CHAPTER NO.

1
INTRODUCTION

Contents: -
1.1 Introduction
1.2 Historical background of FDI
1.3 Definition of FDI
1.4 Definition of retail and retail sector
1.5 FDI in retail sector

1
 CHAPTER NO .1

INTRODUCTION

1.1 INTRODUCTION

FDI have helped India to attain a financial stability and economic growth with the help of
investments in different sectors. FDI has boosted the economic life of India and on the other
hand there are critics who have blamed the government for ousting the domestic inflows.
After liberalization of Trade policies in India, there has been a positive GDP growth rate in
Indian economy. Foreign direct investments helps in developing the economy by generating
employment to the unemployed, Generating revenues in the form of tax and incomes,
Financial stability to the government, development of infrastructure, backward and forward
linkages to the domestic firms for the requirements of raw materials, tools, business
infrastructure, and act as support for financial system. Forward and back ward linkages are
developed to support the foreign firm with supply of raw and other requirements. It helps in
generation of employment and also helps poverty eradication. There are many businesses or
individuals who would earn their lively hood through the foreign investments. There are legal
and financial consultants who also guide in the early stage of establishment of firm.

Foreign investments mean both foreign portfolio investments and foreign direct investments
(FDI). FDI brings better technology and management, marketing networks and offers
competition, the latter helping Indian companies improve, quite apart from being good for
consumers. Alongside opening up of the FDI regime, steps were taken to allow foreign
portfolio investments into the Indian stock market through the mechanism of foreign
institutional investors.

The objective was not only to facilitate non‐debt creating foreign capital inflows but also to
develop the stock market in India, lower the cost of capital for Indian enterprises and
indirectly improve corporate governance structures. On their part, large Indian companies
have been allowed to raise capital directly from international capital markets through
commercial borrowings and depository receipts having underlying Indian equity. Thus, the

2
country adopted a two‐pronged strategy: one to attract FDI which is associated with multiple
attendant benefits of technology, access to export markets, skills, management techniques,
etc. and two to encourage portfolio capital flows which ease the financing constraints of
Indian enterprises.

India has one of the most transparent and liberal FDI regimes among the emerging and
developing economies. By FDI regime we mean those restrictions that apply to foreign
nationals and entities but not to

Indian nationals and Indian owned entities. The differential treatment is limited to a few entry
rules, spelling out the proportion of equity that the foreign entrant can hold in an Indian
(registered) company or business.

Figure 1.1

Foreign direct investment (FDI) has become an integral part of national development
strategies for almost all the countries globally. Its global popularity and positive output in
augmenting of domestic capital, productivity and employment; has made it an indispensable
tool for initiating economic growth for nations. India is evolving as one of the ‘most favoured
destination’ for FDI in Asia and the Pacific (APAC). It has displaced US as the second-most
favoured destination for foreign direct investment (FDI) in the world after China according to
an AT Kearney's FDI Confidence Index. FDI in India has contributed effectively to the
overall growth of the economy in the recent times. FDI inflow has an impact on India's

3
transfer of new technology and innovative ideas; improving infrastructure, a competitive
business environment.

1.2 HISTORICAL BACKGROUND OF FDI:

FDI in India can be traced back with the establishment of East India Company of Britain.
British capital came to India during the colonial era of Britain in India. However, researchers
could not portray the complete history of FDI pouring in India due to lack of abundant and
authentic data. Before independence major amount of FDI came from the British companies.
British companies’ setup their units in mining sector and in those sectors that suits their own
economic and business interest.
After Independence issues relating to foreign capital, operations of MNCs, gained attention of
the policy makers. Keeping in mind the national interests the policy makers designed the FDI
policy which aims FDI as a medium for acquiring advanced technology and to mobilize
foreign exchange resources. The first Prime Minister of India considered foreign investment
as “necessary” not only to supplement domestic capital but also to secure scientific, technical,
and industrial knowledge and capital equipment. With time and as per economic and political
regimes there have been changes in the FDI policy too.
During the 1970s period the government adopted a selective and highly restrictive foreign
policy as far as foreign capital, type of FDI and ownerships of foreign companies was
concerned. Government had setup Foreign Investment Board and enacted Foreign Exchange
Regulation Act in order to regulate flow of foreign capital and FDI flow to India. The soaring
oil prices continued low exports and deterioration in Balance of Payment position during
1980s forced the government to make necessary changes in the foreign policy. It is during
this period that the government had encouraged FDI, allowed MNCs to operate in India.
Thus, resulting in the partial liberalization of Indian Economy. The government introduced
reforms in the industrial sector, aimed at increasing competency, efficiency and growth in
industry through a stable, pragmatic and non-discriminatory policy for FDI flow.
India emerged as a strong economic player on the global front after its first generation of
economic reforms. As a result of this, the list of investing countries to India reached to
maximum number of 120 in 2008. Although, India is receiving FDI inflows from a number of
sources but large percentage of FDI inflows is vested with few major countries. Mauritius,
USA, UK, Japan, Singapore, Netherlands constitute 66 percent of the entire FDI inflows to
India. FDI inflows are welcomed in 63 sectors in 2008 as compared to 16 sectors in 1991.

4
1.3 DEFINITION OF FDI

Any investment from an individual or firm that is located in a foreign country into a country
is called Foreign Direct Investment. 

 Generally, FDI is when a foreign entity acquires ownership or controlling stake in the
shares of a company in one country, or establishes businesses there.

 It is different from foreign portfolio investment where the foreign entity merely buys
equity shares of a company.

 In FDI, the foreign entity has a say in the day-to-day operations of the company.

 FDI is not just the inflow of money, but also the inflow of technology, knowledge,
skills and expertise/know-how.

 It is a major source of non-debt financial resources for the economic development of a

country.

 FDI generally takes place in an economy which has the prospect of growth and also a
skilled workforce.

 FDI has developed radically as a major form of international capital transfer since the
last many years.

 The advantages of FDI are not evenly distributed. It depends on the host country’s
systems and infrastructure. 

 The determinants of FDI in host countries are:

o Policy framework

o Rules with respect to entry and operations/functioning (mergers/acquisitions

and competition)

o Political, economic and social stability

o Treatment standards of foreign affiliates

o International agreements

o Trade policy (tariff and non-tariff barriers)

5
 o Privatisation policy

1.4 DEFINITION OF RETAIL AND RETAIL SECTOR

Retail is the sale of goods to end users, not for resale, but for use and consumption by the
purchaser. The retail transaction is at the end of the supply chain. Manufacturers sell large
quantities of products to retailers, and retailers sell small quantities of those products to
consumers. Example: A person who wants to obtain a product for their own personal use will
usually purchase it at a retail store or from some other retail marketing channel.
Retail is derived from a French word with the prefix re and the verb tailor meaning "to cut
again". It was first recorded as a noun with the meaning of a "sale in small quantities" in 1433
(from the Middle French retail, "piece cut off, shred, scrap, paring").Like the French, the
word retail in both Dutch and German (detail Handel and Onehanded, respectively) also
refers to the sale of small quantities of items.
Evidently, retail trade is one that cuts off smaller portions from large lumps of goods. It is a
process through which goods are transported to final consumers. In other words, retailing
consists of the activities involved in selling directly to the ultimate consumer for personal,
non-business use.

It embraces the direct-to-customer sales activities of the producer, whether through his own
stores by house-to-house canvassing or by mail-order business. Manufacturers engage in
retailing when they make direct-to-consumer sales of their products through their own stores
(as Bata and Corona shoe companies, D.C.M. Stores, Mafatlals and Bombay Dyeing) by
door-to-door canvass or mail order or even on telephone. Even a wholesaler engages in
retailing when sells directly to an ultimate consumer, although his main business may still be
wholesaling. A retailer is a merchant or occasionally an agent or a business enterprise, whose
main business is selling directly to ultimate consumers for non-business use. He performs
many marketing activities such as buying, selling, grading, risk-trading, and developing
information about customer's wants. A retailer may sell infrequently to industrial users, but
these are wholesale transactions, not retail sales. If over one half of the amount of volume of
business comes from sales to ultimate consumers, i.e. sales at retail, he is classified as a
retailer. Retailing occurs in all marketing channels for consumer products.
Retailing is “an act of making a sale to the final consumer”. 

According to this definition, the retail sector of India is prominently divided into organized
and unorganized retail trade shops, with the latter making up 97% of it. The unorganized

6
retail sector is largely composed of local kirana shops, owner manned general stores,
pan/beedi shops, pavement vendors, convenient stores etc.; it is the kind of retailing an
average Indian can relate to as it comes naturally to them hence it is the largest source of self-
employment there. On the other hand, organized retailing refers to corporate-backed
hypermarkets, retail chains and privately owned large businesses which are only allowed to
retail under a license and are liable to huge sales and income taxes.

