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FOREIGN DIRECT INVESTMENT IN RETAIL

RETAILING: AN OVERVIEW

 WORLD’S LARGEST PRIVATE INDUSTRY: US$ 6.6


TRILLION SALES ANNUALLY.

INDIAN RETAILING

 LARGEST EMPLOYER AFTER AGRICULTURE – 8%


OF POPULATION. ORGANIZED RETAIL TRADE
EMPLOYS ROUGHLY 0.5 MILLION PEOPLE AND
UNORGANIZED 39.5 MILLION.
 HIGHEST OUTLET DENSITY IN WORLD – AROUND
12 MILLION OUTLETS.
 STILL EVOLVING AS AN INDUSTRY – LONG WAY
TO GO ……
• ORGANIZED RETAIL SIZE: Rs. 42,000 crore
• TOTAL RETAIL SIZE (INCLUDING
UNORGANIZED): Rs.9, 30, 000 crores.
• RETAIL INDUSTRY GROWING AT 5% EVERY
YEAR. ORGANIZED RETAIL EXPECTED TO
GROW TO Rs. 1 lakh crore BY 2010.
• EXPECTED INVESTMENT OF Rs. 20,000 crore
BY 2010. (ACCORDING TO RESEARCH PAPER
BY KSA TECHNOPAK AND ICICI PROPERTY
SERVICES)
• TRADE AND RETAILING IS THE SINGLE
LARGEST COMPONENT OF THE SERVICES IN
TERMS OF GDP. ACCOUNTS FOR 14% OF THE
SERVICE SECTOR.
• TOTAL NUMBER OF RETAIL OUTLETS (both
food and non-food) WAS 8.5 million IN 1996 AND
12 million IN 2003, A RISE OF 41%.
FDI IN RETAIL:

 GOVT HAS ALLOWED 51% FDI IN SINGLE BRAND


RETAILING.
 WOULD COVER ONLY THOSE THAT ARE
BRANDED DURING MANUFACTURING AND SOLD
UNDER THE SAME BRAND INTERNATIONALLY.
 FDI WOULD BE ALLOWED WITH A PRIOR THREE-
TIER APPROVAL OF THE GOVERNMENT.
APPLICATION WILL BE MADE TO THE
SECRETARIAT OF INDUSTRIAL ASSISTANCE
UNDER THE DEPARTMENT OF INDUSTRIAL
POLICY AND PROMOTION. THEN WOULD BE
REFERRED TO FOREIGN INVESTMENT
PROMOTION BOARD.
 APPLICATIONS WILL HAVE TO SPECIFICALLY
INDICATE THE PRODUCT/PRODUCT CATEGORIES
THAT ARE PROPOSED TO BE SOLD UNDER THE
SINGLE BRAND.

 WHY FDI ….??

BENEFITS OF FDI

 IMPROVE COMPETITION
 DEVELOP THE MARKET
 INCREASED EMPLOYMENT OPPORTUNITIES
 GREATER LEVEL OF EXPORTS DUE TO
INCREASED SOURCING BY MAJOR PLAYERS.
 TOURISM DEVELOPMENT
 BETTER LIFESTYLE
 MANPOWER AND SKILL DEVELOPMENT
BENEFITS TO THE INDIAN GOVERNMENT

 GDP GROWTH
 EMPLOYMENT
 INCREASED TAX REVENUES
 GREATER EXPORTS
 GREATER SOURCING FROM INDIA
 GREATER CONSUMER SPENDING DUE TO
ECONOMIC BOOM
 INCREASING TAX PAYING POPULATION

THE INDIAN ADVANTAGE: REASONS WHY GLOBAL


RETAIL FIRMS EYEING INDIA

 INDIA RANKED 5TH IN THE GLOBAL A.T.


KEARNEY RETAIL DEVELOPMENT INDEX.
• SECOND ONLY TO CHINA IN ASIA
• LEAST SATURATED OF ALL GLOBAL
MARKETS STUDIED
• THE LEAST COMPETITIVE OF ALL GLOBAL
MARKETS STUDIED.
 IMPLIES LOWER BARRIERS OF ENTRY
FOR GLOBAL PLAYERS.
 CONSIDERING TREMENDOUS MARKET
SIZE, EXCELLENT POTENTIAL FOR
FOREIGN PLAYERS.
POLITICAL OUTCRY: NDA, LEFT OPPOSES FDI IN
RETAIL
 ENTRY OF LARGE GLOBAL RETAILERS SUCH AS
WALMART WOULD KILL “MOM AND POP SHOPS”
AND MILLIONS OF JOB.
 GLOBAL RETAILERS WOULD EXERCISE
MONOPOLISTIC POWER TO RAISE PRICES.
 WOULD LEAD TO LOPSIDED GROWTH IN CITIES
CAUSING DISCONTENT AND SOCIAL TENSION
ELSEWHERE.

INDIAN RETAIL MAJORS GEARING UP TO FACE THE


CHALLENGE

 RELIANCE TO INVEST Rs 3,315 crore IN RETAIL


BIZ.
 WADHAWAN FAMILY TO ENTER SUPERMARKET,
F&B SEGMENT.
 PIRAMYD RETAIL TO INVEST Rs. 135 cr FOR
EXPANSION.
 SHOPPERS STOP OPENS NEW OUTLET IN
BANGALORE.
 HOME STORES PLANS Rs 100 cr EXPANSION.
 RPG SPENCER ENTERS DELHI AND PLANS TO
EXPAND.

RECOMMENDATIONS

 GRANT INDUSTRY STATUS.


 EASE DISTRIBUTION : INFRASTRUCTURE
CREATION, OCTROI
 ORGANIZE MARKET FOR REAL ESTATE
• Ensure proper rent laws.
• Increase land supply.