This action might not be possible to undo. Are you sure you want to continue?
com/fdi-in-retailr.asp AN OVERVIEW Retail is India's largest industry, accounting for over ten percent of the country's GDP GDP (guanosine diphosphate): see guanine. and around eight percent of employment. This makes retail the second largest employer after agriculture. The Indian retail industry in valued at about USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 00 billion and is expected to grow to USD 27 billion by 2010 and USD6 7 billion by 2015. Organised retailing, which now accounts for four percent of all retailing, is predicted to extend to ten percent by the year 2010. The Indian retailing sector is at an inflexion inflection, inflexion the act of bending inward, or the state of being bent inward. point where the growth of organised retail and growth in consumption by Indians is set to adopt a higher growth trajectory. The Indian population is witnessing a significant change in its demographics. A large young working population and nuclear families in urban areas, along with increasing numbers of working women and emerging opportunities in the service sector provide the key growth drivers of the organised retail sector. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a 200 report from the UN, the population aged between 1 to 6 years will increase by 71 million to reach 762 million by 2010, leading to huge consumption of goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. . India's middle-income group (popularly called the middle-class) is currently around 2 percent of the total population (over 00 million) and is estimated to increase to 00 million by 202 . This middle-income segment would have about USD 2.8 trillion a year to spend. Retail in India has emerged as one of the most dynamic and fast-moving industries with several players entering the market. Retailing appears on its way to becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behaviour, ushering in a revolution in retailing. Organised retailers are trying a variety of formats, from discount stores to supermarkets and hypermarkets through to speciality chains. Modern retail has entered India in the form of sprawling shopping centres, multi-storeyed malls and huge complexes offering shopping, entertainment and food all under one roof. The services, ambience and product offering of Shoppers' Stop and Lifestyle have increased the expectations of customers. Similarly, Giant, Subhiksha and Big Bazaar Big Bazaar is a chain of department stores in India, currently with 66 outlets. It is owned by the Pantaloon Retail
In areas that the government wants to monitor more closely. billion in fiscal 2006-07. The government also imposes caps on portfolio investments. as the issue of FDI has been debated time and again. Trade Online Kotak-Securities. which customers are used to having. AV Birla Group and ITC ITC (Brit) n abbr (= Independent Television Commission) Fernseh-Aufsichtsgremium ITC n abbr (BRIT) (= Independent Television Commission) . GOVERNMENT POLICY ON FOREIGN INVESTMENT India's foreign investment policy is fairly liberal. some sectors have caps on FDI FDI See: Foreign direct investment . In February 2006. the Government permitted FDI up to 1 percent in the single brand retail trade with the objective of attracting investment. Ads by GoogleReliance Job Openings Jobs for Experience Candidates Only Register Now & Get Best Job Matched HTCareers. these liberalisations have had considerable success. As regarding the foreign investment policy on retail. Entry of big players is likely to ensure an increase in the share of the retail industry in the national GDP to about 18 percent by the end of 2008. within the FDI caps or separately. allowing up to 100 percent foreign investment in most sectors. announcing huge investments in retail have marked the beginning of the 'retail revolution' during 2006 and 2007. investment up to the caps is permitted on the 'automatic route'. and higher disposable income.com/Keat-Pro The entry of big names in retail. The Indian Government has been under pressure to open this sector. as well as to any investments considered to have national-security implications. officially referred to as the Union Government. FDI inflows into India reached a record USD 19.India Ltd . However. such as Reliance. In recent years the government has relaxed or removed the caps in many sectors and shifted most investments to the automatic route.in/Reliance_Jobs Learn About Share Market Monitor the markets real-time & Enjoy higher returns. the government of India The  Government of India (Hindi: Bh rat Sark r). In most sectors.Future Group. Tata. have reinvented the low price option. Organised retailing is projected to have grown at a rate of around 7 percent in 2007 and 2 percent in 2008. government regulations allow 100 percent FDI in cash and carry through the automatic route and the franchise route is also available for big operators. These caps apply mainly in areas considered strategic or sensitive. It will add USD billion by 2010 owing to the presence of a vast market.8 billion in the previous fiscal year. prior approval is necessary from the Foreign Investment Promotion Board. At present. and commonly as Central Government opened the retail sector to FDI in 2006 and that too on a very selective basis. growing consumer awareness about product quality and services. technology and global best . Aimed at encouraging foreign investment. It works on the same economy model as Wal-Mart and has considerable success in many Indian cities and small towns. to cap total foreign equity in certain sectors. This was more than double the total of USD 7.
