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IN ACCOUNTANCY) SEMESTER: II ACADEMIC YEAR 2012-13 SUBMITTED BY MISS. CHETTIAR PRIYANKA RAJENDRAN ROLL NO: 6278 GUIDED BY PROF. S V RANE PARLE TILAK VIDYALAYA ASSOCIATION’S MULUND COLLEGE OF COMMERCE MULUND (W) MUMBAI - 80
I the undersigned, Miss Chettiar Priyanka Rajendran, a student of Mulund College of Commerce Studying in M.com [Accountancy] Semester-II, hereby declare that the project work presented in this report is m y original work. This work has not been previousl y submitted to any other universit y for any other examination.
Date: __ t h Feb., 2013 Place: Mumbai
---------------------------(Chettiar Priyanka Rajendran)
I, Mr. / Ms. ________________________, hereby certify that Miss Chettiar Priyanka Rajendran, a student of Mulund College Of Commerce Studying in M.com [Accountancy] Semester-II, has completed project on topic, A Study of an Analysis of ICICI Prudential Life Insurance Policy, in the academic year 20122013. The information submitted is true and original to the best of my knowledge.
Signature of Project Guide
Signature of Principal
Signature of Co- ordinator
Signature of External Guide
First of all. he is very patient and supportive. Their endless love and support give me strong confidence to face future work and life after the study. A lot of other people have also contributed directly and indirectly to completion of this project would not have seen light of the day. Also my faculty member Prof. I would like to express my gratitude to my parents and my friends for supporting my studies during this journey.e. I would like to express my deepest gratitude to my supervisor Professor S V Rane . its contents have been compiled with help of varied sources of secondary database. without any of them I could not get the present achievement. who guided me and assisted me to accomplish my dissertation in the last six months. When I encountered some problems. Our hearts felt gratitude to all of them. All my gratitude cannot be expressed in words.ACKNOWLEDGEMENT At outset. I have benefited from his academic knowledge and personal encouragement and also made great progress through his valuable advices. . S V Rane guide and suggest me about the project. The essence of this project i. we would like to thank the institutions for having provided us with an opportunity to carry out a project of this magnitude that helped me satisfy my curiosity as far as my area of interest was concerned. but we would specially like to acknowledge the support. suggestions and feedback received from my Project Guide. Meanwhile.
INDEX Sr No. 1 Introduction 1 2 Policy in India 10 3 Limitations 16 4 Recent scenario 22 5 6 Recommendations Boon / Curse 27 31 7 Case Study 33 8 Conclusion 38 9 Bibilography 39 . Particulars Page No.
ascertainment. which links the consumer / customer and public to the marketer through information used to identify and define marketing opportunities and problems. time and place the customer want.Introduction Marketing is an assessment. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries. . The insurance sector in India has come a full circle form being an open competitive market to nationalization and back to a liberalized market again.2) Persuading the customer to buy through advertisement and sales promotion. Marketing research is the function. As a corporate state of mind which insists integration and co-ordination of all marketing functions in welded with all co-operative functions. and fulfillment of consumer needs and desire into products and services through planning and creating demand for companies products. The Creation of customer implies three things:1) Development of product through technical and market research on which afford salesopportunities.3) Making the product available in a form at a price. with a basic objective of maximizing long range corporate profits and satisfy the customer needs and wants. Objective of marketing research may be primary to gather information from different customer attitudes and opinions. serving the consumer demand through planned physical distribution with the for help of marketing channels expanding the marketing even in the face of keen competition.
To put in simple words. which contains the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations. The Ministry of Commerce and Industry. 2000. This notification has been amended from time to time.al) is investment in a foreign country through the acquisition of a local company or the establishment there of an operation on a new (Greenfield) site. Government of India is the nodal agency for motoring and reviewing the FDI policy on continued basis and changes in sectoral policy/ sectoral equity cap.HISTORY FDI Policy in India FDI as defined in Dictionary of Economics (Graham Bannock et. The Reserve Bank of India (‗RBI‘) in this regard had issued a notification. 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. Department of Industrial Policy and . FDI refers to capital inflows from abroad that is invested in or to enhance the production capacity of the economy. The FDI policy is notified through Press Notes by the Secretariat for Industrial Assistance (SIA).
Metro AG of Germany was the first significant global player to enter India through this route. subject to Press Note 3 (2006 Series).e. Apart from quick food bondage identical to Pizza Hut. most general players ha\d been operating in the country. a) b) FDI up to 100% for cash and carry wholesale trading and export trading allowed under the automatic route. 2006. Nike as good as Marks as good as Spencer. Through these rights. FIPB) for retail trade of ‗Single Brand‘ products. Mango. FDI Policy with Regard to Retailing in India It will be prudent to look into Press Note 4 of 2006 issued by DIPP and consolidated FDI Policy issued in October 2010 which provide the sector specific guidelines for FDI with regard to the conduct of trading activities. Indian companies can either sell it through their own stores. The wholesaler deals only with smaller retailers and not Consumers. FDI up to 51 % with prior Government approval (i. FDI was not authorised in retailing. 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.The foreign investors are free to invest in India. Strategic Licensing Agreements Some foreign brands give exclusive licences and distribution rights to Indian companies. Cash And Carry Wholesale Trading 100% FDI is allowed in wholesale trading which involves building of a large distribution infrastructure to assist local manufacturers. 2. where prior approval from the RBI or Foreign Investment Promotion Board (‗FIPB‘) would be required. have entered Indian marketplace by this route.Promotion (DIPP). players such as Lacoste. 3. In franchising and commission agents‘ services. or enter into shop-in-shop arrangements or . Franchise Agreements It is an easiest track to come in the Indian market.FDI is not permitted in Multi Brand Retailing in India. Some of entrance routes used by them have been discussed in sum as below:- 1. except few sectors/activities. Entry Options For Foreign Players prior to FDI Policy Although prior to Jan 24.
