesale Trading 100% FDI is allowed in wholesale trading which involves building of a large distribution infrastructure to assist local manufacturers. The wholesaler deals only with


smaller retailers and not Consumers. Metro AG of Germany was the first significant global player to enter India through this route. 3. Strategic Licensing Agreements Some foreign brands give exclusive licences and distribution rights to Indian companies. Through these rights, Indian companies can either sell it through their own stores, or enter into shop-in-shop arrangements or distribute the brands to franchisees. Mango, the Spanish apparel brand has entered India through this route with an agreement with Pyramid, Mumbai, SPAR entered into a similar agreement with Radhakrishna Foodlands Pvt. Ltd 4. Manufacturing and Wholly Owned Subsidiaries. The foreign brands such as Nike, Reebok, Adidas, etc. that have wholly-owned subsidiaries in manufacturing are treated as Indian companies and are, therefore, allowed to do retail. These companies have been authorised to sell products to Indian consumers by franchising, internal distributors, existent Indian retailers, own outlets, etc. For instance, Nike entered through an exclusive licensing agreement with Sierra Enterprises but now has a wholly owned subsidiary, Nike India Private Limited.

FDI Scenario in India Cabinet approves 51 pc FDI in multi-brand retailing and 100% FDI permitted in Single Brand Retail. This opens India's $450 billion retail market to global supermarket giants. It expected to boost investment in retails sector in India. The new rules may commit supermarkets to strict local sourcing requirements and minimum investment levels aimed at protecting jobs. The conditions include • • • • Minimum investment of $100 million, 50% in back end Back end cannot include investment in land and rentals and front end stores At least 30% sourcing from small scales industries Stores can be in cities with minimum population of one million

Government will have the first right of procurement of farm produce

The Government has not categorically defined the meaning of “Single Brand” anywhere neither in any of its circulars nor any notifications. In single-brand retail, FDI up to 51 per cent is allowed, subject to Foreign Investment Promotion Board (FIPB) approval and subject to the conditions mentioned in Press Note 3 that (a) Only single brand products would be sold i.e. retail of goods of multi-brand even if produced by the same manufacturer would not be allowed (b) Products should be sold under the same brand internationally


(c) single-brand product retail would only cover products which are branded during manufacturing and (d) Any addition to product categories to be sold under “single-brand” would require fresh approval from the government. While the phrase ‘single brand’ has not been defined, it implies that foreign companies would be allowed to sell goods sold internationally under a ‘single brand’, viz. Reebok, Nokia, and Adidas. Retailing of goods of multiple brands, even if such products were produced by the same manufacturer, would not be allowed. FDI in ‘Single brand’ retail implies that a retail store with foreign investment can only sell one brand. For example, if Adidas were to obtain permission to retail its flagship brand in India, those retail outlets could only sell products under the Adidas brand and not the Reebok brand, for which separate permission is required. If granted permission, Adidas could sell products under the Reebok brand in separate outlets. Brands could be classified as products and multiple products, or could be manufacturer brands and own-label brands. Assume that a company owns two leading international brands in the footwear industry – say ‘A’ and ‘R’. If the corporate were to obtain permission to retail its brand in India with a local partner, it would need to specify which of the brands it would sell. A reading of the government release indicates that A and R would need separate approvals, separate legal entities, and may be even separate stores in which to operate in India. However, it should be noted that the retailers would be able to sell multiple products under the same brand, e.g. a product range under brand ‘A’ Further, it appears that the same joint venture partners could operate various brands, but under separate legal entities. Now, taking an example of a large departmental grocery chain, prima facie it appears that it would not be able to enter India. These chains would, typically, source products and, thereafter, brand it under their private labels. Since the regulations require the products to be branded at the manufacturing stage, this model may not work. The


regulations appear to discourage own-label products and appear to be tilted heavily towards the foreign manufacturer brands. There is ambiguity in the interpretation of the term ‘single brand’. The existing policy does not clearly codify whether retailing of goods with sub-brands bunched under a major parent brand can be considered as single-brand retailing and, accordingly, eligible for 51 per cent FDI. Additionally, the question on whether co-branded goods (specifically branded as such at the time of manufacturing) would qualify as single brand retail trading remains unanswered. 100 percent FDI in single brand welcomed by Small scale industries Welcoming the government’s decision to allow 100 per cent foreign direct investment in single-brand retail, India’s small and medium enterprises (SMEs) say the mandatory 30 percent sourcing from micro and small industries will help them achieve higher growth. A Confederation of Indian Industry (CII) survey found that the SME industry, by and large, supported 100 per cent FDI in single-brand retail. “The government’s decision of mandatory sourcing of a minimum of 30 per cent from Indian micro and small industry will help SMEs to achieve higher growth in sales, size of the industry, capacity addition, increased orders, qualitative improvements and branding of the products, technology up gradation, employment etc.,” said the survey on the impact of FDI in retail on SMEs. According to the survey, mandatory sourcing will provide for expansion of the scales of production facilitating domestic value addition in manufacturing, thereby creating a multiplier effect on employment, technology up gradation and income generation, demand and further investment. The SMEs are also bullish about 51 per cent FDI in multi-brand retail and expect its earlier and speedier implementation would lead to the growth of organised retail. “India’s growing retail boom is a success story. Fifty-one percent FDI in multi-brand retail and its early implementation would give a major boost to the all-round growth of organized retail in the country having substantial positive impact on the growth of SMEs,” said Chandrajit Banerjee, director general, CII. The CII survey was based on a