Brazil and Thailand. while the German giant Metro AG and South African retailer ShopRite have entered India with the cash & carry format. McDonalds. food processing. and catering to the demand for such branded goods in India.v. construction development. industrial parks. The world's second largest retailer Carrefour and the largest grocery retailer Tesco are also contemplating an India presence. such as manufacturing. Subway and KFC KFC Kentucky Fried Chicken (restaurant chain) KFC Kenya Flower Council KFC Kitchen Fresh Chicken (Kentucky Fried Chicken motto) KFC Kung Fu Cult (Cinema) KFC Kitchen Fixed Charge have already built a huge market of their own with franchisee operations. They further point out that foreign companies would source most of their items domestically and sourcing of goods produced in India would involve transfer of technology . Fendi (luxury products). In 2007. ties. Going forward. is not allowed. re·ju·ve·nat·ed. watches. re·ju·ve·nat·ing. textiles ready-to wear). but also that the retail sector has the potential to be leveraged to rejuvenate re·ju·ve·nate tr. some global brands such as Nike (footwear). Food retailers such as Pizza Hut. The group opposing FDI in multibrand retail believes that restrictions on FDI will safeguard the livelihood of nearly 1 million small store owners. protect the local unorganised retail. Lladro (porcelain goods). Metro is to open 1 -18 stores in all major cities across the country. traditional home accessories and gift items) and Toyota (retail trading of cars) have obtained approvals for trading. even if the same manufacturer produces the goods. To restore to youthful vigor or appearance. Indian opinion is divided on this issue. The competition has become intense with the recent announcement of Tata's joint venture with Australia's biggest retailer Woolworth for creating a multi-brand durable chain. On the other hand. the group favouring FDI believes that giving the retail sector a boost will not only strengthen the economy. travel accessories. Damro (discount furniture). re·ju·ve·nates 1. on 0th January 2008. make young again. while ShopRite will be setting up a cold chain in suburban areas of large cities within the next three years. In China. packaging and logistic services.practices. opening the retail sector to FDI has not only generated immense employment opportunities but also has given a big boost to their economy as a whole. Argenterie Greggio (silverware. After the announcement of the policy. petroleum and natural gas. specific targeted sectors. However. However in his budget speech. cutlery. credit-information services and mining. 2. the Government further relaxed FDI in sectors as diverse as civil aviation. The Government is expected to adopt a highly-calibrated approach to allowing further FDI in the retail space unless the political consensus is achieved. But this still leaves an unfinished agenda of permitting greater foreign investment in politically sensitive areas such as insurance and multi brand retailing. the world's biggest retailer Wal-Mart also entered India in a 0: 0 joint venture with the Bharti group. The retailing of goods of multiple brands. safeguard the interests of suppliers and farmers and avoid job losses to millions. the finance minister has hinted at the relaxation of FDI norms on retail in the near future. commodity exchanges. Louis Vuitton (shoes.