For example. even if such products were produced by the same manufacturer. it implies that foreign companies would be allowed to sell goods sold internationally under a ‗single brand‘. While the phrase ‗single brand‘ has not been defined. (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.. Manufacturing and Wholly Owned Subsidiaries. Adidas. that have wholly-owned subsidiaries in manufacturing are treated as Indian companies and are. own outlets. the Spanish apparel brand has entered India through this route with an agreement with Piramyd. Retailing of goods of multiple brands. existent Indian retailers.. we examine the concept of ‗single brand‘ and the associated conditions: FDI in ‗Single brand‘ retail implies that a retail store with foreign investment can only sell one brand. For instance. internal distributors. These companies have been authorised to sell products to Indian consumers by franchising. Nike India Private Limited. Nike entered through an exclusive licensing agreement with Sierra Enterprises but now has a wholly owned subsidiary. those retail outlets could only . Mumbai. Nokia. allowed to do retail. In single-brand retail. FDI up to 51 per cent is allowed.distribute the brands to franchisees. Mango. etc. viz. FDI in Single Brand Retail The Government has not categorically defined the meaning of ―Single Brand‖ anywhere neither in any of its circulars nor any notifications. Adidas. Ltd 4. (b) products should be sold under the same brand internationally.e. Going a step further. if Adidas were to obtain permission to retail its flagship brand in India. SPAR entered into a similar agreement with Radhakrishna Foodlands Pvt. etc. would not be allowed. The foreign brands such as Nike. therefore. subject to Foreign Investment Promotion Board (FIPB) approval and subject to the conditions mentioned that (a) only single brand products would be sold (i. retail of goods of multi-brand even if produced by the same manufacturer would not be allowed). Reebok. Reebok.
A reading of the government release indicates that A and R would need separate approvals. brand it under their private labels. If granted permission. prima facie it appears that it would not be able to enter India.sell products under the Adidas brand and not the Reebok brand. thereafter. it should be noted that the retailers would be able to sell multiple products under the same brand.g. Additionally. what is a ‗brand‘? Brands could be classified as products and multiple products. Assume that a company owns two leading international brands in the footwear industry – say ‗A‘ and ‗R‘. Adidas could sell products under the Reebok brand in separate outlets. separate legal entities. The existing policy does not clearly codify whether retailing of goods with sub-brands bunched under a major parent brand can be considered as singlebrand retailing and. There is ambiguity in the interpretation of the term ‗single brand‘. but under separate legal entities. 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. FDI in Multi Brand Retail The government has also not defined the term Multi Brand. this model may not work. source products and. it would need to specify which of the brands it would sell. If the corporate were to obtain permission to retail its brand in India with a local partner. However. and may be even separate stores in which to operate in India. . The regulations appear to discourage own-label products and appear to be tilted heavily towards the foreign manufacturer brands. But. a product range under brand ‗A‘ Further. These chains would. Now. taking an example of a large departmental grocery chain.. e. it appears that the same joint venture partners could operate various brands. typically. FDI in Multi Brand retail implies that a retail store with a foreign investment can sell multiple brands under one roof. eligible for 51 per cent FDI. Since the regulations require the products to be branded at the manufacturing stage. for which separate permission is required. or could be manufacturer brands and own-label brands. accordingly.
are unlikely to shift from the preferred route right away. Department of Industrial Policy and Promotion (DIPP). Ministry of Commerce circulated a discussion paper on allowing FDI in multi-brand retail. Opening up FDI in multi-brand retail will mean that global retailers including Wal-Mart. They must still rely on innovative structuring of franchise arrangements to maximize their returns. If implemented. it would open the doors for global retail giants to enter and establish their footprints on the retail landscape of India. The paper doesn‘t suggest any upper limit on FDI in multi-brand retail. Pantaloon of the Raheja Group and Shopper‘s Stop. which have exclusive franchisee owned stores. 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. it means that foreign .In July 2010. Consumer durable majors such as LG and Samsung. 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. 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. 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. the current FDI Policy will not make any difference. the foreign investor must negotiate its joint venture agreements carefully. they must tie up with a local partner. In effect. with an option for a buy-out of the Indian partner‘s share if and when regulations so permit. For those companies which choose to adopt the route of 51% partnership. 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. Foreign Investor’s Concern Regarding FDI Policy in India For those brands which adopt the franchising route as a matter of policy. They would have preferred that the Government liberalize rules for maximizing their royalty and franchise fees. RPG Group through Food world. Currently. 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 is important that the domestic retail sector is allowed to grow and consolidate first. 2009. Further. like. Another concern is that the Indian retail sector. . The Hon‘ble Department Related Parliamentary Standing Committee on Commerce. causing discontent and social tension elsewhere. on ‗Foreign and Domestic Investment in Retail Sector‘. that the entry of large global retailers such as Wal-Mart would kill local shops and millions of jobs. therefore. is still under-developed and in a nascent stage and that. Hence. before opening this sector to foreign investors. leading to large scale displacement of persons employed in the retail sector. These included: It would lead to unfair competition and ultimately result in large-scale exit of domestic retailers. The first brand could also be their last if they do not negotiate the strategic arrangement diligently. especially the small family managed outlets. both the consumers and the suppliers would lose. as the manufacturing sector has not been growing fast enough. in its 90th Report. it would lead to asymmetrical growth in cities. while the profit margins of such retail chains would go up. particularly organized retail. laid in the Lok Sabha and the Rajya Sabha on 8 June. since the unorganized retail sector employs an enormous percentage of Indian population after the agriculture sector.brand owners must be extremely careful whom they choose as partners and the brand they introduce in India. thirdly. the persons displaced from the retail sector would not be absorbed there. Antagonists of FDI in retail sector oppose the same on various grounds. 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. had made an in-depth study on the subject and identified a number of issues related to FDI in the retail 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.
Storage infrastructure is necessary for carrying over the agricultural produce from production periods to the rest of the year and to prevent distress sales.Limitations LIMITATIONS OF THE PRESENT SETUP Infrastructure There has been a lack of investment in the logistics of the retail chain. Lack of adequate storage facilities cause heavy losses to farmers in terms of wastage in quality and quantity of produce in general. with only 5386 stand-alone cold storages. including overseas markets. The chain is highly fragmented and hence. it has a very limited integrated cold-chain infrastructure. Though FDI is permitted in cold- . Though India is the second largest producer of fruits and vegetables (about 180 million MT). having a total capacity of 23. perishable horticultural commodities find it difficult to link to distant markets. leading to an inefficient market mechanism. round the year. .6 million MT. 80% of this is used only for potatoes.
