TABLE OF CONTENT

Summary..5 Objective..6 Methodology6 Findings 6 General Introduction 7 Division of retail industry 7 Types of retail operations9 Retail industry in India10 Employment in retailing 12 The question of FDI in retail 15 FDI policy in India 17 Entry options prior to FDI policy 21 Limitations of present setup 24 Some recent happenings in case of FDI32 Recommendations36 Conclusion38 Biblography 41

EXECUTIVE SUMMARY
Retailing is timely delivery of goods and services demanded by consumers at prices that are competitive and affordable. In the past, retailers secured customers loyalty by offering convenient locations, special or unique assortments of goods, greater or better services than competitors, and store credit cards. All this has changed. Retail store assortments have grown more alike as national brand manufacturers place their branded goods in more and more places. Services differentiation also has eroded. Many department stores have trimmed services, and many discounters have increased theirs. Face of the Indian retail industry is changing from traditional Kirana stores to mall country. Significantly change in the demographics which have encouraged organized retail market. Similarly, supermarkets have opened larger stores, carry a larger number and variety of items, and are upgrading facilities. Theyve also increased their promotional budgets and moved heavily into private labels. Others have sought to create stronger differentiation.There have been a lot of furor over introducing foreign direct investment in the Indian retail sector. Many say that the employment opportunity for common man will be dampened and many say that the local retailers will be eliminated from the scene. Many strikes were conducted in the country and the protests by the various groups of shopkeepers kept the reporters busy for many days. As per law India allows 100 % foreign investment in the single brand retail sector. While no investment is allowed in the multi-brand sector. In the cash and carry, export products the regulations are much less. So basically this means that at present foreign direct investment in India in single brand products is going on. Indian retail sector have been plagued by the problems of improper public distribution system. Further especially in the cold chain facility sector the wastage of food crops is at its high. Most of the produced food crops have ended up as waste due to the lack of cold chain infrastructure. This problem can be solved to an extant with this decision. this would further help in upgrading our state of the art agriculture sector to newer heights.GDP can be expected to improve with more skilled agriculturists and definitely more tax for the government.

OBJECTIVE To study the Role, Benefits and involvement of FDI in retail sector

METHODOLOGY The research methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. It is necessary for the researcher to know not only the research methodology/techniques but also the methodology. The research design is descriptive in nature. The secondary data was collected, which includes collection of data through internet, newspaper, magazines, etc. In case of secondary data the nature of data collection work is merely that of compilation. FINDINGS AT Kerney has estimated Indias total retail market at US$ 202.6 billion which is expected to grow at a compounded 30 percent over the next five years. In Single brand there is 100% FDI is allowed.

No final decision taken on FDI in multibrand. 100% FDI in cash & carry wholesale.

There are some Adverse effect of FDI is there in retail sector, For e.g., the total Retail sales in India to be Rs. 312180 crore approximately turnover per employee for the Indian retail sector comes to around Rs. 78045 (taking total employment of 4 crore). In contrast, the turnover per employee for Wal -Mart International comes to around Rs. 7418332 (Annual Report 2005 of Wal-Mart puts the total sales figure for Wal-Mart International at $ 56277 million, which at the current exchange rate comes to Rs. 244804.95 crore approximately; total number of employees of Wal Mart International according to their website is around 330000). There are also some great benefits of FDI in Indian retail sector like more Job opportunities by foreign players.
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GENERAL INTRODUCTION Definition and scope of Retailing

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. DIVISION OF RETAIL INDUSTRY The retail industry is mainly divided into: - 1) Organized and 2) Unorganized Retailing Organized retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganized retailing, on the other hand, refers to the traditional formats of lowcost retailing, for example, the local kirana shops, owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc. The Indian retail sector is highly fragmented with 97 per cent of its business being run by the unorganized retailers. The organized retail however is at a very nascent stage. The sector is the largest source of employment after agriculture, and has deep penetration into rural India generating more than 10 per cent of Indias GDP.