large sample size covering different categories of SMEs according to sales turnover. This included companies with a turnover of Rs.25 lakh to Rs.1 crore, between Rs.1 crore to Rs.5 crore, Rs.5 crore to 25 crore and those having turnover between Rs.25 crore and 100 crore and above, from different regions of the country. Asked how the SME industry considered the entry of MNC (Multinational Corporation) retailers, over 66 per cent of the respondents said it was an opportunity. Around 21 percent of them perceived it as a threat. About 12.5 per cent of respondents said the decision would have little or no impact on their businesses. Over 98 per cent of the respondents said opening of the FDI in retail will augment growth of sales of their products. Of them, around 21 percent foresaw the growth of sales to escalate more than 20 per cent while 31 per cent expected the impact in the range of 10-20 percent. Around 48 per cent of the respondents said the decision would have a positive impact whereas 35 per cent expected no change in the employment scenario.

The government has also not defined the term Multi Brand. FDI in Multi Brand retail implies that a retail store with a foreign investment can sell multiple brands under one roof. In July 2010, Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce circulated a discussion paper on allowing FDI in multi-brand retail. The paper doesn’t suggest any upper limit on FDI in multi-brand retail. If implemented, it would open the doors for global retail giants to enter and establish their footprints on the retail landscape of India. Opening up FDI in multi-brand retail will mean that global retailers including Wal-Mart, Carrefour and Tesco can open stores offering a range of household items and grocery directly to consumers in the same way as the ubiquitous ’kirana’ store.

Foreign Investor’s Concern Regarding FDI Policy in India For those brands which adopt the franchising route as a matter of policy, the current FDI Policy will not make any difference. They would have preferred that the Government liberalize rules for maximizing their royalty and franchise fees. They must still rely on innovative structuring of franchise arrangements to maximize their returns. Consumer durable majors such as LG and Samsung, which have exclusive franchisee owned stores, are unlikely to shift from the preferred route right away. For those companies which choose to adopt the route of 51% partnership, they must tie up with a local partner. The key is finding a partner which is reliable and who can also teach a trick or two about the domestic market and the Indian consumer. Currently, the organized retail sector is dominated by the likes of large business groups which decided to diversify into retail to cash in on the boom in the sector – corporates such as Tata through its brand Westside, RPG Group through Food world, Pantaloons of the Raheja Group and Shopper’s Stop. Do foreign investors look to tie up with an existing retailer or look to others not necessarily in the business but looking to diversify, as many business groups are doing? An arrangement in the short to medium term may work wonders but what happens if the Government decides to further liberalize the regulations as it is currently contemplating? Will the foreign investor terminate the agreement with Indian partner and trade in market without him? Either way, the foreign investor must negotiate its joint venture agreements carefully, with an option for a buy-out of the Indian partner’s share if and when regulations so permit. They must also be aware of the regulation which states that once a foreign company enters into a technical or financial collaboration with an Indian partner, it cannot enter into another joint venture with another Indian company or set up its own subsidiary in the ‘same’ field’ without the first partner’s consent if the joint venture agreement does not provide for a ‘conflict of interest’ clause. In effect, it means that foreign brand owners must be extremely careful whom they choose as partners and the brand they introduce in India. The first brand could also be their last if they do not negotiate the strategic arrangement diligently.

Concerns for the Government for only Partially Allowing FDI in Retail Sector A number of concerns were expressed with regard to partial opening of the retail sector for FDI. The Honourable Department Related Parliamentary Standing Committee on Commerce, in its 90th Report, on ‘Foreign and Domestic Investment in Retail Sector’, laid in the Lok Sabha and the Rajya Sabha on 8 June, 2009, had made an in-depth study on the subject and identified a number of issues related to FDI in the retail sector. These included: It would lead to unfair competition and ultimately result in large-scale exit of domestic retailers, especially the small family managed outlets, leading to large scale displacement of persons employed in the retail sector. Further, as the manufacturing sector has not been growing fast enough, the persons displaced from the retail sector would not be absorbed there. Another concern is that the Indian retail sector, particularly organized retail, is still under-developed and in a nascent stage and that, therefore, it is important that the domestic retail sector is allowed to grow and consolidate first, before opening this sector to foreign investors. Antagonists of FDI in retail sector oppose the same on various grounds, like, that the entry of large global retailers such as Wal-Mart would kill local shops and millions of jobs, since the unorganized retail sector employs an enormous percentage of Indian population after the agriculture sector; secondly that the global retailers would conspire and exercise monopolistic power to raise prices and monopolistic (big buying) power to reduce the prices received by the suppliers; thirdly, it would lead to asymmetrical growth in cities, causing discontent and social tension elsewhere. Hence, both the consumers and the suppliers would lose, while the profit margins of such retail chains would go up.