The growth of retailing in India under the organized sector is such that in spite of owning a
meagre 2-3% of the sector, it is responsible for trade worth 180-394 (US$ billion), compared
to 360 of China's. Statistically speaking, retail in India is growing at a rate of 46.64%
annually. In 2004, The High Court of Delhi defined the term ‘retail’ as a sale for final
consumption in contrast to a sale for further sale or processing (i.e. wholesale).

A sale to the ultimate consumer. Thus, retailing can be said to be the interface between the
producer and the individual consumer buying for personal consumption. This excludes direct
interface between the manufacturer and institutional buyers such as the government and other
bulk customers. Retailing is the last link that connects the individual consumer with the
manufacturing and distribution chain. A retailer is involved in the act of selling goods to the
individual consumer at a margin of profit.
Retail sector includes all the shops that sell goods to the ultimate customer, who buys them
for personal and not business use. It encompasses all kinds of shops, from kiosks and small
groceries to supermarket chains and large department stores. In addition to traditional bricks-
and-mortar shops, the retail sector includes mail-order and online businesses.

1.5 FDI IN RETAIL SECTOR

Foreign direct investment (FDI) in the retail sector in India is restricted. In 2006, the
government eased retail policy for the first time, allowing up to 51 per cent FDI through the
single brand retail route. Since then, there has been a steady increase in FDI in the retail
sector, and the cumulative FDI in single-brand retail stood at $195 million by the middle of
2010 (DIPP, 2010).
According to the Department of Industrial Policy and Promotion (DIPP) of the Government
of India, single-brand retail comprises those retailers selling products “of a ‘single brand’
only, such that products should be sold under the same brand internationally; and single-

7
brand product retailing covers only products which are branded during manufacturing. In this
category, FDI is allowed to the extent of 51 per cent in contrast, no FDI is allowed in the
multi-brand retail category. This includes all firms in organized retail that seek to stock and
sell multiple brands, such as large international retailers like Wal-Mart and Carrefour. This is
the sector that is most under dispute.
The Retail sector of India is vast, and has huge potential for growth and development, as the
majority of its constituents are un-organized. The retail sector of India handles about $250
billion every year, and is expected by veteran economists to reach to $660 billion by the year
2015. The business in the organized retail sector of India, is to grow most and faster at the
rate of 15-20% every year, and can reach the level of $100 billion by the year 2015. Here, it
is noteworthy that the retail sector of India contributes about 15% to the national GDP, and
employs a massive workforce of it, after the agriculture sector. India's growing economy with
a rate of approximately 8% per year makes its retail sector highly fertile and profitable to the
foreign investors of all sectors of commerce and economy, of all over the world.
Organized retailing entails trading conducted by licensed retailers and unorganized retailing
includes all types of low cost trading like local shops, small roadside stores and temporary
shops or door to door selling of various goods. Until now, according to the Indian retailing
laws, Foreign Direct Investment in multi-brand retail market prohibited. But government is
thinking to open the FDI in retail in India which implies that foreign investment in retailing is
possible up to 51%. Now the announcement of retail FDI in India has triggered a series of
debates on both positive and negative notes and become political issue.

8
 CHAPTER NO. 2
RESEARCH METHODOLOGY

Content: -
2.1 Objectives of the study
2.2 Scope of study
2.3 Sample size
2.4 Data collection
2.5 Primary data
2.6 Secondary data

9
 CHAPTER NO. 2

RESEARCH METHODOLOGY

2.1 OBJECTIVES OF THE STUDY

The Government of India was initially very apprehensive of the introduction of the Foreign
Direct Investment in the Retail Sector in India. The unorganized retail sector as has been
mentioned earlier occupies 98% of the retail sector and the rest 2% is Research Methodology
contributed by the organized sector. Hence one reason why the government feared the surge
of the Foreign Direct Investments in India was the displacement of labour. The unorganized
retail sector contributes about 14% to the GDP and absorbs about 7% of our labour force.
Hence the issue of displacement of labour consequent to FDI is of primal importance. There
are different viewpoints on the impact of FDI in the retail sector in India, according to one
viewpoint, the US evidence is empirical proof to the fact that FDI in the retail sector does not
lead to any collapse in the existing employment opportunities. There are divergent views as
well.

According to the UK Competition Commission, there was mass scale job loss with entry of
the hypermarkets brought about by FDI in the UK retail market. India being a signatory to
World Trade Organization’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.

10
2.2 SCOPE OF STUDY

FDI has a major role in the economic development of our country. Growth of FDI has seen
in many sectors over the past few years. New reforms/policies have been taken by the
government to encourage FDI in Retail Sector. Government has initiated to approve 100
percent FDI in single-brand retail through automatic route. The present study takes into
consideration FDI retail inflows into the country in the last 6 years. The relation between FDI
retail and economic growth of the country has been examined using the proxy variable GDP
and stock market movements has been examined using the proxy variable NIFTY.

2.3 SAMPLE SIZE

I have targeted 100 people of various age groups for the purpose of research. The sample size
is influenced by the target population.

2.4 DATA COLLECTION

One of the important tools for conducting research availability of the necessary and useful
data. Data collection is in many ways more of an art that a find. Sometimes the data are
available readily in one form or other and sometimes they are to be collected a fresh. Mainly
data can be collected by using two methods.

2.5 PRIMARY DATA

Primary data will be collected through questionnaire. The questionnaire has prepared to
collect the data that is useful to conduct this study. The questionnaire is filled by respondents
and provides the information. In this study, questionnaire is based on the objective of the
study and the title of the study, and collected information from customers. The questionnaires
are containing the questions, which are simple and understandable to the respondents.
Primary data are obtained by a study specifically designed to fulfil the data needed of
problem.

11
2.6 SECONDARY DATA

Secondary data is the data which is already collected and assembled. This data is available
with the company or firm and it can also be got from newspapers, periodicals, magazines etc.
The research has collected the required secondary data from the records of the organization as
well as from the journals, yellow pages, newspapers, text books, encyclopaedia, etc.

12
 CHAPTER NO. 3

REVIEW OF LITERATURE

Contents: -

1. Abrar (2012)
2. Chari & Raghavan (2011).
3. Fulzele & Zodage (2013)
4. Gokhale & Sinha (2012)
5. Grover & Gupta (2014)
6. Guruswamy et al. (2005)
7. Jain & Sukhlecha (2012)
8. Khare M. (2013)
9. Krishnan & Bhandare (2013)
10. Mukherjee (2011)
11. Rao & Prashant (2012)
12. Sharma & Bansal (2015)
13. Verma (2012)
14. Rajput (2012)

13
 CHAPTER NO. 3

REVIEW OF LITERATURE

 Abrar (2012) discussed the nature of relations which international retailers share with
their suppliers, their effect on workers and cultivators in country like India. The paper
discussed in detail the source of pressure for allowing FDI in India, possible impact
on marginal producers and workforce along with the pressure to ensure irreversibility
of allowing FDI in retail. The researcher concluded that allowing healthy FDI in retail
sector will help to increase GDP and leads to economic development. It will help
Indian retail market to integrate with global market. It is likely to provide better
employment opportunities to people in India. The consumers on the other side will be
benefited by a good consumer experience.

 Chari & Raghavan (2011) analysed the impact of opening retail sector to FDI in
India such as entry of foreign players would lead to large scale exit of incumbent local
retailers, the organized retail sector in India is at its nascent stage, so it would be
difficult to compete with big players. The study further pointed out that FDI would
help to tackle inflation, by creating better linkages demand and supply it also helps to
improve the final sale prices that are being paid to farmers, an added benefit of
improved distribution and warehousing channels are expected to come from enhanced
exports.

 Fulzele & Zodage (2013) pointed out the positive impacts of FDI in Indian retail
sector. India possesses a number of opportunities to attract foreign players to invest.
The study concluded that FDI is necessary for growth and development of farmers,
generating new employment opportunities, benefits to customers, development of
SSI’s, capital inflow, infrastructure development, inflation control, improvement in

14
 retailing services, technical know-how infusion, improves SCM, growth of GDP,
decline in cost of production of goods and services.

 Gokhale & Sinha (2012) said that allowing FDI in multi brand retailing will open
floodgates for foreign retailers to invest and will change the retail landscape forever in
India. For global retailers, India provides a lucrative market. The study pointed out
that Transnational Retailers (TNR) may not always be successful in other countries
for example Wall-Mart in China etc. The responses of Indian organized players to
FDI in Multi brand retailing are positive thus once the funds come into India through
the FDI route, it will usher in a phase of expansions.