5% in 1999-2000 to 30. up to 51 per cent of ownership.3% in 2007-08. FDI flow to the sector has not been significant. Of these. While India has continued to provide emphasis on the development of MSME sector. Rationale behind Allowing FDI in Retail Sector FDI can be a powerful catalyst to spur competition in the retail industry. a total of 94 proposals have been received. 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. FDI in single-brand retailing was permitted in 2006. 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. Between then and May 2010. The policy of single-brand retail was adopted to allow Indian consumers access to foreign brands.chain to the extent of 100%. In spite of such heavy subsidies. Indian farmers realize only 1/3rd of the total price paid by the final consumer. in the absence of FDI in retailing. 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. have developed a monopolistic and non-transparent character. overall food based inflation has been a matter of great concern. This has largely been due to the inability of this sector to access latest technology and improve its marketing interface. An FDI inflow of US$196. governed by State APMC Acts. Wholesale regulated markets. as against 2/3rdby farmers in nations with a higher share of organized retail. through the automatic route. due to the current scenario of low competition and poor productivity. Intermediaries dominate the value chain Intermediaries often flout mandi norms and their pricing lacks transparency. the share of unorganised sector in overall manufacturing has declined from 34. Since Indians spend a lot of money shopping abroad. According to some reports. this policy enables them to spend the same money on the same goods in India. 57 proposals have been approved.46 million under the category of single brand retailing was received between April 2006 and .
India will significantly flourish in terms of quality standards and consumer expectations. It is therefore obvious that we should not only permit but encourage FDI in retail trade. 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. 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. or 0. it is to be noted that the Indian Council of Research in International Economic Relations (ICRIER). comprising 0.02% and Trent Ltd. Apart from this. 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. particularly farmers and consumers. designs and technological knowhow.84% up at Rs 441 on the Bombay Stock Exchange. It would also help bring about improvements in farmer income & agricultural growth and assist in lowering consumer prices inflation. to 17.04 points.16 per cent of the total FDI inflows during the period. Permitting foreign investment in food-based retailing is likely to ensure adequate flow of capital into the country & its productive use. a premier economic think tank of the country. traditional. The exchange‘s key index rose 173.99%. But this is very less as compared to what it would have been had FDI upto 100% been allowed in India for single brand. retailers. in a manner likely to promote the welfare of all sections of society. 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. Retail stocks rose by as much as 5%.September 2010. which was appointed to look into the impact of BIG capital in the retail sector. Shares of Pantaloon Retail (India) Ltd ended 4.48. In light of the above. 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. Shares of Shopper‘s Stop Ltd rose 2.19%.614. Lastly. 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 . By partially opening this sector. by allowing FDI in retail trade. while Indian companies can access global best management practices. 3.
and most of them agree with considering a cap of 49-51 per cent to start with. the American Chamber of Commerce in India. and unthinking application of capital for profit. have been demanding liberalisation of FDI rules on multi-brand retail for some time. US-India Business Council (USIBC). Carrefour. which the unorganized sector (kirana and other small time retailing shops) have undoubtedly failed to provide to the masses employed in them. For example FDI in multi –brand retailing can be allowed in a calibrated manner with social safeguards so that the effect of possible labor . Left alone foreign capital will seek ways through which it can only multiply itself. tax income and employment generation. Industrial organisations such as CII.Upgradation in Agriculture. Allowing FDI in multi brand retail can bring about Supply Chain Improvement. Growth in market size and Benefits to govemment through greater GDP. FICCI. and TESCO share the same view and insist on a clear path towards 100 per cent opening up in near future. 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.Manpower and Skill development. 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. may spell doom and deepen the gap between the rich and the poor. the largest Australian retailer that operates in wholesale cash-and-carry ventures 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 multi-brand retailing. given our peculiar socio-economic conditions. The international retail players such as Walmart. Greater Sourcing From India. IKEA. Efficient Small and Medium Scale Industries. This can be done by integrating into the rules and regulations for FDI in multi-brand retailing certain inbuilt safety valves. Germany‘s Metro AG and Woolworths Ltd. Large multinational retailers such as USbased Walmart. Metro. Investment in Technology.Tourism Development.employment but a better paying employment. 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.
to help improve efficiencies of small retailers. 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. Similarly to develop our small and medium enterprise (SME). at lower rates. 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. Extension of institutional credit. Further. To ensure that the foreign investors make a genuine contribution to the development of infrastructure and logistics. undertaking of proactive programme for assisting small retailers to upgrade themselves. it can be stipulated that a percentage of FDI should be spent towards building up of back end infrastructure. It will ensure that the retailing giants do resort to predatory pricing or acquire monopolistic tendencies. PDS is still in many ways the life line of the people living below the poverty line. 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. logistics or agro processing units. the government and RBI need to evolve suitable policies to enable the retailers in the unorganized sector to expand and improve their efficiencies. Back-end logistics must for FDI in multi-brand retail . Besides. If Government is allowing FDI. To take care of the concerns of the Government before allowing 100% FDI in Single Brand Retail and Multi.dislocation can be analyzed and policy fine tuned accordingly. To protect the interest of small retailers the government may also put in place an exclusive regulatory framework. it can also be stipulated that a minimum percentage of manufactured products be sourced from the SME sector in India. Formulation of a Model Central Law regarding FDI of Retail Sector.Brand Retail. 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. Enactment of a National Shopping Mall Regulation Act to regulate the fiscal and social aspects of the entire retail sector. 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. by public sector banks.