Limitations of the present setup
Infrastructure There has been a lack of investment in the logistics of the retail chain, leading to an inefficient market mechanism. Though India is the second largest producer of fruits and

vegetables (about 180 million MT), it has a very limited integrated cold-chain infrastructure, with only 5386 stand-alone cold storages, having a total capacity of 23.6 million MT. , 80% of this is used only for potatoes. The chain is highly fragmented and hence, perishable horticultural commodities find it difficult to link to distant markets, including overseas markets, round the year. Storage infrastructure is necessary for carrying over the agricultural produce from production periods to the rest of the year and to prevent distress sales. Lack of adequate storage facilities cause heavy losses to farmers in terms of wastage in quality and quantity of produce in general. Though FDI is permitted in cold-chain to the extent of 100%, through the automatic route, in the absence of FDI in retailing; FDI flow to the sector has not been significant. Intermediaries dominate the value chain Intermediaries often flout mandi norms and their pricing lacks transparency. Wholesale regulated markets, governed by State APMC Acts, have developed a monopolistic and non-transparent character. According to some reports, Indian farmers realize only 1/3 rd of the total price paid by the final consumer, as against 2/3rd by farmers in nations with a higher share of organized retail. Improper Public Distribution System (PDS) There is a big question mark on the efficacy of the public procurement and PDS set-up and the bill on food subsidies is rising. In spite of such heavy subsidies, overall food based inflation has been a matter of great concern. The absence of a ‘farm-to-fork’ retail supply system has led to the ultimate customers paying a premium for shortages and a charge for wastages. No Global Reach The Micro Small & Medium Enterprises (“MSME”) sector has also suffered due to lack of branding and lack of avenues to reach out to the vast world markets. While India has continued to provide emphasis on the development of MSME sector, the share of unorganised sector in overall manufacturing has declined from 34.5% in 1999-2000 to

30.3% in 2007-08. This has largely been due to the inability of this sector to access latest technology and improve its marketing interface.

Rationale behind Allowing FDI in Retail Sector
FDI can be a powerful catalyst to spur competition in the retail industry, due to the current scenario of low competition and poor productivity. The policy of single-brand retail was adopted to allow Indian consumers access to foreign brands. Since Indians spend a lot of money shopping abroad, this policy enables them to spend the same money on the same goods in India. FDI in single-brand retailing was permitted in 2006, up to 51 per cent of ownership. Between then and May 2010, a total of 94 proposals have been received. Of these, 57 proposals have been approved. An FDI inflow of US$196.46 million under the category of single brand retailing was received between April 2006 and September 2010, comprising 0.16 per cent of the total FDI inflows during the period. Retail stocks rose by as much as 5%. Shares of Pantaloons Retail (India) Ltd ended 4.84% up at Rs 441 on the Bombay Stock Exchange. Shares of Shopper’s Stop Ltd rose 2.02% and Trent Ltd, 3.19%. The exchange’s key index rose 173.04 points, or 0.99%, to 17,614.48. But this is very less


as compared to what it would have been had FDI up to 100% been allowed in India for single brand. The policy of allowing 100% FDI in single brand retail can benefit both the foreign retailer and the Indian partner – foreign players get local market knowledge, while Indian companies can access global best management practices, designs and technological knowhow. By partially opening this sector, the government was able to reduce the pressure from its trading partners in bilateral/ multilateral negotiations and could demonstrate India’s intentions in liberalising this sector in a phased manner. Permitting foreign investment in food-based retailing is likely to ensure adequate flow of capital into the country & its productive use, in a manner likely to promote the welfare of all sections of society, particularly farmers and consumers. It would also help bring about improvements in farmer income & agricultural growth and assist in lowering consumer prices inflation. Apart from this, by allowing FDI in retail trade, India will significantly flourish in terms of quality standards and consumer expectations, since the inflow of FDI in retail sector is bound to pull up the quality standards and cost-competitiveness of Indian producers in all the segments. It is therefore obvious that we should not only permit but encourage FDI in retail trade. Lastly, it is to be noted that the Indian Council of Research in International Economic Relations (ICRIER), a premier economic think tank of the country, which was appointed to look into the impact of BIG capital in the retail sector, has projected the worth of Indian retail sector to reach $496 billion by 2011-12 and ICRIER has also come to conclusion that investment of ‘big’ money (large corporates and FDI) in the retail sector would in the long run not harm interests of small, traditional, retailers. In light of the above, it can be safely concluded that allowing healthy FDI in the retail sector would not only lead to a substantial surge in the country’s GDP and overall economic development, but would inter alia also help in integrating the Indian retail market with that of the global retail market in addition to providing not just employment