Food and grocery retail

The food business in India is largely unorganized adding up to barely Rs.400 billion, with other large players adding another 50 per cent to that. The All India food consumption is close to Rs.9, 000 billion, with the total urban consumption being
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around Rs.3, 300 billion. This means that aggregate revenues of large food players is currently only 5 per cent of the total Indian market, and around 15-20 per cent of total urban food consumption. Most food is sold in the local wet market, vendors, roadside push cart sellers or tiny kirana stores. According to McKinsey report, the share of an Indian household's spending on food is one of the highest in the world, with 48 percent of income being spent on food and beverages

Apparel retail
The ready-mades and western outfits are growing at 40-45 per cent annually, as the market teams up with international brands and new entrants entering this segment creating an Rs.5 billion market for the premium grooming segment. The past few years has seen the sector aligning itself with global trends with retailing companies like Shoppers stop and Crossroads entering the fray to entice the middle class. However, it is estimated that this segment would grow to Rs. 3 billion in the next three years.

Gems and Jewellery retail

The gems and jewellery market is the key emerging area, accounting for a high proportion of retail spends. India is the largest consumer of gold in the world with an estimated annual consumption of 1000 tonnes, considering actual imports and recycled gold. The market for jewellery is estimated as upwards of Rs. 650 billion.

Pharmaceutical retail
The pharmacy retailing is estimated at about Rs. 300 billion, with 15 per cent of the 51 lakh retail stores in India being chemists. Pharmacy retailing will follow the trend of becoming more organized and corporatized as is seen in other retailing formats (food apparel etc). A few corporates who have already forayed into this segment include Dr Morepen (with Life spring and soon to be launched Tango), Medicine Shoppe, Apollo pharmacies, 98.4 from Global Healthline Pvt Ltd, and the recently launched CRS Health from SAK Industries. In the south, RPG groups Health & Glow is already in this category, though it is not a pure play pharmacy retailer but more in the health and beauty care business.

Music Retail
The size of the Indian music industry, as per this Images-KSA Study, is estimated at Rs.11 billion of which about 36 percent is consumed by the pirated market and organized music retailing constitutes about 14 percent, equivalent to Rs.1.5 billion.

Book retail
The book industry is estimated at over Rs. 30 billion out of which organized retail accounts for only 7 per cent (at Rs.2.10 billion). This segment is seen to be emerging with text and curriculum books accounting to about 50 per cent of the total sales. The gifting habit in India is catching on fast with books enjoying a significant share, thus expecting this sector to grow by 15 per cent annually.

Consumer durables retail

The consumer durables market can be stratified into consumer electronics comprising of TV sets, audio systems, VCD players and others; and appliances like washing machines, microwave ovens, air conditioners (A/Cs). The existing size of this sector stands at an estimated US$ 4.5 Billion with organized retailing being at 5 per cent.

TYPES OF RETAIL OPERATIONS

Consumers today can shop for goods and services at store retailers, nonstore retailers, and retail organizations. Perhaps the best known type of retailers is the department store. Retail store types pass through stages of growth and decline that we can think of as the retail life cycle. Department stores took 80 years to reach maturity, whereas warehouse retail outlets reached maturity in 10 years. The most important retail store types are described as below
1.

Specialty stores: narrow product line. The body shop, Athletes foot, The limited.

2. Department stores: Several product lines. Sears, JCPenney, Nordstrom, Bloomingdales. 3. Supermarket: Large, low cost, low margin, high volume, self service store deigned to meet total needs for food and household products. Kroger, Safeway, Food emporium.

4. Convenience stores: Small store in residential area, often open 24/7, limited line of high- turnover convenience products plus takeout. 7-Eleven, Circle K

5. Discount store: Standard or specialty merchandise; low price, low margin, high volume stores. Wal-Mart, Kmart, Circuit City.