The idea is that the firms must have already created jobs for rural India before they venture into multi-brand retailing. But the change . and a good consumer experience. Only those foreign retailers who first invest in the backend supply chain and infrastructure would be allowed to set up multi brand retail outlets in the country. in the fierce battle between the advocators and antagonist of unrestrained FDI flows in the Indian retail sector. one of the arguments which inevitably needs to be considered and addressed while deliberating upon the captioned issue is the interests of consumers at large in relation to the interests of retailers. where too the issue of allowing FDI in the retail sector was first met with incessant protests. Therefore. the interests of the consumers have been blatantly and utterly disregarded. where ever they get the lowest price. It is also pertinent to note here that it can be safely contended that with the possible advent of unrestrained FDI flows in retail market.FDI in multibrand retailing and lifting the current cap of 51% on single brand retail is in that sense a steady progression of that trajectory. max variety.The government has added an element of social benefit to its latest plan for calibrated opening of the multibrand retail sector to foreign direct investment (FDI). The Industrial policy 1991 had crafted a trajectory of change whereby every sectors of Indian economy at one point of time or the other would be embraced by liberalization. But the government has by far cushioned the adverse impact of the change that has ensued in the wake of the implementation of Industrial Policy 1991 through safety nets and social safeguards. privatization and globalization. but later turned out to be one of the most promising political and economical 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. 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. Consumers will shop in accordance with their utmost convenience. since nobody can force a consumer to visit a mega shopping complex or a small retailer/sabji mandi. Moreover. the interests of the retailers constituting the unorganized retail sector will not be gravely undermined.
and manufacturing. One hopes that the government would stand up to its responsibility. constrained by regulations allowing entry primarily through cash and carry operations. with considerable consumer acceptance for organized retailing formats.retailing. agriculture. because what is at stake is the stability of the vital pillars of the economy. In the wake of liberalization. Recent Scenario 1] Today. the socio economic equilibrium of the entire country. the organized retail segment is still in a nascent stage with global retailers entering India only in the last few years. particularly in the urban areas. Complex corporate structures and the fact that intermediaries obtain a disproportionate share of value in the supply chain have always deterred foreign investments in the retail arena. India is perceived as one of the most favorable global investment destinations.that the movement of retailing sector into the FDI regime would bring about will require more involved and informed support from the government. even the Indian retail sector has scaled an impressive growth curve over the last decade. Notwithstanding the above performance. In short. .
. In 2007. The country has around 12 million stores. 1. the retail trade in India had a share of 8-10% in the GDP (Gross Domestic Product) of the country. The creation of malls across the country and new high-streets had suddenly urged traditional retailers to modernize themselves. With growing market demand. Unorganized retailing is by far the prevalent form of trade in India – constituting 98% of total trade. The Indian retail industry is expected to grow from Rs. It‘s only imperative that the Indian retail has benchmarks of excellence that will catapult the industry into the global arena. Now with FDI in retail likely to become a reality. the shopkeepers‘ landscape will change even further. Question of FDI in Indian Retail Sector: Should it be allowed? Issues and Implications of FDI in Indian retailing sector. while organized trade accounts only for the remaining 2% – and this is projected to increase to 15-20 per cent by 2010. It will accelerate the retail market growth and provide more .000 crore in 2004-05 to Rs. especially over the last few years. rather they may try to establish the monopoly power in the country. and strong income growth. India is a nation of shopkeepers. In this context the present paper attempts to review the issues and implications of FDI inflows in to the Indian retail sector. but it will benefit the consumers as they will have wider choices Foreign direct investment in Indian retail sector: Issues and implications 281 at competitive prices. changing lifestyles. the industry is expected to grow at a pace of 25-30% annually. Retailing in India is at a very interesting era as various factors are bringing about the big bang effect to retail. 2 and 3 cities and this makes chain store retail interesting. Comprising of organized and unorganized sectors.09. while it rose to 12% in 2009 and reached 22% by 2010. which means one store for every 100 customers. 4] The main fear of FDI in retail trade is that it will certainly disrupt the livelihood of the poor people engaged in this trade. 35. Development of retail is happening across tier 1. retail industry is one of the fastest growing industries in India. 5] The 51% foreign direct investment (FDI) will obviously have a negative impact on small retailers. The opening up of big markets to foreign sponsored departmental outlets will not necessarily absorb them. 3] Nonetheless the organized sector is expected to grow faster than GDP growth in next few years driven by favorable demographic patterns.2] The Indian retail industry is the fifth largest in theworld.000 crore by the year 2010 and hence is the most promising emerging market for investment.
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. It is obviously good for local competition. Under the Government Approval route. The FDI Bill will definitely have a positive impact on the retail industry and the country by attracting more foreign investments. and accordingly eligible for 51 percent FDI. Once these multi-chain retailers establish themselves. Automatic route dispenses with the need of multiple approvals from Government and/or regulatory agencies (Government of India or the RBI). it will surely improve our back-end storage and procurement process. Of late. proposal for FDI in ‗Single Brand Product Retailing‘ are received in the Department of Industrial Policy and Promotion. Unlike FDI in single brand retailing which pertains to brand loyal and a relatively small high income clientele. it will teach the local retailers about real competition and help in insuring that they give better service to Indian consumers. FDI in multi-brand retailing would have direct impact on a vast spectrum of population and thus a . 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. the Government of India has expressed its desire to bring the Multi-Brand retailing within the ambit of FDI.employment opportunities. The impact on local kirana shops will not be affected. which will also propel the existing infrastructure. they will create infrastructure facilities. With big retail giants coming to India. Additionally. The elimination of the intermediate channels in the procurement process will lead to reduction of prices for consumers. 6]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 singlebrand retailing. The kirana stores operate in a different environment catering to a certain set of customers and they will continue to find new ways to retain them. and in the process has put in train a debate on its possible outcome. The farmers will be benefited from FDI as they will be able to get better prices for their products.FDI in Single and Multi-Brand Retail Sectors Foreign Direct Investment under the Industrial Policy 1991 and thereafter under different Foreign Trade Policies is being allowed in different sectors of the economy in different proportion under either the Government route or Automatic Route. Ministry of Commerce & Industry. By allowing 51% foreign investments in the Indian market. In Retailing.