but a better paying employment, which the unorganized sector (kirana and other small time retailing shops) have undoubtedly failed to provide to the masses employed in them. Industrial organisations such as CII, FICCI, US-India Business Council (USIBC), the American Chamber of Commerce in India, The Retail Association of India (RAI) and Shopping Centers Association of India (a 44 member association of Indian multi-brand retailers and shopping malls) favour a phased approach toward liberalising FDI in multibrand retailing, and most of them agree with considering a cap of 49-51 per cent to start with. The international retail players such as Wal-Mart, Carrefour, Metro, IKEA, and TESCO share the same view and insist on a clear path towards 100 per cent opening up in near future. Large multinational retailers such as US-based Wal-Mart, Germany’s Metro AG and Woolworths Ltd, the largest Australian retailer that operates in wholesale cash-andcarry ventures in India, have been demanding liberalisation of FDI rules on multi-brand retail for some time. Thus, as a matter of fact FDI in the buzzing Indian retail sector should not just be freely allowed but per contra should be significantly encouraged. Allowing FDI in multi brand retail can bring about Supply Chain Improvement, Investment in Technology, Manpower and Skill development, Tourism Development, Greater Sourcing From India, Up gradation in Agriculture, Efficient Small and Medium Scale Industries, Growth in market size and Benefits to government through greater GDP, tax income and employment generation. Prerequisites before allowing FDI in Multi Brand Retail and Lifting Cap of Single Brand Retail FDI in multi-brand retailing must be dealt cautiously as it has direct impact on a large chunk of population. Left alone foreign capital will seek ways through which it can only multiply itself, and unthinking application of capital for profit, given our peculiar socioeconomic conditions, may spell doom and deepen the gap between the rich and the

poor. Thus the proliferation of foreign capital into multi-brand retailing needs to be anchored in such a way that it results in a win-win situation for India. This can be done by integrating into the rules and regulations for FDI in multi-brand retailing certain inbuilt safety valves. For example FDI in multi –brand retailing can be allowed in a calibrated manner with social safeguards so that the effect of possible labour dislocation can be analysed and policy fine-tuned accordingly. To ensure that the foreign investors make a genuine contribution to the development of infrastructure and logistics, it can be stipulated that a percentage of FDI should be spent towards building up of back end infrastructure, logistics or agro processing units. Reconstituting the poverty stricken and stagnating rural sphere into a forward moving and prosperous rural sphere can be one of the justifications for introducing FDI in multi-brand retailing. To actualize this goal it can be stipulated that at least 50% of the jobs in the retail outlet should be reserved for rural youth and that a certain amount of farm produce be procured from the poor farmers. Similarly to develop our small and medium enterprise (SME), it can also be stipulated that a minimum percentage of manufactured products be sourced from the SME sector in India. PDS is still in many ways the life line of the people living below the poverty line. To ensure that the system is not weakened the government may reserve the right to procure a certain amount of food grains for replenishing the buffer. To protect the interest of small retailers the government may also put in place an exclusive regulatory framework. It will ensure that the retailing giants do resort to predatory pricing or acquire monopolistic tendencies. Besides, the government and RBI need to evolve suitable policies to enable the retailers in the unorganized sector to expand and improve their efficiencies. If Government is allowing FDI, it must do it in a calibrated fashion because it is politically sensitive and link it (with) up some caveat from creating some back-end infrastructure. Further, To take care of the concerns of the Government before allowing 100% FDI in Single Brand Retail and Multi- Brand Retail, the following recommendations are being proposed :•

Preparation of a legal and regulatory framework and enforcement mechanism to

ensure that large retailers are not able to dislocate small retailers by unfair means.

Extension of institutional credit, at lower rates, by public sector banks, to help

improve efficiencies of small retailers; undertaking of proactive programme for assisting small retailers to upgrade themselves.

Enactment of a National Shopping Mall Regulation Act to regulate the fiscal and

social aspects of the entire retail sector.

ROLE OF GOVERNMENT IN PROMOTING FDI IN RETAIL The government announced that the retail sector foreign investors who want to set up operations in India would have to source at least 30 percent of their requirements exclusively from Indian micro and small enterprises. Needless to say, this is a piece of good news for the Indian SME sector. In fact, I think that the benefits of approving FDI in retail would outweigh any potential threats to our whole economy. Allowing FDI in the retail sector, which has long been facing several supply side constraints, will certainly help unclog supply bottlenecks of which we are complaining for a long time as a cause of high inflation. In addition, the retail sector is expected to grow ten times in the next ten years but this level of growth is not possible without expansion of the organised retail sector, which, in turn, is not likely without participation of big global players. As far farmers are concerned nobody can deny the fact that at present there is a big difference in farm gate prices, wholesale prices and retail prices. Allowing big global players in retail will help to unlock the true potential of the agricultural value chain in the country where the majority of the population is employed in agriculture, not unorganised retail. Removal of the long chain of intermediaries will also benefit

customers. The Indian industry will benefit to a great extent once global retailers will start setting up local operations here and sourcing products from local manufacturers, particularly from sectors like handicrafts, textiles, and food processing. It will also avail opportunities for SMEs to benefit from partnership with big players in product development, deal under signed contract, timely payment, new knowledge about supply chain management, and more connectivity with international channels. The government is likely to allow global supermarkets such as Wal-Mart, Tesco and Carrefour to set up deep discount stores in India, but with a few conditions. The department of industrial policy and promotion has moved a formal proposal to allow up to 51% FDI in multi brand retail and 100% in single brand retail. According to the proposed policy, at least 50% of the total FDI should be in back-end infrastructure. Large deep discount stores will be allowed to be set up only in cities with a population of more than 10 lakh and only in those states that allow FDI in multi-brand retail.