 Grover & Gupta (2014) tried to find out the explanatory variables of FDI inflows in
the country with the help of simple and multiple regression method. Two models were
developed by the researchers to study the impact of FDI on economic growth. Model
1: FDI model, which depicts the factor influencing FDI in India. Model 2: Economic
growth model, which depicts the contribution of FDI to economic growth.
Econometric techniques viz. coefficient of determination, Std. error, F-ratio, t-
statistics, D-W statistics are used. The study revealed that trade GDP, reserves GDP
and financial position variables shows a positive relation with FDI while R&D GDP
and exchange rate GDP variables shows negative relation with FDI. The study
concluded that FDI is a significant factor to influence the level of economic growth in
India.

 Guruswamy et al. (2005) stated the positive points of FDI on Indian economy such
as greater efficiency and improvement of living standards. The study shows some
negative points attached to FDI driven “modern retailing” i.e. labour displacing by
destroying the traditional retail sector, there can monopoly of giant foreign retailers.
The study further suggested some points to be considered for better upliftment of
retail sector such as: there should be some conditionality for the entry of giant foreign
players in the market, constrain of limited availability of bank finance should be

15
 removed, a National commission must be established to deal with and recommend the
problems faced by retail sector in India, manufacturing sector should be improved.

 Jain & Sukhlecha (2012) in the study tried to give reasons on the basis of which FDI
should be allowed in multi-brand retailing in India. Example of other developing
countries like Thailand and China who initially protested against the entry of foreign
investment in retail sector and then, later on proved out to be the most effective
decision in country ‘s development and standing in the world were discussed. The
study suggested that FDI should be allowed with some recommendations such as
establishment of national commission, appropriate lending policies by RBI, setting up
of co-operative stores for small retailers.

 Khare M. (2013) in the study focused upon the impact of FDI policy on Indian retail
sector. The researcher uses SWOT analysis to highlight the opportunities and
challenges faced along with the shortcomings of FDI policy. The study highlighted
strengths of the FDI policy such as: fast growing economy, young and dynamic
manpower, enhanced employment opportunities, highest shop density in the world,
increased purchasing power and disposable income, better priced products for the
customers, high growth rate in retail and wholesale trade. Further the study discussed
about the weaknesses of the policy such as: low capital investment in retail sector,
retailers will focus upon metro customers as compare to village customers, small
sized retail outlets, lack of trained manpower, lack of competition, low volume of
retail sales, high priced as compare to specialized shops. The study also pointed out
various as opportunities like untapped rural market, India as an attractive retail
destination for global giant players, FDI policy will help to improve competition,
improvement in retailer’s efficiency, increase in exports, foreign capital infusion and
latest managerial skills upgradation. The study also discussed about various threats in
front of FDI policy like survival of small retailers would be difficult, a start-up of
roadside bargains, Indians will do the work and profits would be collected by
foreigners, loss of jobs in manufacturing sector, high initial investments, difficult to
meet demand of all segments of customers, lack of unified tax system, unable to
employ people on contract basis, labour laws are not well followed, difficult to

16
 provide parking space in urban areas, dominance of unorganized sector. At the end
the researcher concluded that GOI must welcome foreign players with a talented pool
of human resources having expertise in retailing. The pros and cons of FDI policy
must be considered in light of interest of small retailers.

 Krishnan & Bhandare (2013) pointed out that with the changing trends of retailing
in India, traditional and new formats will co-exist. There exists a number of
favourable factors like increasing population, rapid urbanization, expected increase in
India’s growth, growing middle class, increasing number of blue collar and white
collar workers, changing life style , expected increase in FDI flow, progressive
policies, economic and political stability, growth of nuclear families, increasing
working women population for growth of organized retail in India. The researchers
also highlighted various advantages and disadvantages of FDI in retailing.

 Mukherjee (2011) suggested that retail FDI policy needs to focus on benefits of the
majority of Indian consumers by giving them access to branded products at lower
prices. Consumer welfare is a key component of policy making in developed
countries, however by ignoring consumers, the goals of enhancing consumer access to
goods and services and reduction in inequality and poverty may not be achieved. The
study concluded that FDI should be allowed in multi-brand retail in a phased manner
which would also facilitate investment in the supply chain and increase domestic
sourcing. To protect the interest of consumers, the Competition Act 2002, the
Consumer Protection Act (amendment) 2002 needs to be reviewed and must be
amended as per requirement.

 Rao & Prashant (2012) discussed the policies, benefits and impact of FDI in retail
sector. The study emphasized that after experiencing the benefits of opening large-
scale investment in telecommunication and IT industry, the time has come to open
liberal FDI policy in retail sector. There is risk of displacement of small retailers by
foreign players who have strong financial strength, capability of creating monopoly,
increasing cut throat competition. The researchers suggested that to overcome the

17
 negative impact of FDI, a proper regulatory framework must be prepared and FDI
must be encouraged on gradual basis.

 Sharma & Bansal (2015) explored the trends of FDI in Indian retail sector. The
study pointed out perceived opportunities of opening FDI on one hand like capital
infusion, benefit to farmers and consumers, improvement in supply chain, logistics
and technology and potential threats such as dominance of organized retail, increased
unemployment due to removal of middlemen, increase in real estate cost because of
increase in demand to set up new big outlets and negative impact on Indian culture.
FDI in retail should be allowed in a phased manner. Formulation of National
commission is suggested to tackle the problems of retail sector in a well-defined
manner. The researcher suggested that manufacturing sector must be strengthened to
accommodate displaced retail sector staff.

 Verma (2012) discussed various marketing strategies which must be adopted by big
giant retailers to capitalize the Indian market. The researcher suggested that adoption
of local culture, targeting youth, high volume low margin business model, e-tailing,
owner feel to a sales person, adoption of franchise and direct business model can help
business community to understand Indian consumer well. The researcher pointed out
that retail market in India is dominated by unorganized retailers. India being an
attractive destination for foreign players, will definitely be affected in terms of
growth. It is the peak time for business community to apply innovative ideas to create
difference in the mind of customers.

 Rajput (2012) pointed out that after opening up of FDI in Indian retail sector a
marked change can be seen in the strategies opted by Indian retailers to attract
customers. They study analysed the impact of the present retail FDI policy on Indian
consumers and economy using SWOT analysis. The analysis reveals that it will have
a positive impact on the growth of Indian economy as a whole.

18
 CHAPTER NO. 4

FDI IN RETAIL SECTOR OF INDIA

Content: -

4.1 Indian retail industry

4.2 FDI policy in India

4.3 Types of FDI

4.4 Advantages of FDI

4.5 Disadvantages of FDI

4.6 Importance and barriers to FDI in India

4.7 FDI in retail and its effect on various stakeholders

19
 CHAPTER NO. 4

FDI IN RETAIL SECTOR OF INDIA

4.1 INDIAN RETAIL INDUSTRY

Retailing in India is one of the pillars of its economy and accounts for about 22 percent of its
GDP. The Indian retail market is estimated to be US$ 500 billion Until 2011, Indian central
government denied and one of the top five retail markets in the world by economic value.
India is one of the fastest growing retail markets in the world, with 1.2 billion people. As of
2013, India's retailing industry was essentially owner manned small shops. In 2010, larger
format convenience stores and supermarkets accounted for about 4 percent of the industry,
and these were present only in large urban centres.

India's retail and logistics industry employs about 40 million Indians (3.3% of Indian
population). foreign direct investment (FDI) in multi-brand retail, forbidding foreign groups
from any ownership in supermarkets, convenience stores or any retail outlets. Even single-
brand retail was limited to 51% ownership and a bureaucratic process. In November 2011,
India's central government announced retail reforms for both multi-brand stores and single-
brand stores. These market reforms paved the way for retail innovation and competition with
multi-brand retailers such as Walmart, Carrefour and Tesco, as well single brand majors such
as IKEA, Nike, and Apple. The announcement sparked intense activism, both in opposition
and in support of the reforms. In December 2011, under pressure from the opposition, Indian
government placed the retail reforms on hold till it reaches a consensus.

In January 2012, India approved reforms for single-brand stores welcoming anyone in the
world to innovate in Indian retail market with 100% ownership, but imposed the requirement
that the single brand retailer source 30 percent of its goods from India. Indian government
continues the hold on retail reforms for multi-brand stores. In June 2012, IKEA announced it
had applied for permission to invest $1.9 billion in India and set up 25 retail stores.