6 Off price retailers: Leftover goods, overruns, irregular merchandise sold at less than retail. Factory outlets; independent off price retailers Fileenes Basement, TJ Maxx; warehouse clubs Sams club, Costco, BJs wholesale.

7. Superstore: Huge selling space, routinely purchased food and household items, plus services (laundries, shoe repair, dry cleaning, check cashing).

RETAIL INDUSTRY IN INDIA

Trade or retailing is the single largest component of the services sector in terms of contribution to GDP. Its massive share of 14% is double the figure of the next largest broad economic activity in the sector. The retail industry is divided into organized and unorganized sectors. Organized retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporatebacked hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganized retailing, on the other hand, refers to the traditional formats of low-cost retailing.

Unorganized retailing is by far the prevalent form of trade in India constituting 98% of total trade, while organized trade accounts only for the remaining 2%. Estimates vary widely about the true size of the retail business in India. AT Kearney estimated it to be Rs. 4, 00,000 crores. On the other hand, if one used the Governments figures the retail trade in 2002-03 amounted to Rs. 3, 82,000 crores. One thing all consultants are agreed upon is that the total size of the corporate owned retail business was Rs. 15,000 crores in 1999 and poised to grow to Rs.35, 000 crores by 2012 and keep growing at a rate of 40% per annum. In a recent presentation, FICCI has estimated the total retail business to be Rs. 11, 00,000 crores or 44% of GDP. Food retail trade is a very large segment of the total economic activity of our country and due to its vast employment potential; it deserves very special focused attention. Efficiency enhancements and increase in the food retail sales activity would have a cascading effect on employment and economic activity in the rural areas for the marginalized workers. Thus even without FDI driving it, the corporate owned sector is expanding at a furious rate.

EMPLOYMENT IN RETAILING
A simple glance at the employment numbers is enough to paint a good picture of the relative sizes of these two forms of trade in India organized trade employs roughly 5 lakh people, whereas the unorganized retail trade employs nearly 3.95 crores5! According to a GoI study the number of workers in retail trade in 1998 was almost 175 lakhs. Given the recent numbers indicated by other studies, this is only indicative of the magnitude of expansion the retail trade is experiencing, both due to economic expansion as well as the jobless growth that we have seen in the past decade. It must be noted that even within the organized sector, the number of individually-owned retail outlets far outnumber the corporate backed institutions. Though these numbers translate to approximately 8% of the workforce in the country (half the normal share in developed countries) there are far more retailers in India than other countries in absolute numbers, because of the demographic profile and the preponderance of youth, Indias workforce is proportionately much larger. That about 4% of Indias population is in the retail trade says a lot about how vital this business is to the socio-economic equilibrium in India.

Organized retail is still in the stages of finding its feet in India even now. Though organized trade makes up over 70-80% of total trade in developed economies, Indias figure is low even in comparison with other Asian developing economies like China, Thailand, South Korea and Philippines, all of whom have figures hovering around the 20-25% mark. These figures quite accurately reveal the relative underdevelopment of the retail industry in India. (Here development is used in the narrowest sense of the term, implying lean employment and high automation)

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Retail as a Forced Employment Sector