Besides this. old regulations and zoning laws. POLICY IMPLICATIONS CONCENTRATION IN RETAIL SPACE Quality real estate space is a key concern of the retail industry in India. an inextricable web of deceit. the Government is releasing unused textile mill land for retail development. roughly 00 million square feet of additional retail space is likely to be generated. Also FDI has the potential to provide a boost to food products. With recent changes in the regulatory environment.to ventures to ensure adherence of quality standards. with food chains for direct procurement from farmers and investment in cold chains and other infrastructure. So intricate or entangled as to make escape impossible: an inextricable maze. OH. the future will see land and rent reforms driving development in these areas as well. By 2011. leather products and so on will benefit from large-scale procurement by international chains. Consequently. the opening up of the market to foreign investors. Of the planned malls. Currently. b. at 0 percent the Delhi & NCR region has the highest mall density in India. linked to the growth in the real estate sector. are the factors that are gradually transforming the traditional real estate sector into a more transparent and accessible market. In 200 . in turn. and this number is expected to rise to almost 600 by 2011. fruits. the growth of private equity and rising demand for posh residential and commercial premises. While it is difficult to get quality real estate in central locations largely due to private holdings. POLICY ENABLERS LEADING GROWTH The growth in organised retail is inextricably in·ex·tri·ca·ble adj. there are about 200 operational malls. This. FDI in real estate has resulted in joint ventures between Indian and international developers. Of this around four to five billion USD is likely to come though the FDI route. known worldwide as a major manufacturer of computers ). The other state governments are also becoming conscious of the easy collection of revenues from land sales and tax from retail development on otherwise useless land. According to an estimate.com) A technology company specializing in financial terminal transactions. some other aspects of the Government's policy have been favourable on other fronts. Currently. fishery and dairy products. an estimated 100 million square feet of quality shopping centre space is expected to be generating retail sales of over USD 11 billion. NCR was heavily invested in the hardware side of the industry. Dayton. textiles and garments. including vegetables. 1. annual investments in real estate through domestic and overseas real estate funds is pegged at around seven to nine billion USD. Until the late 1990s. the Government allowed FDI in domestic real estate. For example in Mumbai. Similarly. High rental yields will also ensure stronger negotiations between developers and local Government bodies. good marketing production techniques and the introduction of global best practices in management. In Delhi including Delhi national capital region (NCR (NCR Corporation. retail systems and data warehousing. www. This would result in integration of Indian manufacturing with the global supply chain.ncr. a. will create more jobs at various levels. the Government has released large tracts of land for retail development. 0 .
Tesco sources over USD 100 million worth of textiles from India annually. "in other words. better infrastructure. International brands that increasingly rely on Tier II cities to drive growth include Nokia. Tesco also have a sourcing base. There is an increase in demand from the big foreign retailers for various products. Tier II and III cities will be the major growth drivers in the coming years. 90 percent of India sourcing is accounted for by apparel. thus increasing the availability of retail space. RETAIL SOURCING In case of India. fine jewellery. The world's biggest and arguably the most famous retailer. The company also imports shorts from Bangalore (about a million pieces a year). India has 61 other cities with populations greater than half a million. Increasing awareness levels in Tier II cities are eroding the earlier difference between metros and Tier II cities in terms of 'urban aspirations'. Wal-Mart Stores Inc. in other words Adv. and Tirupur's knitwear alone accounts for 0 percent of Tesco's Indian imports. Delhi and the NCR will account for about 0 percent of these malls. 1. Until now. in other words . A majority of the top 20 giant retailers worldwide have plans to increase sourcing from India. Tier I cities such as Mumbai. Ford. Other items include footwear. Over four million vests and T-shirts sold in Tesco stores each year are made in Tirupur. many of them had third-party buying offices in India but now they are setting-up sourcing and buying offices. Since large pockets of land are more easily available in smaller towns. and Spencer's have already built up significant presence in Tier II cities. Chennai and Kolkata clearly have the upper hand in terms of higher disposable incomes. towels. which account for about 80 percent of the sector's revenues. In 200 . Besides the six metropolitan areas. Delhi and Bengaluru. pens. The respective state governments have also been proactive in permitting use of land for commercial development. representing 80 percent of India's population and contributing around 1 percent to the country's GDP.percent are concentrated in the country's smaller towns and cities. Reebok and Adidas. awareness levels. stainless steel stainless steel: see steel. the end of the quota regime or. there is a huge opportunity in retail sourcing.otherwise stated. Other players such as Pantaloon Pantaloon: see commedia dell'arte. Pune. players such as Reliance have announced major retail investments in Tier II cities. we are broke" put differently . It now sources a total of one billion USD worth of diamonds. shrimps. Currently the south Indian apparel hubs of Bengaluru and Tirupur account for a large proportion of the sourcing. . house wares and shoes from India through its procurement offices in Bengaluru. About 60 to 80 percent of the market consists of textiles/ apparels/garment exports and cotton made-ups (terry towels). Over 60 percent of malls in India will be in the six big metros. propensity to spend and an affluent urban youth population. textiles. Pizza Hut. added to the already huge volumes that retailers source from India. apparel. the end of the Multi Fibre Agreement. These cities are witnessing higher incomes and a fundamental change in consumer mindset. began its activities in India in 2001 with the opening of a sourcing liaison office in Bengaluru that grew to a full subsidiary with more than 120 associates. leather products.