20
An analyst from Fitch Group On 7 December 2012, the Federal Government of India allowed
51% FDI in multi-brand retail in India. The government managed to get the approval of
multi-brand retail in the parliament despite heavy uproar from the opposition (the NDA and
leftist parties), Some states will allow foreign supermarkets like stated that the 30 percent
requirement was likely to significantly delay if not prevent most single brand majors from
Europe, USA and Japan from opening stores and creating associated jobs in India On 14
September 2012, the government of India announced the opening of FDI in multi-brand
retail, subject to approvals by individual states. This decision was welcomed by economists
and the markets, but caused protests and an upheaval in India's central government's political
coalition structure. On 20 September 2012, the Government of India formally notified the
FDI reforms for single and multi-brand retail, thereby making it effective under Indian law.
Walmart, Tesco and Carrefour. India will allow foreign groups to own up to 51 per cent in
"multi-brand retailers", as supermarkets are known in India, in the most radical pro-
liberalisation reform passed by an Indian cabinet in years; to open while other states will not

Figure 4.1

21
Indian Retail Sector: An Overview

The presence of retail sector in India can be felt way back from the time of melas and haats,
these were meant to cater the need of local people living nearby. The emergence of kirana
stores and mom & pop stores were observed after sometime. The Government also started
supporting the retail sector and as a result a number of indigenous retail stores came into
existence. With the passage of time, economy started becoming more open and a changed
face of retail sector came into existence. The first few companies which came into existence
to set up retail chains were from textile sector (S. Kumar’s, Raymond etc).

The Retail Industry can be broadly categorized as:

Organized and Unorganized Retailing.

 Organized Retailing represents licensed retailers who got them registered for income
tax, sales tax etc.

 Unorganized Retailing represents retailers who are not registered for income tax, sales
tax etc. And do not possess license for their workings, for example: street hawkers.

Today India is fifth largest in the world in terms of retailing. The overall retail is projected to
double to $1 trillion by 2020 from $600 billion in 2015, where modern retail is expected to
grow 3 time to $180 billion by 2020from $60 billion in 2015 as per BCG report on “Retail
2020: Retrospect, Reinvent, Rewrite”.

The retail sector is growing at a very faster pace and the key factors driving the growth are:

 Increasing no. of young population

 Double family income
 Increasing working women population
 Techno-savvy youngsters
 Nuclear families
 Rapid urbanization
 Customer liking towards modern shopping environment
 New retail formats with differentiated strategies
 Positive regulatory environment: promotion of ease of doing business concept
through Make in India.

22
As a result of ever-changing demand of customers liberalization of FDI policy, favourable
responses of customers towards innovative products, the retail sector is able to attract big
players to play in the field.

4.2 FDI POLICY IN INDIA

Investment climate in India has improved tremendously since 1991 when the government
opened up the economy and initiated the LPG strategies.

Figure 4.2

 The improvement in this regard is commonly attributed to the easing of FDI norms.

 Many sectors have opened up for foreign investment partially or wholly since the
economic liberalization of the country.

 Currently, India ranks in the list of the top 100 countries in ease of doing business.

 In 2019, India was among the top ten receivers of FDI, totalling $49 billion inflows,
as per a UN report. This is a 16% increase from 2018.

 In February 2020, the DPIIT notifies policy to allow 100% FDI in insurance
intermediaries.

23
  In early 2020, the government decided to sell 100% stake in the national airlines Air
India.

FDI Routes in India

Figure 4.3

There are three routes through which FDI flows into India. They are described in the
following table:

Category 1 Category 2 Category 3

100% FDI permitted Up to 100% FDI permitted Up to 100% FDI permitted

through Automatic through Government through Automatic +
Route. Route. Government Route.

24
  Automatic Route FDI.

In the automatic route, the foreign entity does not require the prior approval of the
government or the RBI.

Examples:

 Medical devices: up to 100%

 Thermal power: up to 100%

 Services under Civil Aviation Services such as Maintenance & Repair Organizations

 Insurance: up to 49%

 Infrastructure company in the securities market: up to 49%

 Ports and shipping

 Railway infrastructure

 Pension: up to 49%

 Power exchanges: up to 49%

 Petroleum Refining (By PSUs): up to 49%

 Government Route FDI

Under the government route, the foreign entity should compulsorily take the approval of the
government. It should file an application through the Foreign Investment Facilitation Portal,
which facilitates single-window clearance. This application is then forwarded to the
respective ministry or department, which then approves or rejects the application after
consultation with the DPIIT.

Examples:

 Broadcasting Content Services: 49%

 Banking & Public sector: 20%

 Food Products Retail Trading: 100%

25
  Core Investment Company: 100%

 Multi-Brand Retail Trading: 51%

 Mining & Minerals separations of titanium bearing minerals and ores: 100%

 Print Media (publications/printing of scientific and technical magazines/specialty

journals/periodicals and facsimile edition of foreign newspapers): 100%

 Satellite (Establishment and operations): 100%

 Print Media (publishing of newspaper, periodicals and Indian editions of foreign

magazines dealing with news & current affairs): 26%

 Sectors where FDI is prohibited 

There are some sectors where any FDI is completely prohibited. They are:

 Agricultural or Plantation Activities (although there are many exceptions like

horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc.)

 Atomic Energy Generation

 Nidhi Company

 Lotteries (online, private, government, etc.)

 Investment in Chit Funds

 Trading in TDR’s

 Any Gambling or Betting businesses

 Cigars, Cigarettes, or any related tobacco industry

 Housing and Real Estate (except townships, commercial projects, etc.)

4.3 TYPES OF FDI

 Horizontal FDI arises when a firm duplicates its home country-based

activities at the same value chain stage in a host country through FDI.

26
  Platform FDI Foreign direct investment from a source country into a
destination country for the purpose of exporting to a third country.

 Vertical FDI takes place when a firm through FDI moves upstream or
downstream in different value chains i.e. when firms perform value-adding
activities stage by stage in a vertical fashion in a host country.

 Horizontal FDI arises when a firm duplicates its home country-based

activities at the same value chain stage in a host country through FDI.

 Platform FDI Foreign direct investment from a source country into a

destination country for the purpose of exporting to a third country.

 Vertical FDI takes place when a firm through FDI moves upstream or
downstream in different value chains i.e., when firms perform value-adding
activities stage by stage in a vertical fashion in a host country.

4.4 ADVANTAGES OF FDI

 Growth in Economy:

 Due to foreign companies entering into retail sector, new infrastructure will be built thereby
bolstering the jagging real estate sector. In turn, banking sector will also grow as the funds
needed to build infrastructure will be provided by banks.

 Job Opportunities: 

It has been estimated according to government, that approximately ten million jobs will be
created mostly in retail and real estate sectors.

 Benefits to Farmers: 

27
In the retailing business, the intermediaries have dominated the interface between the
manufacturers or producers and the consumers. Hence the farmers and manufacturers lose
their actual share of profit margin, as the lion’s share is eaten up by the middlemen.

This issue can be resolved by FD1, as farmers might get contract farming, where they will be
able to supply an organised retailer based upon demand and will get paid handsomely for that
and they need not run in search of buyers.

 Benefits to consumers:

 Consumers will get variety of good quality products at low prices compared to market rates
and will be able to choose from various international brands at one place.

 Lack of Infrastructure:

 This has been one of the common issues in the retailing chain in India for years, which has
led to the process of an incompetent market mechanism. To cite an example, in spite of India
being one of the largest producers of fruits and vegetables, lack of proper cold storage facility
significantly affects the selling of these perishable items and also in huge losses. Allowing
FDI might help India have better logistics and storage technologies resulting in avoiding
wastage. Due to FDI foreign companies will invest around $ 100 million in India. Thereby,
infrastructure facilities, refrigeration technology, transportation sector will get a boost.

 Cheaper Production facilities: 

FDI will assure operations in production cycle and distribution. Due to economies of
operation, production facilities will be available at a cheaper rate and thus resulting in
availability of variety products to the ultimate consumers at a reasonable and cheaper price.

 Availability of new technology: 

FDI allows transfer of skills and technology from abroad and develops the infrastructure of
the domestic country. Greater managerial talent will flow in from other countries. Domestic
consumer will get the benefit of getting great variety and quality products at all price points.
28
  Long term cash liquidity: 

FDI will render necessary capital for establishing organised retail chain stores. It is a long-
term investment because the physical capital in the domestic company is not easily
liquidated.