It is important to understand how retailing works in our economy, and what role it plays in the lives of its citizens, from a social as well as an economic perspective. India still predominantly houses the traditional formats of retailing, that is, the local kirana shop, paan/beedi shop, hardware stores, weekly haats, convenience stores, and bazaars, which together form the bulk. Most importantly, Indian retail is highly fragmented, with about 11 million outlets operating in the country and only 4% of them being larger than 500 square feet in size. Compare this with the figure of just 0.9 million in the US, yet catering to more than 13 times of the Indian retail market size. The Indian retail industry was, and continues to be, highly fragmented. According to the global consultancy firms AC Neilsen and KSA Technopak, India has the highest shop density in the world. In 2001 they estimated there were 11 outlets for every 1,000 people. Further, a report prepared by McKinsey & Company and the Confederation of Indian Industry (CII) predicted that global retail giants such as Tesco, Kingfisher, Carrefour and Ahold were waiting in the wings to enter the retail arena. This report also states that the Indian retail market holds the potential of becoming a $300 billion per year market by 2012, provided the sector is opened up Significantly. It does not talk about creating additional jobs however, which should be the prime concern of the policy maker. One of the principal reasons behind the explosion of retail and its fragmented nature in the country is the fact that retailing is probably the primary form of disguised unemployment/underemployment in the country. Given the already over-crowded agriculture sector, and the stagnating manufacturing sector, and the hard nature and relatively low wages of jobs in both, many million Indians are virtually forced into the services sector. Here, given the lack of opportunities, it is almost a natural decision for an individual to set up a small shop or store, depending on his or her means and capital. And thus, a retailer is born, seemingly out of circumstance rather than choice. This phenomenon quite aptly explains the millions of kirana shops and small stores. The explosion of retail outlets in the more busy streets of Indian villages and towns is a visible testimony of this.

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The presence of more than one retailer for every hundred persons is indicative of the lack of economic opportunities that is forcing people into this form of selfemployment, even though much of it is marginal. Because of this fragmentation, the Indian retail sector typically suffers from limited access to capital, labor and real estate options. The typical traditional retailer follows the low-cost-and-size format, functioning at a small-scale level, rarely eligible for tax and following a cheap model of operations. As on January 1st of this year, there were 413.88 lakhs job seekers registered at the Employment Exchange. They register at the exchange, to enjoy the benefits and security that a job in the organized sector provides lifetime employment, pension, and union membership etc. A vast majority is aware of what these figures signify that they are most unlikely to get such jobs. Therefore, they find jobs in the informal sector, mostly in retail. Retailing is by far the easiest business to enter, with low capital and infrastructure needs, and as such, performs a vital function in the economy as a social security net for the unemployed. India, being a free and democratic country, provides its people with this cushion of being able to make a living for oneself through selfemployment, as opposed to an economy like China, where employment is regulated. Yet, even this does not annul the fact that a multitude of these so-called self-employed retailers are simply trying to scrape together a living, in the face of limited opportunities for employment. In this light, one could brand this sector as one of forced employment, where the retailer is pushed into it, purely because of the paucity of opportunities in other sectors.

THE QUESTION OF FDI IN RETAIL

Given this backdrop, the recent clamor about opening up the retail sector to Foreign Direct Investment (FDI) becomes a very sensitive issue, with arguments to support both sides of the debate. It is widely acknowledged that FDI can have some positive results on the economy, triggering a series of reactions that in the long run can lead to greater efficiency and improvement of living standards, apart from greater integration into the global economy. Supporters of FDI in retail trade talk of how ultimately the consumer is benefited by both price reductions and improved selection, brought about by the technology and know-how of foreign players in the Market. This in turn can lead to greater output and domestic consumption. But the most important factor against FDI driven modern retailing is that it is labor displacing to the extent that it can only expand by destroying the traditional retail sector.
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Till such time we are in a position to create jobs on a large scale in manufacturing, it would make eminent sense that any policy that results in the elimination of jobs in the unorganized retail sector should be kept on hold. Though most of the high decibel arguments in favor of FDI in the retail sector are not without some merit, it is not fully applicable to the retailing sector in India, or at least, not yet. This is because the primary task of government in India is still to provide livelihoods and not create so called efficiencies of scale by creating redundancies. As per present regulations, no FDI is permitted in retail trade in India. Entry of foreign players now will most definitely disrupt the current balance of the economy; will render millions of small retailers jobless by closing the small slit of opportunity available to them. Imagine if Wal-Mart, the worlds biggest retailer sets up operations in India at prime locations in the 35 large cities and towns that house more than 1million people. The supermarket will typically sell everything, from vegetables to the latest electronic gadgets, at extremely low prices that will most likely undercut those in nearby local stores selling similar goods. Wal-Mart would be more likely to source its raw materials from abroad, and procure goods like vegetables and fruits directly from farmers at preordained quantities and specifications. This means a foreign company will buy big from India and abroad and be able to sell low severely Undercutting the small retailers. Once a monopoly situation is created this will then turn into buying low and selling high. Such re-orientation of sourcing of materials will completely disintegrate the already established supply chain. In time, the neighbouring traditional outlets are also likely to fold and perish, given the predatory pricing power that a foreign player is able to exert. As Nick Robbins wrote in the context of the East India Company, By controlling both ends of the chain, the company could buy cheap and sell dear. The producers and traders at the lowest level of operations will never find place in this sector, which would Now have demand mostly only for fluent English-speaking helpers. Having been uprooted from their traditional form of business, these persons are unlikely to be suitable for other areas of work either. It is easy to visualize from the discussion above, how the entry of just one big retailer is capable of destroying a whole local economy and send it hurtling down a spiral. One must also not forget how countries like China, Malaysia and Thailand, who opened their retail sector to FDI in the recent past, have been forced to enact new laws to check the prolific expansion of the new foreign malls and hypermarkets.