For example FDI in multi –brand retailing can be allowed in a calibrated manner with social safeguards so that the effect of possible labor dislocation can be analyzed and policy fine tuned accordingly. The government may also put in place an exclusive regulatory framework to protect the interest of small retailers. FDI in multibrand retailing is in that sense a steady progression of that trajectory. But the government has by far cushioned the adverse impact of the change that has ensued in the wake of the implementation of Industrial Policy 1991 through safety nets and social safeguards. To ensure that the foreign investors make a genuine contribution to the development of infrastructure and logistics. because what is at stake is the stability of the vital . it can be stipulated that a percentage of FDI should be spent towards building up of back end Infrastructure. One hopes that the government would stand up to its responsibility. Besides. may spell doom and deepen the hiatus between the rich and the poor. 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. It will ensure that the retailing giants do resort to predatory pricing or acquire monopolistic tendencies. This can be done by integrating into the rules and regulations for FDI in multibrand retailing certain inbuilt safety valves. given our peculiar socio-economic conditions.The Industrial policy 1991 had crafted a trajectory of change whereby every sectors of Indian economy at one point of time or the other would be embraced by liberalization. to develop the small and medium enterprise (SME). Left alone foreign capital will seek ways through which it can only multiply itself. One of the justifications for introducing FDI in multi-brand retailing is to transform the poverty stricken and stagnating rural sphere into a forward moving and prosperous rural sphere. it can also be stipulated that a minimum percentage of manufactured products be sourced from the SME sector in India. logistics or agro processing units. privatization and globalization. Public Distribution System is still in many ways the life line of the people living below the poverty line. and unthinking application of capital for profit. the government and RBI need to evolve suitable policies to enable the retailers in the unorganized sector to expand and improve their efficiencies.sensitive issue. Thus the proliferation of foreign capital into multibrand retailing needs to be anchored in such a way that it results in a win-win situation for India. But the change that the movement of retailing sector into the FDI regime would bring about will require more involved and informed support from the government. 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. Similarly.
the government was able to reduce the pressure from its trading partners in bilateral/multilateral negotiations and could demonstrate India‘s intentions in liberalizing this sector in a phased manner. and manufacturing.04 points. In short.46 million under the category of single brand retailing was received between April 2006 and September 2010.99%.02% and Trent Ltd. a total of 94 proposals have been received.19%. 10] Apart from this.16 per cent of the total FDI inflows during the period.E. Retail stocks rose by as much as 5%. designs and technological knowhow. while Indian companies can access global best management practices.M. It would also help bring about improvements in farmers‘ income & agricultural growth and assist in lowering consumer prices inflation. 57 proposals have I. An FDI inflow of US$196. Of these. or 0. VOL. By partially opening this sector.pillars of the economy. 8] 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.S. 9] Permitting foreign investment in food-based retailing is likely to ensure adequate flow of capital into the country.J. up to 51 per cent of ownership. Since Indians spend a lot of money shopping abroad. due to the current scenario of low competition and poor productivity. agriculture. FDI in singlebrand retailing was permitted in 2006. Between then and May 2010.. to 17. Shares of Shopper‘s Stop Ltd rose 2.48. comprising 0. by allowing FDI in retail trade.retailing. The policy of single-brand retail was adopted to allow Indian consumers access to foreign brands. 7] Rationale Behind Allowing FDI in Retail SectorFDI can be a powerful catalyst to spur competition in the retail industry. 3. particularly farmers and consumers. The exchange‘s key index rose 173.3(3) 2012: 280-283 ISSN 2229600X282 been approved. since the inflow of FDI in retail sector is bound to pull up the quality standards and . & its productive use in a manner likely to promote the welfare of all sections of society. this policy enables them to spend the same money on the same goods in India. the socio economic equilibrium of the entire country.614. Shares of Pantaloon Retail (India) Ltd ended 4. 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.84% up at Rs 441 on the Bombay Stock Exchange. India will significantly flourish in terms of quality standards and consumer expectations.
it is to be noted that the Indian Council of Research in International Economic Relations (ICRIER). the retail trade in India is now undergoing an intensive structural change which could cause irreversible damage to local commodity supply chains and competition. by public sector banks. 11] Further. a premier economic think tank of the country. However. Recommendations The few recommendations for formulation of policies by government: Much of the Indian retail trade (particularly grocery) still has traditional features: small family-run shops and street hawkers dominate the situation in most of the country. has projected the worth of Indian retail sector to reach $496 billion by 2011-12 and ICRIER has also come to the 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. India can learn (and perhaps forestall loss of genuine competition and product variety) from the experience of south-east Asian countries which are improving regulatory frameworks and some advanced retailing economies like . • Formulation of a Model Central Law regarding FDI of Retail Sector. which was appointed to look into the impact of BIG capital in the retail sector. undertaking of proactive programme for assisting small retailers to upgrade themselves. The existing regulations are not adequate to fulfil the new 49requirements. It is therefore obvious that we should not only permit but encourage FDI in retail trade. • Enactment of a National Shopping Mall Regulation Act to regulate the fiscal and social aspects of the entire retail sector. the following recommendations are being proposed 10• 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. at lower rates. to help improve efficiencies of small retailers. to take care of the concerns of the Government before allowing 100% FDI in Single Brand Retail and MultiBrand Retail. Lastly.cost-competitiveness of Indian producers in all the segments.• Extension of institutional credit.
A number of good examples of programs to upgrade traditional retail exist. the Philippines. . German competition policies in content and implementation are significant for India to the extent that they are different from other advanced retailing countries like the US and Great Britain. and increase public hygiene and economic competitiveness. governments have several options for helping small farmers participate in supermarket channels (or gain access to viable alternatives) and traditional retailers coexist or compete with the modern retail sector. On balance. A number of developing countries even have policies that encourage the development of supermarkets and regulate wet-markets in order to modernize commerce. theseregulations have done little to limit supermarket spread. At that stage it is important for governments and the private sector to enforce competition policies. Hong Kong. Option 2: Upgrade Traditional Retail.Finally. Option 1:Regulate Modern Retail? To the extent developing countries have regulated modern retail. such as in China. partly because although regulations tend to targe large-format stores (and thus not limit small traditional stores). lower food prices and congestion.Germany which are already considered more successful regulators in this sector. in Latin America four to five chains typically control about 75percent of a sector that in turn controls an average of 55percent of food retail. in the early stages of supermarket spread.Policies for ―Competitiveness with Inclusiveness‖ in the Supermarket Revolution. however.As the supermarket revolution proceeds in developing countries. their goal has been to reduce the speed and scope of its spread. the sector becomes concentrated— for example. the supermarket sector is relatively fragmented (weakly concentrated). including neighbourhood stores and convenience stores. and farmers and processors thus have a wide range of potential buyersamong supermarket chains and between the modern and traditional sectors. Instead they usually take a laissez-faire approach to small shops and hawkers and make minimum initial public investments in open and covered municipal markets. The regulations have mainly limited the location and hours of modern retail. In the advanced stage of supermarket spread. Of particular interest are those of East and Southeast Asia. modern retail comes in a wide variety of formats. German policy now proactively aims to preserve small and medium competitors in retail sector.Few developing countries have a pro-traditional or pro–small retail policy.