 Conducive for the country’s economic growth: 

FDI will create a competition among the global investors, which will ultimately guarantee
better and lower prices, thereby benefiting people in all sections of the society. The market
growth and expansion will increase. It will step-up retail employment. It will ensure better
managerial techniques and success. Higher wages will be paid by the international
companies. Urban consumers will be exposed to international lifestyles.

 FDI opens up a new avenue for Franchising: 

Restrictions on FDI are regarded as trade barriers as they traverse direct market access to
foreign firms. Retail giants who are very keen in looking for entry into foreign markets look
for other available alternatives. These restrictions on the global retailers regarding the inflow
of FDI, leads them towards getting the market entry through franchises. Thus, countries
which offer promising market potentialities for retail growth offer substantial growth in the
franchising sector also.

4.5 DISADVANTAGES OF FDI

 Impact on the organised players (eq. Kirana shops) The overall size of retail market in
India at present is estimated at ` 5,88,000 crore of which, the unorganised portion of
the market is worth ` 5,83,000 crore and the share of organised portion of the market
is ` 5000 crores. The unorganised market provides the second largest employment
opportunities to 3.95 million people (first being the agricultural sector). It is argued
that opening the retail sector will have an impact on sales in the unorganised sector.

29
 As a result of this, employment provided by the unorganised sector will be affected. It
is reasoned that by reducing the number of intermediaries, organised retailing will
lead to some job displacement.
 Limited Employment Generation It is said that FDI might provide employment
opportunities, but it is argued that it cannot provide employment opportunities to
semi-illiterate people. This argument gains more importance because in India, large
number of semi-illiterate people are present.

 Fear of lowering of prices There is a fear that allowing FD1 in retail would result in
lowering of prices, as FDI will bring in good technology, supply chain etc. If prices
are lowered, then it will lower the margin of unorganised players also. As a result of
this, the unorganised market will be affected. This in turn will have an impact on the
employment opportunities provided by the unorganised market.

 FDI in retail will drain out the country’s share of revenue to foreign countries, which
may cause negative impact on India’s economy.

 Fears that domestic organised retail sector might not be competitive enough to tackle
international players might not only resulting in loss of market share for them but in
closure of their units.

 There is a possibility of small business owners and workers from other functional
areas, as lot of people are involved in unorganised retail business, may lose their jobs.
Small retailers and other ‘Kirana Stores’ may close down.

 Supermarkets will establish their monopoly in the Indian market. Due to supermarkets
fine tuning and higher accessibility they will be able to buy goods at lower prices and
therefore will be able to sell at lower prices to consumers. This will result in closing
of many small retailers.

 Though Government has stipulated that 30% procurement should be from Indian
sources, this may get diluted over the years. The remaining 70% procurement from
cheaper countries will make the people run towards that stuff and the 30% supply

30
 from Indian small industries will have their own death, unable to compete with low
price Chinese goods.

4.6 IMPORTANCE AND BARRIERS TO FDI IN INDIA

Foreign investment was introduced in 1991 under Importance and barriers to FDI in India:
Foreign Exchange Management Act (FEMA), driven by then finance minister Dr. Manmohan
Singh. As Singh subsequently became the prime minister, this has been one of his top
political problems, even in the current times. India disallowed overseas corporate bodies
(OCB) to invest in India. India imposes cap on equity holding by foreign investors in various
sectors, current FDI in aviation and insurance sectors is limited to a maximum of 49%.

31
 Figure 4.4

Starting from a baseline of less than $1 billion in 1990, a 2012 UNCTAD survey projected
India as the second most important FDI destination (after China) for transnational
corporations during 2010–2012. As per the data, the sectors that attracted higher inflows were
services, telecommunication, construction activities and computer software and hardware.
Mauritius, Singapore, US and UK were among the leading sources of FDI. Based on
UNCTAD data FDI flows were $10.4 billion, a drop of 43% from the first half of the last
year.

32
Nine from 10 largest foreign companies investing in India (from April 2000- January 2011)
are based in Mauritius. List of the ten largest foreign companies investing in India (from
April 2000- January 2011) are as follows

 TMI Mauritius Ltd. - Rs 7294 crore/$1600 million

 Cairn UK Holding - Rs6663 crore/$1492 million
 Oracle Global (Mauritius) Ltd. - Rs 4805 crore/$1083 million
 Mauritius Debt Management Ltd.- Rs 3800 crore/$956 million
 Vodafone Mauritius Ltd. - Rs 3268 crore/$801 million
 Etisalat Mauritius Ltd. - Rs 3228 crore
 CMP Asia Ltd. - Rs 2638.25 crore/$653.74 million
 Oracle Global Mauritius Ltd. - Rs 2578.88 crore / $563.94 million
 Merrill Lynch (Mauritius) Ltd. - Rs 2230.02 crore / $483.55 million

In 2015 India emerged as top FDI destination surpassing China and the US. In first half of the
2015 India attracted FDI of $ 31 billion compared to $ 28 billion and $ 27 billion of China
and the US respectively. The Government of India has amended FDI policy to increase FDI
inflow. In 2014, the government increased foreign investment upper limit from 26% to 49%
in insurance sector. It also launched Make in India initiative in September 2014 under which
FDI policy for 25 sectors was liberalised further. As of April 2015, FDI inflow in India
increased by 48% since the launch of "Make in India" initiative. India was ranking 15th in the
world in 2013 in terms of FDI inflow; it rose up to 9th position in 2014, while in 2015 India
became top destination for foreign direct investment.

Over the last decade India has emerged as one of the favourite destinations for foreign
investors. But compared to china, India still lags behind in attracting foreign investments.
Some of the main factors which tend to act as roadblock for foreign investment in India
include political considerations, poor infrastructure, inadequate government policies, rigid
labour laws and rampant corruption.

 Political Considerations: 

33
The fractious nature of Indian politics has led to expiry of one-party rule system. No
government is possible these days without the support of regional political outfits. These
regional satraps in the name of protecting the interests of poor, oppose liberalisations of
policies which might lead to increase in foreign investment. Government which is dependent
on support of these outfits is hence forced to slow down liberalisation of FDI policies.
Besides, opposition parties often oppose foreign investment senselessly, inciting locals on the
way, just to ensure that government doesn’t run away with the credit for bringing investment.
A case in point is POSCO steel plant in Orissa which is yet to take off due to opposition by
locals. A change in government also sometimes leads to step motherly treatment towards
projects setup by foreign investment during previous government’s tenure. Such kind of
unpredictability makes foreign investors sceptic of investing in India.

 Infrastructure:

Despite the importance being accorded to infrastructure by the government it continues to be

a reason to not invest in India. India’s roads still continue to be one of the worst in the world.
The power cuts remain a way of life. States like UP, Bihar which face severe crunch of
infrastructure are also the ones to attract least foreign investment. Existing infrastructure
projects often do not get adequate government support leading to withdrawal of foreign
investment. Enron faced such situation when it pulled out of the Dabhol power project which
had an FDI of $2.9 billion citing government opposition to the project.

 Government Policies:

India happens to have one of the highest tariff rates in the world. Most of the East Asian
countries charge taxes up to 30%. However, the corporate taxes are charged in excess of 35%
in India. A cap on the foreign equity in certain sectors also limits foreign investments.
Though in recent times, government has taken measures to facilitate easy entry of foreign
investors in India, but the exit barriers are still not as flexible. Investors find it difficult to exit
the market freely, even if they find entering relatively easy.

 Labour Laws: 

34
India has abundance of manpower available at one of the cheapest rates in the world. But, the
inflexible nature of labour laws often makes investors shy away from India. The present
Indian labour laws forbid layoffs of workers for any reason. These laws protect the workers
and thwart attempts to restructure business. To retrench unnecessary workers, firms require
approval from both employees and state governments-approval that is rarely given. Labour
unions extort huge sums from companies through over-generous voluntary retirement
schemes and often resort to strikes in case their demands are not met. India needs to upgrade
its labour laws to attract foreign investors which in the long run will prove beneficial to
labours also.

 Corruption & Bureaucracy: 

In India corruption is the norm, not an exception. India is afflicted with a crisis in
governance, with corruption in nearly every public service. In order to set up an operation in
India, investors whether local or foreign have to pay some form of bribery. Despite steps by
government in recent times to simplify norms for foreign investors, various surveys reveal
that foreign investors still find it difficult to cut a path through the paper work of overlapping
government agencies. International reports on transparency rank India as one of the most
corrupt country every year. A combination of legal hurdles, lack of institutional reforms,
bureaucratic decision-making and the allegations of corruption at the top have turned foreign
investors away from India. Many of the foreign investors have become leery of the country’s
history of discrimination against foreign companies and its reputation as a slow, difficult,
bureaucracy ridden environment to do business.