Figure:1.4- New proposals of Government in FDI in retailing The government, on November 24, had approved 51% FDI in multi-brand retail and also increased the cap in the single-brand retail to 100%, from the earlier 51%. Allowing 100% ownership in single-brand retail will help foreign retailers like Marks & Spencer and Zara Espana SA gain full ownership of their Indian outlets and will also

facilitate the entry of other global retailers like IKEA and Gap Inc, which were not willing to form partnership to establish outlets in India. Earlier, last month, the Press Trust of India quoting Commerce and Industry Minister Anand Sharma said India would move ahead with the decision to open single-brand retail for FDI, notwithstanding the fact that the government has not yet notified the decision on opening doors for foreign retail giants in the single brand as well as multibrand retail sector. The government in December withdrew its decision to allow foreign players entry into the country's $450-billion retail market, in the wake of several political parties voicing reservations against the policy decision.

DATA INTERPRETATION & ANALYSIS Below is a summary of the data results from the survey following analysis. There were 100 respondents in total. The following analysis charts display the results visually. Statement (1) Customers preferences to do shopping in hypermarkets like big bazaar This question has been asked to know the awareness level & shopping attitude of customers towards Hypermarkets. Table: 2.1 Response Yes No Can’t Say Total Respondent 100 00 00 100 Percentage 100 00 00 100


0% 0%

Y es No C an't S ay

100 %

Figure: 2.1 Customers preference towards shopping in hypermarkets Interpretation As through the research work I came to know that all the respondents prefer to do shopping from hypermarket. As the hypermarkets denotes where a customer can buy anything under a one roof. Statement (2) Customers given ranking to different Hypermarkets according to their choice from 1 to 11 As there are no.of hypermarkets exist in India so a list of 11 hypermarkets has been shown to respondents to give ranking according to their choice.


1 1% % 6 % 5 %

1% 0

2 2 % % 4% 0

5 % 3 % 2% 5

B B za r ig a a R nce F elia resh Ma & S rks pencer More for you Visha Meg Ma l a rt S ubhik sha H yper city Metro ca & ca sh rry Vm rt a S hoprite hyper S r ba a ta za r

Figure: 2.2 Likings of customers towards different hypermarkets Interpretations Respondents are highly visited at big bazaar as 40% of respondents gave first preference to big bazaar and after that 25% goes to Reliance fresh, 10% to V mart and remain all are standing out 1% to 5%. Statement (3) Factors influences Customers to do shopping in hypermarket? This question has been asked to know the preference of customers that how much consideration they give towards Product, Price, Comfort level, Convenience while purchasing goods from hypermarkets. Product Price Comfort Variety of Goods Strongly Agree Agree Neutral Disagree Strongly Disagree

Convenie nce 35 29 08 14 14

25 39 24 09 3

40 40 05 05 10

31 21 14 15 19

36 30 17 09 08

Table No. 2.2 Factors influences Customers to do shopping in hypermarket

40 35 30 25 20 15 10 5 0

S trong Ag ly Ag ree Neutra l D a ree is g

S trong D ly is P roduc t P e ric C fort om Va riety of G oods C onvenienc e

Figure:2.3 Factors influences Customers to do shopping in hypermarket Interpretations The results shows that most of the respondents are agree or strongly agree that they consider the all variables while doing shopping from hypermarket. There are very rare respondents who are less conscious towards above stated variables. Statement (4) Frequency of customers to go to these retail outlets The main purpose of this question was to check the shopping level of customers or their interest in hypermarkets




3% 25%

Onc In A Week e T e in aWeek wic Les tha 1 m s n onth B etween 1 to 3 Month


B etween 3 to 5 month More tha 5 m n onth
2 7%

Figure: 2.4 Frequency to do shopping in Hypermarket Interpretation Out of 100 respondents The most percentage goes to who do shopping between 1 to 3 month i.e. 37%, after that 27 % prefer less than one month and remaining percentage 4% who goes to hypermarket twice in a week or more than 5 month. Thus it shows that shopping form hypermarkets is quite popular among respondents. Statement (5) Are you aware about existing foreign players like Wal-Mart & Carrefour? Response Yes No Can’t Say Respondent 90 08 02 Percentage 90% 8% 2%

Table No. 2.3 Awareness regarding foreign players like Wal-Mart & Carrefour


C an't S ay




C an't S ay No Y es

Y es






8 0


Figure: 2.5 Awareness regarding foreign players like Wal-Mart & Carrefour Interpretation The main aim to ask this question was to check the awareness level of customers towards foreign players in hypermarket. And I came to know that out of 100 respondents 65% are aware about the foreign players. Statement (6) Awareness of customers about new regulations of government towards foreign investment in Retailing As existence of FDI in retailing in India from so many years but new norms formulated by government are familiar to customers 100% Foreign direct Investment in Single Brand Retail Response Yes No Can’t Say Total Respondent 62 27 11 100

% of Respondents 62 27 11 100

Table No. 2.4Awareness towards new regulations in single brand 11%

27 %

Yes N o C n't S y a a


Figure: 2.6 Awareness towards new regulations in single brand 50% Foreign direct Investment in multi Brand Retail Response Yes No Can’t Say Total Respondent 55 30 15 100 % of Respondents 55 30 15 100