In most of these countries. the programs in question are municipal. Private-sector actors are helping traditional retailers (and supermarket independents and chains) obtain the services and products they need. for example. • They experiment with privatizing wet-market management in some cases (such as in China and Hong Kong).‖ • They accept the social and market role of wet-markets. Private-sector programs are emerging to help small farmers get the assets and services they need to supply supermarket channels. like ITC. Option 4: Help Farmers Become Competitive Suppliers toSupermarkets. Upgrading wholesale markets‗ infrastructure and services is thus important to the whole traditional supply chain. Reliance. has direct procurement links to fish and vegetable farmers in China.• They promote traditional retailer modernization and competitiveness. Agrifood businesses in India.Governments need to supplement private efforts with . which typically buy from small farmers. Option 3: Upgrade Wholesale Markets to Serve Retailers and Farmers Better.Singapore.Examples are modern cash-and-carry chains that act as wholesalers. and small traditional shops but encourage them to locate in non-congested areas and on fixed sites (to increase hygiene and tax payment) and to improve their physical infrastructure. and technical assistance and procure output from farmers. likeBharti/Wal-mart in India. But governments and wholesaler associations also need to invest in upgrading wholesale markets in order to maximize access by farmers and retailers. and Taiwan. They also train the operators in business skills. Singapore‗s approach is to ―cherish but upgrade and modernize. Metro in China. Such programs have been undertaken in China and Mexico. Tata. • They are proactive: the Hong Kong Consumer Council‗s dictum of ―managing and facilitating change‖ rather than leaving wet-markets to flounder and collapse. food safety. have rural business hubs that offer consumables. The programs have several elements in common:50 • Governments involved in these programs have a ―broad tent‖ approach—that is. Metro. Small shops and wet-market stall operators typically source food products from wholesale markets. they allow development of supermarkets as well as traditional retailers. and DSCL Hariyali . Godrej.‖ Hong Kong‗s policy is to ―retain but modernize. hawkers. farm inputs. characterizes all the East and Southeast Asian approaches studied. sometimes under a national umbrella policy. and Makro in Pakistan. and hygiene.
in turn. Option 5: Urban Planning Laws. share a common interest with corporate retailers.The position of the neighbouring municipalities thus needs to be strengthened by a new law (that has been introduced to adjust German building law with European regulation).public investments inimproving farmers‗ access to assets. The proposal of not allowing FDI in retail initially to major cities. and credit facilities for making on-farm investments in assets needed to meet quality and volume requirements. The ministry of urban development at the central level has no jurisdiction over urban area planning in the states except in the case of exceptional laws pertaining to the coastal regions. Some of these assets are public goods. training. and smaller shops in the neighbouring municipalities will not close down due to the new competition. and also not allowing in cities with population of less than 1million is move in right direction. wholesale market upgrading. and physical infrastructure such as cold chains and roads. such as regulations on retailer-supplier relations to promote fair commercial practices. The law against dishonest competition (referred to as unfair trade practices in India) forbids a number of marketing practices which are regarded as . It is clear that land use laws/zoning laws are not the most commonly used regulatory devices against large format retailing and at present the land use laws in urban centres are in the most pliant condition since the local governments implement them and they are most susceptible to omission and commission on behalf of real estate developers who. training in postharvest handling. the Delhi region and union territories. such as irrigation and greenhouses. The state of urban planning in India is such that there is as yet no ceiling on the size or number of retail outlets that may be started in a designated commercial zone. services. SEZs as well as certain sectors. Option 6: Regulation of misleading statements andadvertisements. forests. such as assistance with market linkages between small farmer cooperatives and supermarket chains. market information.What is needed is to include regulations for the establishment of big retail projects in States Regional Planning documents. When municipalities allow big retail projects. Other assets are semi-51 public or private goods. Investors in retail have to prove that their project will not end up affecting retail shops in the same or neighbouring municipality. and information. New big retail projects are now checked to assess their influence on thelocal supply. they are scrutinised to ensure that they meet the requirements of regional planning.
This means a retail store with foreign direct investment can sell multiple brands under one roof. However. origin. especially the nature.52 Option 7: Regulatory Framework to avoid monopolistic practices.These include misleading statements or advertisements about business circumstances. as was done during the telecom sector liberalisation with the National Telecom Policy mandating that each circle should have at least 4-6players. Subhiksha claimed in advertisements that its prices were the lowest compared to rivals like Big Bazar. manner of manufacture or the pricing of goods or commercial services or the size of the available stock. it is the link . In a recently reported case in India a leading corporate retailer. While the FDI in single-brand retailing was allowed earlier. the verdict has not been made public as yet. manufacturing or infrastructure sectors. FDI in multi-brand retailing is being allowed now. and Apana Bazar. However. Retail can be single or multi brand and may be described as a sale to the ultimate consumer at a margin of profit. Big Bazar filed a case against the advertisements and the Advertising and Standards Council of India is understood to have given its verdict in April 2007.dishonest. FDI in retail is a boon for India Foreign direct investment (FDI) refers to foreign capital that is invested to enhance the production capacity of the economy. So. DMART. FDI in retail is different from the investment in corporate. Appropriate policy formulation can also aide this cause. The possible monopolistic/ monopsonistic tendencies of the large retailers (fears of ‗predatory behaviour‗ and ‗abuse of dominance‗) would have to be proactively dealt to ensure competition in the market.etc. It is to be understood that free and fair competition in procurement of farm produce is the key to farmers‗ enhanced remuneration.