4.7 FDI IN RETAIL AND ITS EFFECT ON VARIOUS STOCKHOLDERS

FDI is one of the major sources of investment for a country like India, which would assist in
improving country’s growth rate, create employment opportunities, sharing of technical
know-how, development of infrastructure and R&D in the host country. The FDI in retail
sector will also help in,

 increasing foreign exchange reserves

 Reducing the balance of trade deficit
 Developing agricultural sector etc.
35
  Effects of FDI in Retail Sector:
 Loss of jobs: Retail sector offers huge growth potential and is the second
largest employer in India. Any changes by bringing major foreign retailers
will not only result in unemployment on the front-end retail but also make the
middlemen unemployed who have been working in this industry.
 Financial instability: Once the overseas investors are established in Indian
retail sector, they may transfer funds and profits earned to their home country.
This might lead to financial instability.

 Effect on Traditional Mom and Pop Stores:

Traditional retailing has been established in India for many centuries, and is characterized by
small, family-owned operations. Because of this, such businesses are usually very low-
margin, are owner operated, and have mostly negligible real estate and labour costs. Such
small shops develop strong networks with local neighbourhoods. The informal system of
credit adds to their attractiveness. Moreover, low labour costs also allow shops to employ
delivery boys, such that consumers may order their grocery list directly on the phone.

These advantages are significant, though hard to quantify.

In contrast, players in the organized sector have to cover big fixed costs, and yet have to keep
prices low enough to be able to compete with the traditional sector. Getting customers to
switch their purchasing away from small neighbourhood shops and towards large-scale
retailers may be a major challenge. The experience of large Indian retailers such as Big
Bazaar shows that it is indeed possible. The oppositions, on the other hand, believe that local
kirana shops will not be affected. 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.

 Effect on Farmers:

36
In all probability, with the onset of FDI in multi-brand retailing, the food and packaging
industry will also get an impetus. Though India is the second largest producer of fruits and
vegetables, it has a very limited integrated cold-storage infrastructure. Due to lack of
adequate storage facilities farmers incur heavy losses, in terms of wastage in quality and
quantity of produce in general, and of fruits and vegetables in particular. With liberalization
of FDI norms in retail sector, there could be a complete overhaul of the currently fragmented
supply chain infrastructure. Extensive backward integration by multinational retailers,
coupled with their technical and operational expertise, can hopefully rectify structural flaws.
Also, farmers can benefit with the “farm-to fork” (from farm to table) ventures with retailers
which helps in

 Cutting down intermediaries

 Giving better prices to farmers
 Providing stability and economies of scale which will benefit both the farmers and
consumers.

 Effect on Consumers:

In the LPG era consumers have got the choice of selecting products from available options
and also the sellers. In India it is observed that, those who purchase at modern outlets have
found products having better quality, lower prices, one-stop shopping, choice of more brands
and products, better shopping experiences with family as some of the reasons for their choice
of outlet. On the other hand, proximity to residence, goodwill, credit availability, possibility
of bargaining, choice of loose items, convenient timings, home delivery, etc. are some of the
benefits of traditional outlets that attracts consumers to such outlets. Consumers are the major
beneficiaries of the retail boom as organized retailers are initiating measures such as tracking
of consumer behaviour and consumer loyalty programmes to retain their market share
(Mukherjee and Patel (2005)). Authors of ICRIER Policy series paper (August, 2011) and
various other surveys have pointed out that most consumers are willing to experiment to
different brands and so they are in favour of allowing FDI in retail.

Apart from providing Indian consumers more choices in the form of reputed, good quality
brands, liberalizing multi-brand retailing in India is likely to facilitate much greater inflows
of investments. This, in turn, will lead to the development of more efficient and lower cost

37
supply chains, resulting in better quality as well as lower-priced products for Indian
consumers. This will increase consumer spending, which in turn, will drive growth in all
sectors of the economy in a virtuous cycle.

 Effect on Existing Indian Organized Retail Firms:

The existing Indian organized retail firms (such as Food-world Supermarkets Ltd, Nilgiris’s,
ShopRite etc.) support retail reforms and consider international competition as a blessing in
disguise. They expect a flurry of joint ventures with global majors for expansion capital and
opportunity to gain expertise in supply chain management.

38
 CHAPTER NO. 5

DATA ANALYSIS, INTERPRETATIONS AND PRESENTATION

Content: -

5.1 Gender

5.2 Age (in years)

5.3 Are you aware of the current FDI in retail regulation and policy?

5.4 Do you think the Indian government should open up FDI restrictions in the retail sector?

5.5 Are you happy with the current FDI retail policy as it is?

5.6 Do you think FDI is useful for Indian economy's progress?

5.7 Do you think that government reforms need to be made to support domestic retailers so
that they can face the foreign investment competition?

5.8 Do you believe that lifting restrictions on FDI in retail sector will allow more investment,
technical skills and consumer choice?

5.9 Do you think FDI will kill entrepreneurship in India?

5.10 Do you think there will be a negative change in sales volume and revenue after large
supermarkets opened their stores in India?

5.11 How frequently do you make visit for shopping in a month?

5.12 How much money do you spend at one visit to the shop?

5.13 Do you think unorganised retail sector has adopted new strategy of selling in last five
years?

5.14 Do you think that retail sector in India is growing very fast?

39
5.15 Do you think that growth in retail sector has changed the standard of living of the
customers?

5.16 How much has the retail sector area has been developed?

5.17 Do you think that growth of retail sector is able to satisfy the needs of the customers?

5.18 Which of the following outlets in your city you are aware of?

5.19 How many retail outlets have been opened in your area in last five years?

5.20 What are your predictions about retail sector in view of the current situation?

40
 CHAPTER NO. 5

DATA ANALYSIS, INTERPRETATIONS AND PRESENTATION

5.1) Gender

Serial no Response No of respondents Percentage

1 Male 56 56%
2 Female 44 44%
3 Prefer not to say Nil Nil

Table no. 5.1

Figure 5.1

In above table and pie diagram we can observe that: -

 56% respondents are male

 And 44% respondents are female.

5.2) Age (in years)

41
 Serial no Response No of respondents Percentage
1 Below 25 55 55%
2 25-35 38 38%
3 Above 35 7 7%

Table no.5.2

Figure 5.2

In above table and pie diagram we can observe that: -

 55% respondents are below age of 25 years

 38% respondents are in age group of 25 to 35
 And 7% respondents are above 35 years.

5.3) Are you aware of the current FDI in retail regulation and policy?

Serial no Response No of respondents Percentage

42
 1 Yes 86 86%
2 No 14 14%

Table no. 5.3

Figure 5.3

In above table and pie diagram we can observe that: -

 86% respondents are aware of current FDI policy

 And 14% respondents are not aware of current FDI policy.

5.4) Do you think the Indian government should open up FDI restrictions in the retail sector?

Serial no Response No of respondents Percentage

1 Yes 94 94%

43
 2 No 6 6%

Table no. 5.4

Figure 5.4

In above table and pie diagram we can observe that: -

 94% respondents think that Indian government should open up restrictions on FDI in
retail sector
 And 6% respondents think that Indian government should keep restrictions on FDI in
retail sector.

5.5) Are you happy with the current FDI retail policy as it is?

Serial no Response No of respondents Percentage

1 Yes 72 72%

44
 2 No 28 28%

Table no. 5.5

Figure 5.5

In above table and pie diagram we can observe that: -

 72% respondents are happy with current FDI retail policy as it is

 28% respondents are not happy with current FDI retail policy.

5.6) Do you think FDI is useful for Indian economy's progress?

Serial no Response No of respondents Percentage

1 Yes 89 89%
2 No 11 11%

45
 Table no. 5.6

Figure 5.6

In above table and pie diagram we can observe that: -

 89% respondents think that FDI is useful for Indian economy’s progress
 And 11% respondents don’t think that FDI would help in Indian economy’s progress.

5.7) Do you think that government reforms need to be made to support domestic retailers so
that they can face the foreign investment competition?

Serial no Response No of respondents Percentage

1 Yes 93 93%
2 No 7 7%

46
 Table no. 5.7

Figure 5.7

In above table and pie diagram we can observe that: -

 93% of the respondents think that government reforms need to be made to support
domestic retail sector to face foreign investment competition
 And 7% of the respondents think that government reforms would not help domestic
retailers to face foreign investment competition.

5.8) Do you believe that lifting restrictions on FDI in retail sector will allow more
investment, technical skills and consumer choice?