Table No. 2.5 Awareness towards new regulations in multi brand


60 50 40 30 20 10 0 Yes no c n't s y a a Yes no can't s ay

Figure: 2.7 Awareness towards new regulations in multi brand Interpretation The first question revealed that 62% of respondents were aware of current FDI in retail policy, with 27% not being aware, and 11% of respondents giving 'no response'. This data shows that a significant amount of people within the domestic market place are paying an interest in the current policies and how these could influence their industry and country. The awareness was anticipated to be high, due to the very fact that the topic has been discussed in the Indian media many a time over the last decade. Regarding awareness towards 50% in single brand retailing 55% of respondents are aware, 30% are not aware and 15 have no any idea regarding this.

Statement (7) Permission to foreign retailers for 100% investment in single brand in India would be beneficial for country

The main purpose behind this question was to know the view about new proposal set out by government in FDI policy in Retail. Response Strongly Agree Agree Neutral Disagree Strongly Disagree Total Respondents 16 42 23 15 4 100 % of Respondents 16 42 23 15 4 100

Table: 2.6 Permission of 100% in single brand would be beneficial Figure: 2.8 Permission of 100% in single brand would be beneficial
45 40 35 30 25 20 15 10 5 0

R pns es e

S trong ly Ag ree

Ag ree

Neutra l

D a ree is g

S trong ly D a ree is g

Interpretation As in this question 16% & 42% respondents are in favour or agree that government is doing right by promoting 100% FDI in single brand retailing where it will more beneficial for small as well as medium scale industries. 23% of the respondents are neither agree nor disagree. Statement (8) Customers view towards Indian Government in reduction of the FDI restrictions in India


It was evident from the responses that a significant number of respondents would like to see the opening up of FDI in the retail sector. Response Yes No Can’t Say Total Respondents 51 35 14 100 % of Respondents 51 35 14 100

Table: 2.7 Reduction in FDI restrictions


Y es No 51% 35% C t say an

Figure 2.9. Reduction in FDI restrictions

Interpretation 51% of respondents said 'Yes', India should open up the FDI policy and reduce the restrictions on entry level, while 35% said 'No and 14% of respondents have no idea about or clear. These results show a strong amount of support for the concept of opening up FDI, although the data analysis also highlights that there is still a small but significant (35%) group of people within the domestic industry who oppose the idea of opening up FDI.

Statement (9). Government new norms in foreign direct investment will helpful for Indian economy in following factors Formulation of Problem-The objectives of using factor analysis are to study about the factors that determines attitude of customers regarding Promotion of FDI in Retail segment by Government in India. The variables to be included in the factor analysis based on past research, theory and judgments. The variables are appropriately measured on 5-point likert scale. A sample of 100 subscribes was interviewed using questionnaires. The respondents were asked to indicate their degree of agreement with the following statements using a 5-point scale (1=strongly agree, 5=strongly disagree) Factor analysis attempts to identify underlying variables, or factors, that explain the pattern of correlations within a set of observed variables. Factor analysis is often used in data reduction to identify a small number of factors that explain most of the variance observed in a much larger number of manifest variables. Factor analysis can also be used to generate hypotheses regarding causal mechanisms or to screen variables for subsequent analysis (for example, to identify collinearity prior to performing a linear regression analysis). KMO (Kaiser-Meyer-Olkin) is a measure of sampling adequacy. A value of KMO close to 1 indicates pattern of correlation are relatively compact and so factor analysis should yield distinct reliable factors. The KMO statistic value varies between 0 to1. Kaiser (1974) recommends accepting value greater than 0.5 is acceptable. So as in this test here the value is .788 it means the variable which has been collected are sufficient and adequate.

KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity Approx. Chi-Square df Sig. .788 615.771 171 .000


Table: 2.8 KMO & Bartlett's Test BARTLETT’S Test measure tests the null hypothesis that the original correlation matrix is an identity matrix. For factor analysis to work we need some relationship between variables. Bartlett’s test is highly significant (P<0.001) therefore Factor analysis is appropriate. Null Hypothesis: Ho: correlation matrix is an identity matrix. Alternative Hypothesis: Hi: correlation matrix is not an identity matrix. The above table shows that the value of KMO (.788) indicates that null hypothesis is an identity matrix, is rejected by the Bartlett’s test of Sphericity .It will automatically lead to acceptance of alternative hypothesis i.e. correlation matrix is not an identity matrix. The approximate chi-square statistic is 615.771 with 171 degree of freedom. The value of the KMO statistics is .788. It indicates that factor analysis is right technique for test. Communalities - This is the proportion of each variable's variance that can be explained by the factors. Initial communalities are estimates of the variance in each variable accounted for by all components or factors. Extraction communalities are estimates of the variance in each variable accounted for by the factors (or components) in the factor solution. Small values (bold) indicate Variables that do not fit well with the factor solution, and should possibly be dropped from the analysis.


This table depicts that variable 5 (Benefits to small enterprises), Variable 8 (Infrastructure improvements) and variables 18 (Cheaper Production facilities) that are not fit in this analysis.