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Given their economies of scale and huge resources, a big domestic retailer or any new foreign player will be able to provide their merchandise at cheaper rates than a smaller retailer. But stopping an Indian retailer from growing bigger is something current public policy cannot do, whereas the State does have the prerogative in whether foreign entry in the retail sector should be stalled or not. It is true that it is in the consumers best interest to obtain his goods and services at the lowest possible price. But this is a privilege for the individual consumer and it cannot, in any circumstance, override the responsibility of any society to provide economic security for its population. Clearly collective well-being must take precedence over individual benefits.

FDI POLICY IN INDIA

FDI as defined in Dictionary of Economics (Graham Bannock et.al) is investment in a foreign country through the acquisition of a local company or the establishment there of an operation on a new (Greenfield) site. To put in simple words, FDI refers to capital inflows from abroad that is invested in or to enhance the production capacity of the economy. Foreign Investment in India is governed by the FDI policy announced by the Government of India and the provision of the Foreign Exchange Management Act (FEMA) 1999. The Reserve Bank of India (RBI) in this regard had issued a notification, which contains the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000. This notification has been amended from time to time. The Ministry of Commerce and Industry, Government of India is the nodal agency for motoring and reviewing the FDI policy on continued basis and changes in sectoral policy/ sectoral equity cap. The FDI policy is notified through Press Notes by the Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion (DIPP). The foreign investors are free to invest in India, except few sectors/activities, where prior approval from the RBI or Foreign Investment Promotion Board (FIPB) would be required.

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FDI Policy with Regard to Retailing in India

a) FDI up to 100% for cash and carry wholesale trading and export trading allowed under the automatic route. FDI up to 100 % with prior Government approval (i.e. FIPB) for retail trade of Single Brand products, subject to Press Note 3 (2006 Series). FDI is not permitted in Multi Brand Retailing in India.

b)

c)

FDI in Single Brand Retail

The Government has not categorically defined the meaning of Single Brand anywhere neither in any of its circulars nor any notifications. In single-brand retail, FDI up to 100 per cent is allowed, subject to Foreign Investment Promotion Board (FIPB) approval and subject to the conditions mentioned in Press Note 3[8] that (a) only single brand products would be sold (i.e., retail of goods of multi-brand even if produced by the same manufacturer would not be allowed), (b) products should be sold under the same brand internationally, (c) single-brand product retail would only cover products which are branded during manufacturing and (d) any addition to product categories to be sold under single-brand would require fresh approval from the government. While the phrase single brand has not been defined, it implies that foreign companies would be allowed to sell goods sold internationally under a single brand, viz., Reebok, Nokia, Adidas. Retailing of goods of multiple brands, even if such products were produced by the same manufacturer, would not be allowed. FDI in Single brand retail implies that a retail store with foreign investment can only sell one brand. For example, if Adidas were to obtain permission to retail its flagship brand in India, those retail outlets could only sell products under the Adidas brand and not the Reebok brand, for which separate permission is required. If granted permission, Adidas could sell products under the Reebok brand in separate outlets.