consumer has to argue and fight a lot in case he has to return some faulty product to the retailer. With the entry of FDI. Foreign investment in food-based retailing would ensure adequate flow of capital into the country and its productive use. In accordance to the provisions made. The Indian retail sector is highly fragmented with around 97 per cent of its business being run by unorganized retailers. Regulated markets have also developed monopolistic character. This process will be standardized. in the unorganized sector. intermediaries. Indian farmers. It will promote welfare of farmers by agriculture growth and thereby increasing their income level. FDI will improve investment in logistics of the retail chain. India is .between the producer/manufacturer and the individual consumer. prices lack transparency and the due share of farmer is not paid to him. India had to open up the retail trade sector to foreign investment as she is a signatory to the World Trade Organization‘s General Agreement on Trade & Services. at present. which includes wholesale and retail services. any company going for 51% partnership in retail will have to tie up with a local partner. In the absence of intermediaries. At present. The producer will get direct payment from the retailer and the same will be higher than what he was getting earlier due to the foul play by intermediaries. the retail sector will become organized. It will serve as an antidote to inflation. Besides. the consumer will end up paying lower price for a better product. known by different names in different parts of the country. FDI will assist in reducing the dominance of value chain by intermediaries. leading to an efficient market mechanism. FDI in retail will make the consumer happy as well. realize only 1/3rd of the final price paid by the consumer as against 2/3rd realized by farmers in the countries with a greater share of organized retail. This will improve the income levels of all concerned and will make economy flourish with quality branded products at a lower price. flout the business ethics. Organized retail is still at a nascent stage.
India will flourish in terms of quality standards and consumer expectations. 2012 in India Knowledge @Wharton The Indian government recently announced a slew of reforms. including allowing foreign direct investment (FDI) in multi-brand retail up to a level of 51%. Perishable horticultural commodities find it difficult to link to distant markets. Case Study FDI in Indian Retail: The Big Benefits Will Come Tomorrow. Allowing FDI in multi-brand retail will bring about supply chain improvement. Even the FDI retail may be assigned this job. The organized sector will also lay stress on producing more and will generate more employment in production. Foreign direct investment in the retail sector will spur competition as the current scenario is of low competition and poor productivity. including overseas markets. Fears that the entry of FDI in multi-brand retail may cause unemployment as foreign firms may not procure material from domestic producers and may import the same from international market are unfounded as the entry of big companies like Reliance and Tata has substantially improved the life standard of farmers and villages from where they are procuring. The irony is that 80% of the capacity is used only for preservation of potatoes. manpower & skill development. Not Today Published: September 20. investment in technology. FDI will become a catalyst in avoiding distress sale and erosion & wastage in quality and quantity of the produce. The present public distribution system will also be strengthened with better products and storage facility. However.400 cold storages having total capacity of about 24 million tonne. upgrade in the agriculture sector. A policy requiring that single-brand retail multinationals source 30% of products and materials from small businesses and craftsmen was changed to mandating that the same amount come from . and benefits to the government through greater GDP and tax income.one of the biggest producers of fruits and vegetables (more than 180 million tonne). it does not have a strong integrated cold-chain infrastructure with only around 5.
companies look for new locations and bring in investment that is calibrated . they open more stores and increase both the scale of operations (volume of products sourced) and scope of products that they feature. In this phase. So if we ask the question: Will international retail chains in the shorter term -. This can be done through a partnership with local chains (with risk and revenue sharing). In Phase One.FDI in 2008 was in the ballpark of US$35 billion and declined in 2009 and 2010. If you look at the numbers -. In the second phase. Large retail chains when they venture abroad do so in three phases.bring in US$8 billion to get back on track. the investment keeps pace with the rate of expansion. establishing sourcing relationships. Johns Hopkins University professor Ravi Aron. This usually takes 18-to-24 months. but also penetrate deep into the hinterland of Indian economic activity and do much to improve the country's "shunned sectors" -infrastructure and logistics. In this op-ed. or a few flagship stores that serve as brand broadcasters. firms expand their demand footprint. but not calibrated to the current volume of business. In the third phase. they often set up a test case/pilot project. establishing supply chains and massive logistics capabilities.as per [financial information services firm] CEIC Data -. the answer is probably not. test merchandizing strategies and set up operational capabilities. FDI in 2011 came in at around US$27 billion or so. The direct FDI impact in the short term from retail chains will be modest. who is a senior fellow at Wharton's William and Phyllis Mack Center for Technological Innovation. As volumes grow and urban and semiurban retail locations get saturated.that is. argues that opening up FDI will not only lead to a greater variety of products for sale and increased consumer choice. putting in operational infrastructure. There is considerable investment in this phase in the form of real estate acquisition. They assess demand.Indian firms. The chains employ this initial-phase entry strategy to learn lessons about the local markets. investment meant to gear up for volumes of business to come. This is volume-independent investment -. they bring in some investment to cover their set-up costs and for establishing their sourcing (supply) footprint.an 18-to-24 month horizon -.
The company began by locating in rural areas and then moved to suburban and semi-urban areas in the U.S. It is a force multiplier that induces even more investment from competitors.the most iconic of these companies and the one most often cited as a threat to Indian mom-and-pop stores -. Brazil. the vast majority of educated . For these reasons. Walmart -. and information-intensive operations). is based on "everyday low prices. foreign investment in retail has an impact that goes beyond its direct investment impact." The firm has an activity system that is meant to help Walmart compete as a cost leader. when they venture into developing markets. the rural areas and semi-urban areas are not where the money is.that large investments manifest themselves.S. The big-box retailers. ship. In China. First. those companies set up supply chains and logistical capabilities. Second. Thailand and Mexico. Consumers in China -. nor do they have massive storage facilities at home. their entry and expansion induce domestic competitors to invest in infrastructure and logistics. spurring significant improvements in the infrastructure needed to source. do not use the same business model as they do in the U. including storage.do not drive miles and do bulk purchasing.is by no means the lowest-price retailer in China. Impact on Mom-and-Pop Retailers FDI is often opposed on the grounds that it will put mom-and-pop stores out of business. Other Impacts The arrival of foreign retail chains has twofold impact. In India.to growth in volumes. It is in the second phase and the third phase -. Indonesia. warehousing.which come after the initial 18-to-24 months -.unlike their American counterparts living in suburbia . Walmart U. China. and begin the process of bypassing monopoly buyers and traders that dominate procurement in many product categories today. as well as greatly speed up the emergence of product standards (especially in perishables and personal consumables). This is very unlikely for several reasons.S. store and deliver products (covering all aspects of value chain and supply chain activities.