Communalities Initial VAR00001 VAR00002 VAR00003 VAR00004 VAR00005 VAR00006 VAR00007 VAR00008 VAR00009 VAR00010 VAR00011 VAR00012 VAR00013 VAR00014 VAR00015 VAR00016 VAR00017 VAR00018 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Extraction .605 .705 .650 .602 .589 .632 .631 .512 .724 .736 .759 .602 .780 .690 .694 .682 .618 .571

Extraction Method: Principal Component Analysis.

Table: 2.9 Communalities


Total Variance Explained Extraction Sums of Squared Initial Eigenvalues Compone nt 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Total 5.379 1.873 1.572 1.338 1.176 1.106 .908 .803 .721 .644 .600 .514 .446 .428 .344 .342 .293 .291 % of Variance 28.313 9.856 8.271 7.042 6.187 5.823 4.777 4.227 3.797 3.390 3.156 2.705 2.347 2.255 1.812 1.798 1.542 1.532 Cumulative % 28.313 38.169 46.440 53.482 59.670 65.493 70.269 74.496 78.293 81.683 84.839 87.544 89.891 92.147 93.959 95.757 97.299 98.831 Total 5.379 1.873 1.572 1.338 1.176 1.106 Loadings % of Variance 28.313 9.856 8.271 7.042 6.187 5.823 Cumulative % 28.313 38.169 46.440 53.482 59.670 65.493 Total 3.481 2.033 2.004 1.746 1.709 1.471 Rotation Sums of Squared Loadings % of Variance 18.319 10.700 10.548 9.190 8.992 7.744 Cumulati ve % 18.319 29.019 39.567 48.757 57.749 65.493

Extraction Method: Principal Component Analysis. Table: 2.10 Total Variance Explained


A. Factor - The initial number of factors is the same as the number of variables used in the factor analysis. However, not all 19 factors will be retained. In this example, only the first six factors will be retained. B. Initial Eigenvalues - Eigenvalues are the variances of the factors. Because we conducted our factor analysis on the correlation matrix, the variables are standardized, which means that the each variable has a variance of 1, and the total variance is equal to the number of variables used in the analysis in this it is 19 c. Total - This column contains the eigenvalues. The first factor will always account for the most variance (and hence have the highest eigenvalue), and the next factor will account for as much of the left over variance as it can, and so on. Hence, each successive factor will account for less and less variance. D. % of Variance - This column contains the percent of total variance accounted for by each factor. E. Cumulative % - This column contains the cumulative percentage of variance accounted for by the current and all preceding factors. For example, the seventh row shows a value of 65.453. This means that the first six factors together account for 65.453% of the total variance.


F. Extraction Sums of Squared Loadings - The number of rows in this panel of the table correspond to the number of factors retained. The values in this panel of the table are calculated in the same way as the values in the left panel, except that here the values are based on the common variance. The values in this panel of the table will always be lower than the values in the left panel of the table, because they are based on the common variance, which is always smaller than the total variance. G. Rotation Sums of Squared Loadings - Rotation is a method used to simplify interpretation of a factor analysis. The values in this panel of the table represent the distribution of the variance after the Varimax rotation. Varimax rotation tries to maximize the variance of each of the factors, so the total amount of variance accounted for is redistributed over the three extracted factors. When trying to interpret the first factor, we can see that all variables that measure education in one way or another (bold) are highly correlated with this factor. Rotation is a method used to simplify interpretation of a factor analysis. When trying to interpret the first factor, we can see that all variables that measure education in one way or another (bold) are highly correlated with this factor


Rotated Component Matrix
Component 1 2 -.188 .063 .107 .214 3 .180 -.019 .076 .258 4 .203 .107 .418 -.072 5 .107 .233 .211 -.009 6 .696 .081 -.078 .321

1)Increase in Employment 2) Growth in Indian economy 3) Better Prices for Farmers 4) Modernization of supply chain 5) Benefit to Small & Medium Enterprises 6) Benefit to Customers 7) Increase in Efficiency 8) Infrastructure Improvements 9) Decrease the Shortage of goods 10) Improve Storage facilities 11) Improve Quality Standards 12) Reduction in wastages of Agricultural Products 13) Modern Technology 14) More connectivity with International channels 15) Timely Payment 16) Healthy Competition in Market 17) Less Supply Constraints 18) Cheaper Production Facilities

.013 .793 .638 .618







.304 .357 .657 .688

.274 .258 .168 -.094

-.121 .333 .125 .452

.047 .276 -.059 .192

.068 -.365 -.166 .005

.666 .342 .071 .005

.062 .139 .423

-.027 .164 .062

-.017 .230 .547

.036 .154 .255

.823 .795 .181

.227 -.060 -.149

.126 .179

.127 .162

.853 .520

.044 .561

.072 .048

.113 .210

.172 .055

-.248 .533

.205 -.086

.721 .603

.064 .145

.191 .046

.293 .104

.502 .744

-.269 .083

.269 .007

-.176 -.008

-.322 -.018

. Rotation Method: Varimax with Kaiser Normalization. Rotated component matrix. Table.2.11

Factor Table


Factor Label

Variables V2 Growth in Indian economy V3) Better Prices for Farmers V4) Modernization of supply chain