Serial no Response No of respondents Percentage

1 Yes 92 92%
2 No 8 8%

47
 Table no. 5.8

Figure 5.8

In above table and pie diagram we can observe that: -

 92% of the respondents said yes that lifting restrictions on FDI in retail sector will
allow more investment, technical skill and consumer choice
 And only 8% of the respondents said no that lifting restrictions will not help in
developing skills consumer choices and increased investments.

5.9) Do you think FDI will kill entrepreneurship in India?

Serial no Response No of respondents Percentage

1 Yes 28 28%
2 No 72 72%

Table no. 5.9

48
 Figure 5.9

In above table and pie diagram we can observe that: -

 28% of the respondents think that FDI will kill entrepreneurship in India
 And 72% of the respondents think that FDI will not kill entrepreneurship in India.

5.10) Do you think there will be a negative change in sales volume and revenue after large
supermarkets opened their stores in India?

Serial no Response No of respondents Percentage

1 Yes 53 53%
2 No 6 6%
3 Some impact 41 41%

Table no. 5.10

49
 Figure 5.10

In above table and pie diagram we can observe that: -

 53% of the respondents think that there will be negative change in sales volume and
revenue after entry of FDI in retail
 6% of the respondents think that it will not affect sales revenue and sales volume
 And 41% of the respondents think that there will be some impact on sales volume and
sales revenue after entry of FDI in retail.

5.11) How frequently do you make visit for shopping in a month?

Serial no Response No of respondents Percentage

1 One time in a month 15 15%
2 Two times in a month 29 29%
3 Three times in a month 39 39%
4 More than three times in a 17 17%
month

Table no. 5.11

50
 Figure 5.11

In above table and pie diagram we can observe that: -

 15% of the respondents said that they visit for shopping once in a month
 29% of the respondents said that they visit for shopping twice in a month
 39% of the respondents said that they visit for shopping three times in a month
 And 17% of the respondents said that they visit for shopping more than three times in
a month.

5.12) How much money do you spend at one visit to the shop?

Serial no Response No of respondents Percentage

1 Below 2000 10 10%
2 2000 to 4000 18 18%
3 4000 to 6000 35 35%
4 More than 6000 37 37%

Table no. 5.12

51
 Figure 5.12

In above table and pie diagram we can observe that: -

 10% of the respondents said that they spent below 2000 rupees at a one visit to the
shop
 18% of the respondents said that they spent in range of 2000 to 4000 rupees at a one
visit to the shop
 35% of the respondents said that they spent in range of 4000 to 6000 rupees at a one
visit to the shop
 And 37% of the respondents said that they spent more than 6000 rupees at a one visit
to the shop

5.13) Do you think unorganised retail sector has adopted new strategy of selling in last five
years?

Serial no Response No of respondents Percentage

1 Yes 60 60%
2 No 9 9%
3 Maybe 31 31%

Table no. 5.13

52
 Figure 5.13

In above table and pie diagram we can observe that: -

 60% of the respondents think that unorganized retail sector has adopted new
selling strategy
 9% of the respondents doesn’t think that unorganized retail sector has adopted
new selling strategy
 And 31% of the respondents are not sure about unorganised retail sector has
adopted any selling strategy or not.

5.14) Do you think that retail sector in India is growing very fast?

Serial no Response No of respondents Percentage

1 Yes 60 60%
2 No 40 40%

Table no. 5.14

53
 Figure 5.14

In above table and pie diagram we can observe that: -

 60% of the respondents think that retail sector in India is growing very fast
 And 40% of the respondents think that retail sector in India is not growing fast.

5.15) Do you think that growth in retail sector has changed the standard of living of the
customers?

Serial no Response No of respondents Percentage

1 Yes 90 90%
2 No 10 10%

Table no. 5.15

54
 Figure 5.15

In above table and pie diagram we can observe that: -

 90% of the respondents think that growth in retail sector has changed the standard of
living of the customers
 And only 10% of the respondents think that growth in retail sector has not changed
standard of living of the customers.

5.16) How much has the retail sector area has been developed?

Serial no Response No of respondents Percentage

1 Approx. 25% 14 14%
2 25% to 50% 75 75%
3 50% to 75% 11 11%
4 75% to 100% Nil Nil

Table no. 5.16

55
 Figure 5.16

In above table and pie diagram we can observe that: -

 14% of the respondents think that approx. 25% retail sector area has been developed
 75% of the respondents think that 25% to 50% retail sector area has been developed
 And only 11% of the respondents think that 50% to 75% of retail sector has been
developed.

5.17) Do you think that growth of retail sector is able to satisfy the needs of the customers?

Serial no Response No of respondents Percentage

1 Yes 59 59%
2 No 8 8%
3 Maybe 33 33%

Table no. 5.17

56
 Figure 5.17

In above table and pie diagram we can observe that: -

 59% of the respondents think that growth in retail sector is able to satisfy customers’
needs
 8% of the respondents think that growth in retail sector is unable to satisfy customers’
needs
 And 33% of the respondents are not sure about that the growth in retail sector is able
to satisfy or unable to satisfy customer’s needs.

5.18) Which of the following outlets in your city you are aware of?

Serial no Response No of respondents Percentage

1 Big bazaar 39 39%
2 KFC 48 48%
3 Pantaloons 24 24%
4 Dominos 65 65%
5 Subway 23 23%
6 Dmart 81 81%
7 Pizza hut 53 53%

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 8 Reliance trends 20 20%
Table no.5.18

Figure 5.18

In above table and bar diagram we can observe that: -

 39% of the respondents are aware of Big Bazaar

 48% of the respondents are aware of KFC
 24% of the respondents are aware of Pantaloons
 65% of the respondents are aware of Dominos
 23% of the respondents are aware of Subway
 81% of the respondents are aware of Dmart
 53% of the respondents are aware of Pizza Hut
 And 20% of the respondents are aware of Reliance Trends.

5.19) How many retail outlets have been opened in your area in last five years?

Serial no Response No of respondents Percentage

1 1 to3 70 70%
2 3 to 6 22 22%
3 More than 6 8 8%

Table no. 5.19

58
 Figure 5.19

In above table and pie diagram we can observe that: -

 70% of the respondents said that there are 1 to 3 new retail outlets have been opened
since last five years
 22% of the respondents said that there are 3 to 6 new retail outlets have been opened
since last five years
 And 8% of the respondents said that there are more than 6 new retail outlets have
been opened since last five years.

 5.20) What are your predictions about retail sector in view of the current situation?

Serial no Response No of respondents Percentage

1 It will remain same 42 42%
2 It will grow slow 43 43%
3 It will grow fast 15 15%

Table no. 5.20

59
 Figure 5.20

In above table and pie diagram we can observe that: -

 42% of the respondents said that retail sector will remain same as it is
 43% of the respondents said that retail sector will grow slow
 And only 15% of the respondents said that retail sector will grow fast.

CHAPTER NO. 6

FINDINGS, CONCLUSION AND SUGGESTIONS

60
Content: -

6.1Findings

6.2Conclusion

6.3 Suggestions

CHAPTER NO. 6
FINDINGS, CONCLUSION AND SUGGESTIONS

6.1 FINDINGS

61
 The FDI inflows and the national GDP of India are intimately related to each other.
The FDI inflows create significant impact over GDP growth of India. During the
economic recession FDI inflows received a negative jolt. FDI inflows in services
sector predict the inflows of Computer Software & Hardware, Telecommunication,
Housing & Real Estate, Construction activities and Power sectors. In the span of 7
years the FDI investments is widely distributed among the 5 sectors namely
Computer Software & Hardware, Telecommunication, Housing & Real Estate,
Construction activities and Power sectors.

 The Telecommunication sector attracts many foreign direct investors due to its close
connection with Services sector and Computer Hardware & Software sector. It is also
found that Power sector and Telecommunication sector does not have good proximity
in attracting Foreign Direct Investments.

 Mauritius is the predominant source of FDI inflows and its analogous investments in
different portfolios has rapidly increased in the span of 10 years. Innovative and
lucrative FDI inflows penetrated to Indian Economy from Singapore.

 It is also concluded that the FDI inflows from Singapore created significant impact on
GDP of India. The Globalized and liberalized Indian Economy invited several FDIs
from USA and UK. An inflated approach of FDI from USA and UK is found in the
years 2004-05 to 2007-08. Out of the total FDI inflows, 32.6% is contributed from
UK. The insignificant growth rate of FDI from Netherlands is noticed conspicuously
during the years 2004-05 & 2007-08.