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But, what is a brand? Brands could be classified as products and multiple products, or could be manufacturer brands and own-label brands. Assume that a company owns two leading international brands in the footwear industry say A and R. If the corporate were to obtain permission to retail its brand in India with a local partner, it would need to specify which of the brands it would sell. A reading of the government release indicates that A and R would need separate approvals, separate legal entities, and may be even separate stores in which to operate in India. However, it should be noted that the retailers would be able to sell multiple products under the same brand, e.g., a product range under brand A Further, it appears that the same joint venture partners could operate various brands, but under separate legal entities. Taking an example of a large departmental grocery chain, prima facie it appears that it would not be able to enter India. These chains would, typically, source products and, thereafter, brand it under their private labels. Since the regulations require the products to be branded at the manufacturing stage, this model may not work. The regulations appear to discourage own-label products and appear to be tilted heavily towards the foreign manufacturer brands.

FDI in Multi Brand Retail

The government has also not defined the term Multi Brand. FDI in Multi Brand retail implies that a retail store with a foreign investment can sell multiple brands under one roof. In July 2010, Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce circulated a discussion paper on allowing FDI in multi-brand retail. The paper doesnt suggest any upper limit on FDI in multi-brand retail. If implemented, it would open the doors for global retail giants to enter and establish their footprints on the retail landscape of India. Opening up FDI in multi-brand retail will mean that global retailers including Wal-Mart, Carrefour and Tesco can open stores offering a range of household items and grocery directly to consumers in the same way as the ubiquitous kirana store.

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Foreign Investors Concern Regarding FDI Policy in India

For those brands which adopt the franchising route as a matter of policy, the current FDI Policy will not make any difference. They would have preferred that the Government liberalize rules for maximizing their royalty and franchise fees. They must still rely on innovative structuring of franchise arrangements to maximize their returns. Consumer durable majors such as LG and Samsung, which have exclusive franchisee owned stores, are unlikely to shift from the preferred route right away. For those companies which choose to adopt the route of 51% partnership, they must tie up with a local partner. The key is finding a partner which is reliable and who can also teach a trick or two about the domestic market and the Indian consumer. Currently, the organized retail sector is dominated by the likes of large business groups which decided to diversify into retail to cash in on the boom in the sector corporate such as Tata through its brand Westside, RPG Group through Foodworld, Pantaloon of the Raheja Group and Shoppers Stop. Do foreign investors look to tie up with an existing retailer or look to others not necessarily in the business but looking to diversify, as many business groups are doing? An arrangement in the short to medium term may work wonders but what happens if the Government decides to further liberalize the regulations as it is currently contemplating? Will the foreign investor terminate the agreement with Indian partner and trade in market without him? Either way, the foreign investor must negotiate its joint venture agreements carefully, with an option for a buy-out of the Indian partners share if and when regulations so permit. They must also be aware of the regulation which states that once a foreign company enters into a technical or financial collaboration with an Indian partner, it cannot enter into another joint venture with another Indian company or set up its own subsidiary in the same field without the first partners consent if the joint venture agreement does not provide for a conflict of interest clause. In effect, it means that foreign brand owners must be extremely careful whom they choose as partners and the brand they introduce in India. The first brand could also be their last if they do not negotiate the strategic arrangement diligently.

