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What is FDI? Indian retail : An overview Retail Scenario in India
Why No FDI in Indian retailing
Case study : Retail in Thailand
Is Wal-Mart good for India?
WHAT IS FDI?
Movement of capital across national frontiers in a manner that grants the investor control over the acquired asset.
Indian Retail : An Overview
Historic/Rural Reach Traditional/Pervasive Reach Government Supported Modern Formats/ International
Exclusive Brand Outlets Hyper/Super Markets Department Stores Shopping Malls PDS Outlets Khadi Stores Cooperatives Convenience Stores Mom and Pop/Kiranas Weekly Markets Village Fairs Melas
Source of Entertainment Neighborhood Stores/Convenience Availability/ Low Costs / Distribution Shopping Experience/Efficiency
Unorganized Retail – 98%
Forced employment sector
Retail Scenario in India
14% of National GDP
Employment to 7% of workforce
Affects unorganized players Increasing Poverty
Drawback s of FDI
Kind of employment
Promotion of cartels and monopoly creation. Increase in real estate prices. Absence of proper regulations would lead to unfair trade practices. Predatory Pricing
Effects on unorganized players
• Form a majority of Indian Retail business
– Contribution to National Income – Employment to ~ 3.98 million people
• FDI will affect
– Sales – Employment
• Dislocation of millions from their occupation.
• Pushing families below the poverty line.
Employment in Retailing
• Limited jobs in manufacturing. • Cannot provide employment to semiliterate people
– Form majority of population
Creation of Monopolies
• Supermarkets will typically sell everything,
– vegetables to the latest electronic gadgets, at extremely low prices
“ foreign company will buy big from India and abroad and be able to sell low”
Real Estate Prices
• Sky rocketing real estate prices
– Increase in space requirements – Growth of organized sector – Requires an additional 220 million sqft by 201011
• Given their economies of scale and huge resources– Establishment of monopoly – Turn into buying low and selling high.
• Problems in terms of:
-- volume, quality and delivery -- depressed prices due to cutthroat competition
Retailing In Thailand Good or Bad?
• Entry of foreign capital –
– increased share of organized retailing to 40%
• Widespread closure of small and traditional retail outlets • Increase in poverty • Government forced to enact new laws.
Is Wal-Mart good for India?
What Wal-Mart can do?
35 Indian towns with Population over 1 million
Average size & Average Performance Wal-mart stores
Total FDI – 20% retail trade => Rs.800 billion / 43,540 persons Displacement = 8 million
Displace – 4,32,000 persons
Average Turnover – Rs 81000 million Employees - 10195
What other alternatives does India have?
Availability of bank finance
Creation of infrastructure
Improvement of manufacturing sector
Establishment of National Commission
Setup of Cooperative Stores
Regulations for foreign players
• FDI in retail is fundamentally different from Greenfield foreign investment in manufacturing.
• Negative effects of Foreign retailers:
– Job loss – Establishment of monopolies – Disruption of supply chains So do we still need FDI in Indian Retail?