 The FDI inflow from Japan shows a declining trend but, on the average, the FDI from
Japan balance through the investment from different portfolios. Germany plays a vital
role in FDI inflows especially on manufacturing, services and construction sectors.
The Germany’s collaborative approach with Indian investments rapidly increased in
the span of 10 years.

 It is found that during 2009-10, the number of retail units has increased to 115.22 lakh
from 110.10 lakh in the previous year registering a growth of 4.7 per cent. There is an

62
 increasing trend in the number of retail sectors in the span of 10 years from 1999 to
2009.

 The retail sector has found to have grown at the rate of 7.5 per cent at constant prices
over the previous year. In the span of 10 years the retail sectors increased their Sales
capacity and contributed significantly to Indian economy.

 The contribution of retails to business turnover performance is highly significant in

the years from 2001-02. The share of retail sectors in some of the emerging areas such
as electronics, engineering goods, chemicals, allied products and marine products is
very low despite large potential in the manufacturing sector. Leather products which
have great potential currently account for only 2-3 per cent of the global business
turnover.

6.2 CONCLUSION
A major argument given by opponents of FDI in retail is that there will be major job losses.
In my view, the jury is out on whether this is the case or not, with different studies claiming
different findings. Big retail chains are actually going to hire a lot of people. So, in the short
run, there will be a spurt in jobs. Eventually, there is likely to be a redistribution of jobs with
some drying up (like that of middlemen) and some new ones sprouting up.
Fears of small shopkeepers getting displaced are vastly exaggerated. When domestic majors
were allowed to invest in retail, both supermarket chains and neighbourhood pop-and-mom
stores coexisted. It’s not going to be any different when FDI in retail is allowed. Who, after
all, will give home delivery? The local kirana. Why would anyone shun them? If anything,
the entry of retail big boys is likely to hot up competition, giving consumers a better deal,
both in prices and choices.
Mega retail chains need to keep price points low and attractive – that is the USP of their
business. This is done by smart procurement and inventory management: Good practices
from which Indian retail can also learn. The argument that farmers will suffer once global
retail has developed a virtual monopoly is also weak. To begin with, it’s very unlikely that
global retail will ever become monopolies. Stores like Wal-Mart or Tesco are by definition
few, on the outskirts of cities (to keep real estate costs low), and cannot intrude into the
territory of local kiranas. So, how will they gobble up the local guy? Secondly, it can’t be

63
anyone’s case that farmers are getting a good deal right now. The fact is that farmers barely
subsist while middlemen take the cream.

6.3 SUGGESTIONS
 The results revealed Foreign Direct Investment create significant impact on retail
sector in India, the FDI are meticulous about their profit motives and also showing
special enthusiasm in choosing the portfolios. It is suggested that SEBI is to take
advantage of the situation and avoid selective policy intervention and focus on clear-
cut and transparent policies and procedures in reducing procedural and bureaucratic
hurdles.

 In the case of Foreign Direct Investments, the inflows are recently inflated through the
retail sectors of both Software & Hardware sectors. While the government has lifted
sectoral caps for FDI over the last decade, policies have thus far been piecemeal and
ad-hoc and a source of uncertainty. The industrial reforms are contributing in
attracting FDIs; it is suggested that they need to be supplemented by more
infrastructure reforms.

 The Foreign Direct Investment in a country-wise analysis clearly showed the

investment of developed countries in India. So, it is strongly recommended to the
Government of India to organize a well-established relationship with both developing
and underdeveloped countries. This would be helpful to analyse the specialization and
lucrative channels of investments from these countries.

 In the span of 10 years the Gross Domestic Product (GDP) growth due to FDI inflows
shows a rapid increase and prove the inflow strengthen of FDI. It is suggested that the
globalized economy should be more liberalized and remove hurdles on account of
persistence of high transaction costs arising from poor infrastructure, inflexible labour
policies in the formal sector and opaque land markets, to attract more inflows
contributing to GDP.

64
  It is found that Foreign Direct Investment is meticulous towards certain important
towards retail sectors like software, automobile and chemical industries. It is
suggested that Government of India is to attract more FDIs, by lifting restrictions on
foreign investment into prohibited sectors such as multi-brand retail. The focus should
not just be on the amount of Greenfield FDI inflows but also the consequent positive
externalities from them, including technological transfer and technological
development. The best type of policy intervention would involve general steps to
enhance overall human capital and technical capabilities of the domestic economy on
a non-discriminatory basis.

 The retail sectors in India create employment opportunities and turnover significantly.
Therefore, it is suggested that the Government should take special care for the FDI
inflows to create more employment opportunities to the retail sectors in India.

 The FDI inflows and arrival of giant malls segment, The Indian economy into highly
potential, moderately potential and low potential. Therefore, it is suggested to the
retail sectors to implement the CRM process to catch hold of their customers.

BIBLOGRAPHY

BOOKS

 "Retail Management"- Chetan Bajaj, Rajnish Tuli, Nidhi Varma, Srivastava-

Oxford University Press, Second Edition 2010.
 Swapna Pradhan, (2009), "Retail Management -Text and Cases", 3rd Edition,

65
 Tata McGraw Hill.
 N.V. SHAHA AND M.A. SHINDE. “FDI IN INDIAN RETAIL SECTOR: A
CRITICAL ANALYSIS”. Tactful Management Research Journal
 Dr. R. Renuka, Dr. M. Ganesan and Dr. M. K. Durga Mani. “Impact of FDI in Indian
Economy with Special Reference to Retail Sector in India”. volume :2, issue :1, Jan
2013
 Dr. Namita Rajput. “FDI AND INDIAN RETAIL SECTOR: AN ANALYSIS”.
Journal of business administration research. Vol 1 No. 1;2012
 Rajiv Bhattacharya “THE OPPORTUNITIES AND CHALLENGES OF FDI IN
RETIAL IN INDIA”. IOSR journal of humanities and social science, VOLUM 5,
ISSUE 5, (Nov-Dec 2012)
 International Finance: A Casebook by Mihir A. Desai

WEBSITES

 www.Wikipedia.com
 http://shodhganga.inflibnet.ac.in
 https://www.researchgate.net
 https://www.slideshare.net
 http://www.ijlemr.com
 https://researchonline.jcu.edu.au
 http://www.allresearchjournal.com
 http://www.ijsdr.org
 https://www.bluleadz.com/blog/5

ANNEXURE

66
Questionnaire

 Gender
a) Male
b) Female
c) Prefer not to say

 Age (in years)

a) Below 25
b) 25-35
c) Above 35

 Are you aware of the current FDI in retail regulation and policy?
a) Yes
b) No

 Do you think the Indian government should open up FDI restrictions in the retail
sector?
a) Yes
b) No

 Are you happy with the current FDI retail policy as it is?
a) Yes
b) No

67
 Do you think FDI is useful for Indian economy's progress?
a) Yes
b) No

 Do you think that government reforms need to be made to support domestic

retailers so that they can face the foreign investment competition?
a) Yes
b) No

 Do you believe that lifting restrictions on FDI in retail sector will allow more
investment, technical skills and consumer choice?
a) Yes
b) No

 Do you think FDI will kill entrepreneurship in India?

a) Yes
b) No

 Do you think there will be a negative change in sales volume and revenue after
large supermarkets opened their stores in India?
a) Yes
b) No
c) Some impact

 How frequently do you make visit for shopping in a month?

a) One time in a month
b) Two times in a month

68
 c) Three times in a month
d) More than three times in a month

 How much money do you spend at one visit to the shop?

a) Below 2000
b) 2000 to 4000
c) 4000 to 6000
d) More than 6000

 Do you think unorganised retail sector has adopted new strategy of selling in last
five years?
a) Yes
b) No
c) Maybe

 Do you think that retail sector in India is growing very fast?

a) Yes
b) No

 Do you think that growth in retail sector has changed the standard of living of
the customers?
a) Yes
b) No

 How much has the retail sector area has been developed?
a) Approx. 25%
b) 25% to 50%
c) 50% to 75%
d) 75% to 100%

69
 Do you think that growth of retail sector is able to satisfy the needs of the
customers?
a) Yes
b) No
c) Maybe

 Which of the following outlets in your city you are aware of?
a) Big bazaar
b) KFC
c) Pantaloons
d) Dominos
e) Subway
f) Dmart
g) Pizza hut
h) Reliance trends

 How many retail outlets have been opened in your area in last five years?
a) 1 to 3
b) 3 to 6
c) More than 6

 What are your predictions about retail sector in view of the current situation?
a) It will remain same
b) It will grow slow
c) It will grow fast

70
71