there are clear indications that textiles and apparel production is consolidating with production shifting towards Asian countries TO CONCLUDE India's economic growth is an exciting new playing field for the retail industry and for entrepreneurs looking to get in on the ground level.stainless steel Any of a family of alloy steels usually containing 10±30% chromium. accessing applications and data from the Web instead of from local servers is a paradigm shift. wood-based articles and carved artefacts. The report further predicts that the market would grow annually at 6. India has clear advantages in industries like textiles. gives remarkable resistance to corrosion and heat. . The presence of chromium. It often refers to a major change in thinking and planning. New formats have emerged. government incentives to exporters and entry of foreign retailers into the domestic market are also boosting retail sourcing from India. See paradigm. . gems and jewellery. According to the CII CII Confederation of Indian Industry CII Chartered Insurance Institute (UK) CII Construction Industry Institute (University of Texas) CII Council of Institutional Investors Ernst and Young Textile and Apparel Report. the Indian textile and apparel industry is poised to emerge as a sourcing hub for global retailers. wellestablished production base. percent. there has been an important paradigm shift A dramatic change in methodology or practice. Exports are also predicted to grow annually by 12 percent with international retailers looking at India as a viable alternative to China for sourcing of apparel. Over the last few years. together with low carbon content. leather. Huge investment is pouring in from the top domestic and global retailers. The retail boom has created a rush in retail space development and significant improvement in real estate and construction work in every small town in the country. In addition. stationary items and watches. Globally. These are exciting times for this sector. driven by the favourable domestic environment. India has several advantages in terms of abundant supply of cotton and man-made fibre. in sourcing from India. cheap and skilled labour and good design capabilities. For example. The sourcing market is projected to grow to to 7 billion USD by 2011 from the current 22 to 2 billion USD. which ultimately changes the way projects are implemented.
and µsingle brand¶ productretailing would cover only products which are branded during manufacturing. one day or the other. Mexico. having one of the highest density of retail outlets per capita in the world and lowest per capita retail space. remains alien to FDI in retail. South Korea too joined the league in 1996. Since 1991. USA and UK respectively. with changing global scenario.7 per cent and 11 per cent in case of China. There has been a constant debate whether FDI in multi brand retail should become a part of government policy. government better realise that no country could remain in isolation or as an island for long and hope to come out on top. accept FDI in retail. Allowing FDI in multi-brand retail will be a courageous decision of the government of India. As per the existing policy of the government. Argentina followed the footsteps of China in 1994. With entry of foreign players. in retail trade of µsingle brand¶ products.Retail sector in India is predominantly unorganised. the industry will add competition which will force players to add value to their product and services. While the contribution of the organised Indian retail sector to the total employment has been 7 per cent as compared to 6 per cent. but the fact is India will have to. While China allowed FDI in 1992. its recommendations are yet to become official. 11. Reason: The unorganised retail sector in India employs mass population which ultimately forms the bulk of the vote bank. . foreign direct investment (FDI) is not allowed in multi brand retail whereas this has been accepted in many other countries with or without restrictions. The political implications may have refrained the government from taking a firm decision on FDI in retail. at present. Meanwhile. the extant policy allowing FDI up to 51 per cent with prior government approval. However. 80 per cent and 70 per cent in case of China. USA and UK respectively. Though the government has entrusted Indian Council for International Economic Research (ICIER) to conduct a comprehensive impact assessment of the participation of large foreign and domestic companies in the retail sector with reference to the small scale retailers and vendors. Indian companies have woken up to the realities of international marketing and their associated challenges. Products should be sold under the same brand internationally. The guidelines for the same read as: Products to be sold should be of a µsingle brand¶ only. India. Most countries liberalised policies for opening of FDI in retailing long ago. whereas Thailand and Indonesia allowed it in 1997 and 1998 respectively. with change being brought about by the policies in the government. Only 2 per cent of the Indian retail sector is organised while this has been 20 per cent. foreign players will also make the sector more organised to offer more employment. Brazil. Besides.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.