Factor Loadings
.793 .638 .618 .737 .357 .657 .688

1) Better Supply V5) Benefit to Small & Medium & benefits to Enterprises economy V7) Increase in Efficiency V8) Infrastructure Improvements V9) Decrease the Shortage of goods

V16) Healthy Competition in Market 2) Better Production & V17) Less Supply Constraints Consumption V18) Cheaper Production Facilities 3)Technological Improvements V12) Reduction in wastages of Agricultural Products V13) Modern Technology V14) More connectivity with International channels V15) Timely Payment V10) Improve Storage facilities 5)Better Quality V11) Improve Quality Standards & Handling V1)Increase in Employment 6) Benefits customers to V6) Benefit to Customers

.533 .502

.744 .547 .853 .561 .721 .823 .795 .696 .666

4) Timely Payment


Analysis and interpretation: Naming of the factors: On the basis of my understanding the six factors are named as Factor1- Better Supply & benefits to economy Factor2- Better Production & Consumption Factor3- Technological Improvements

Factor4- Timely Payment Factor5- Better Quality & Handling Factor6- Benefits to customers Each number represents the correlation between the item and the unrotated factor. These correlations can help us to formulate an interpretation of the factors or components. This is done by looking for a common thread among the variables that have large loadings for a particular factor or component. It is possible to see items with large loadings on several of the unrotated factors, which can make interpretation difficult. In these cases, it can be helpful to examine a rotated solution Component Transformation Matrix
Component Transformation Matrix Component 1 2 3 4 5 6 1 .721 .209 -.309 -.559 .136 -.099 2 .305 .698 .505 .398 .071 -.037 3 .410 -.353 -.174 .523 -.289 -.565 4 .371 -.189 .077 .109 -.523 .732 5 .173 -.469 .777 -.328 .095 -.173 6 .226 -.299 -.099 .368 .781 .322

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.

Table 2.11. Component Transformation Matrix .


Table 2.12 Scree plot The scree plot graphs the eigenvalue against the factor number. You can see these values in the first two columns of the table immediately above. From the third factor on, you can see that the line is almost flat, meaning the each successive factor is accounting for smaller and smaller amounts of the total variance.



The first finding of this project research is that all the 100 respondents are aware

about hypermarkets and the ranking according to interest. And most of respondents are agree that they consider all the factors like product, price, convenience, comfort and variety of goods while doing shopping in Hypermarkets. • As to fulfil the objective of the study the regarding new proposals of government

towards FDI in retail in single or multi brand retailing 62% are aware about current proposed policy of government of 100% FDI in single brand retailing and 55% are aware towards second policy. Apart from that there is mediocre % of respondents who are not at all aware. 11% to 15% of the respondents are like they don’t have any idea about this policy. • The second finding of this research shows that high percentage i.e. 42% of

respondents are agree towards the benefit of new norms of government in FDI in retail in India. 23% of the respondents are on neutral or average. 19% are showing their disinterest towards new policy. • To fulfil last objective of the study that government efforts or benefits to India of

FDI new policy. This objective has been satisfied by taking number of variables in a single question, which has been interpreted on the basis of factor analysis test.


• Due to the nature of the survey being internet/online-based, it was inevitable that

this would have limitations on survey response. • Survey responses were also potentially limited by the length of the survey and by language barriers. • We noted that data available, particularly in relation to India's retail sector, was often inconsistent.


RECOMMENDATIONS OF THE STUDY According to the response of the respondents we can see that most of the respondents are willing to support the government in regard to FDI up gradation policy in retailing. • The government should revoke the recent Press Notes that relate to permitting

cascading sub-companies, as these are only serving to provide a loop-hole for back-door entry by foreign retailers and are not promoting transparency within the policy.

The Research recommends that the retail sector is granted 'industry status' as soon

as possible so that a legislative framework can be put in place for the control and management of the sector and its day to day operation. • Labour Laws need to be reviewed to be more in line with the requirements of

retail sector employment.

Investment should be made by the government to improve the efficiency of the

manufacturing sector so that this sector can grow and provide more employment opportunities going forward. • The government should impose local employment quotas on foreign retailers,

firstly to reduce the effects of any potential labour displacement, and secondly to encourage foreign retailers to provide training, skills and development to local people who without it would not be able to transfer to the 'organised' retail sector or back-end services.


CONCLUSION The survey revealed that there is a strong market sentiment towards opening up FDI, with 83.5% of people supporting the opening of the sector. The domestic retailers who responded believe that FDI in retail will bring the benefit of skills transfer, technology, innovation and best practises as well as supply chain, infrastructure and logistics improvements. They also thought that it would increase employment and economic growth and draw more investment in to the domestic sector and sub-sectors. Overall, 70% of people believe that it would have a positive impact. A small percentage of people feel that India isn't quite ready to open up its foreign retail policy yet, but that it would be ready in the near future and should begin planning a 'phased system'. A minority (4%) believed there would be no benefits at all of allowing FDI and were against opening up policy. This research has revealed that there is strong support for imposing a condition on foreign retailers to source certain products in India, as well as some interest in restricting FDI to branded products, and certain retail formats.



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