They will have a very high variable cost of operation. as the study calls it -. including grains and cereals. This underperforms the earlier scenario by about 35% or so. Under this scenario. So even under this scenario. It is not surprising that these traders are the most virulent opponents of FDI in retail (the main opposition party that derives its support from the trading castes and . not just organized retail -.8% of the total economic activity of a sector can drive the remaining 79% of that sector out of business does not stand the scrutiny of reason. That difference could be a job creation deficit of about 1. The foreign retail chains will need to make very expensive real estate investments. volume-independent costs are also likely to be much higher than the mom-and-pop convenience stores.4 million jobs with an even higher potential loss of economic product since organized retail pays better than local. scale-deprived mom-and-pop establishments.the "as is" economic scenario. These chains will operate with price points that are much higher than those featured by the mom-and-pop shops. A recent study by the CII and Boston Consulting Group estimated the size of organized retail of US$28 billion in 2010 to be 6% to 7% of the total retail market in India.Beware The foreign retail chains will have a more significant impact on traders that dominate procurement of commodities and perishables.would grow to US$1.total retail sector size.25 trillion by 2020 if the efficiencies that typically come from greater competition and modernization of retail supply systems were to be unleashed.Not Farmers -. The CII/BCG study also estimates that if the organized retail sector is not modernized -. This is without taking into consideration other jobs that would not be created in economic activities that span infrastructure and logistics. Supply Footprint: Traders -.middle and upper classes live in the cities (and not in semi-urban and rural areas) where real estate is very expensive and population density is high.8% of the total market. the idea that a fractional segment that accounts for 20. the study predicts that the size of organized retail could grow to US$260 billion or about 20. These firms' real competition will be the domestic multi-brand retailers. Their fixed.the size of the sector will be about US$170 billion. The study predicted that the size of retail -.
S. As with any other sector. Indeed. The emergence of these supply chains that drive transparency of information will bring significantly more competition in sourcing. These are economic fiefdoms that they dominate and exploit. For this reason alone. It is time that India reexamined its axiomatic beliefs. product varieties and quantities demanded) becomes more easily available. The beneficiaries in this case are the Indian consumers. the entry of foreign players introduces competition that will benefit some and will work to the detriment of others. it was said in the U. When the Carrefours. the lower middle class." It took some time for that belief to lose its status as an axiomatic truth. traders oppose it). After all. a joint venture of the Consortium of Indian Farmers Associations (CIFA). Very often these traders dominate geographies and account for nearly all procurement in their geographies. the interests that are threatened have sought to portray this move as detrimental to India. The CII-Boston Consulting Group study found that an Indian tomato farmer earns about 30% or even less of the final price paid by the consumer (in developed countries. Indian farmers and many other rural producers are at the mercy of large and well-organized monopsony buyers. As usual. which will benefit from the well-paying jobs that will be created. it becomes more difficult for the middlemen to dominate local geographies and restrict competition. that "what was good for [General Motors] was good for America. recognized the potential benefits of eliminating middlemen and has expressed its support for opening the retail sector to foreign investment. the East India Company left more than 100 years ago. the Indian Farmer and Industrial Alliance (IFIA).traders has openly stated that "traders' interests will be harmed by FDI in retail"). In another time. and the producers of goods -. In many states. that percentage can be as much as 70%). Walmarts and Tescos set up direct procurement mechanisms where sophisticated procurement systems are put in place and information about demand (prices. the food ministry determines who it will buy from and this is usually a small number of traders who in turn dominate direct procurement from farmers in their geographies.that have been at the mercy of middlemen and monopsony buyers and trader monopolies.including farmers -. farmers and producers should welcome this development (and for this reason alone. .
which runs the ‗Best Price‘ stores. Rajasthan. ―In India.Conclusion A Start Has Been Made Walmart has a joint venture with Bharti Enterprises for cash-and-carry (wholesale) business. Duke. It plans to have 15 stores by March and enter new states like Andhra Pradesh . Wallmart‘s CEO opined that FDI in retail would contain inflation by reducing wastage of farm output as 30% to 40% of the produce does not reach the end-consumer. there is an opportunity to work all the . Madhya Pradesh and Karnataka.
Allowing FDI in multi brand retail can bring about Supply Chain Improvement. Greater Sourcing from India. Part of inflation is due to the fact that produces do not reach the endconsumer. Efficient Small and Medium Scale Industries.Scribd. Up-gradation in Agriculture.way up to farmers in the back-end chain. adding.com www. 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. Thus. tax income and employment generation.in . Manpower and Skill Development. Growth in market size and Benefits to Government through greater GDP.rbi.‖ Duke said. Investment in Technology. which the unorganized sector have undoubtedly failed to provide to the masses employed in them.Manupatra.org.nic.cci. 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.com www. In light of the above.dipp.Legalserviceindia. 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.in www. that a similar trend was noticed when organized retail became popular in the US.in www.com www. Bibliography Websites: www. Many of the foreign brands would come to India if FDI in multi brand retail is permitted which can be a blessing in disguise for the economy. Tourism Development.
com www. Kearney‘s Report on Indian Retail.retailguru.edu www.com Reports/ Research Papers A.R.Pradeekumar-FDI is it the Need of he Hour? Google search Dipakumar Dey-Aspects of Indian Economy-Google search Newspapers The Economic Times .legallyindia.T. www. 2008 FDI Consolidated Policy Dr.Beneficial or Detrimental-research paper Damayanthi/S.KBalyan ―FDI in Indian Retail.icsi.
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