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Concerns for the Government for only Partially Allowing FDI in Retail Sector
A number of concerns were expressed with regard to partial opening of the retail sector for FDI. The Honble Department Related Parliamentary Standing Committee on Commerce, in its 90th Report, on Foreign and Domestic Investment in Retail Sector, laid in the Lok Sabha and the Rajya Sabha on 8 June, 2009, had made an in-depth study on the subject and identified a number of issues related to FDI in the retail sector. These included: It would lead to unfair competition and ultimately result in large-scale exit of domestic retailers, especially the small family managed outlets, leading to large scale displacement of persons employed in the retail sector. Further, as the manufacturing sector has not been growing fast enough, the persons displaced from the retail sector would not be absorbed there. Another concern is that the Indian retail sector, particularly organized retail, is still under-developed and in a nascent stage and that, therefore, it is important that the domestic retail sector is allowed to grow and consolidate first, before opening this sector to foreign investors. Antagonists of FDI in retail sector oppose the same on various grounds, like, that the entry of large global retailers such as Wal-Mart would kill local shops and millions of jobs, since the unorganized retail sector employs an enormous percentage of Indian population after the agriculture sector; secondly that the global retailers would conspire and exercise monopolistic power to raise prices and monopolistic (big buying) power to reduce the prices received by the suppliers; thirdly, it would lead to asymmetrical growth in cities, causing discontent and social tension elsewhere. Hence, both the consumers and the suppliers would lose, while the profit margins of such retail chains would go up.

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ENTRY OPTIONS FOR FOREIGN PLAYRES PRIOR TO FDI POLICY

Although prior to Jan 24, 2006, FDI was not authorized in retailing, most general players had been operating in the country.

1) Franchise Agreements
It is an easiest track to come in the Indian market. In franchising and commission agents services, FDI (unless otherwise prohibited) is allowed with the approval of the Reserve Bank of India (RBI) under the Foreign Exchange Management Act. This is a most usual mode for entrance of quick food bondage opposite a world. Apart from quick food bondage identical to Pizza Hut, players such as Lacoste, Mango, Nike as good as Marks as good as Spencer, have entered Indian marketplace by this route.

2) Cash And Carry Wholesale Trading

100% FDI is allowed in wholesale trading which involves building of a large distribution infrastructure to assist local manufacturers. The wholesaler deals only with smaller retailers and not Consumers. Metro AG of Germany was the first significant global player to enter India through this route.

3)

Strategic Licensing Agreements

Some foreign brands give exclusive licenses and distribution rights to Indian companies. Through these rights, Indian companies can either sell it through their own stores, or enter into shop-in-shop arrangements or distribute the brands to franchisees. Mango, the Spanish apparel brand has entered India through this route with an agreement with Pyramid, Mumbai, SPAR entered into a similar agreement with Radhakrishna Foodlands Pvt. Ltd

4) Manufacturing and Wholly Owned Subsidiaries

The foreign brands such as Nike, Reebok, Adidas, etc. that have wholly-owned subsidiaries in manufacturing are treated as Indian companies and are, therefore, allowed to do retail. These companies have been authorized to sell products to Indian consumers by franchising, internal distributors, existent Indian retailers, own outlets, etc. For instance, Nike entered through an exclusive licensing agreement with Sierra Enterprises but now has a wholly owned subsidiary, Nike India Private Limited.

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PREREQUISITES BEFORE ALLOWING FDI IN MULTI BRAND RETAIL AND LIFTING CAP OF SINGLE BRAND RETAIL
FDI in multi-brand retailing must be dealt cautiously as it has direct impact on a large chunk of population. Left alone foreign capital will seek ways through which it can only multiply itself, and unthinking application of capital for profit, given our peculiar socio-economic conditions, may spell doom and deepen the gap between the rich and the poor. Thus the proliferation of foreign capital into multi-brand retailing needs to be anchored in such a way that it results in a win-win situation for India. This can be done by integrating into the rules and regulations for FDI in multi-brand retailing certain inbuilt safety valves. For example FDI in multi brand retailing can be allowed in a calibrated manner with social safeguards so that the effect of possible labor dislocation can be analyzed and policy fine tuned accordingly. To ensure that the foreign investors make a genuine contribution to the development of infrastructure and logistics, it can be stipulated that a percentage of FDI should be spent towards building up of back end infrastructure, logistics or agro processing units. Reconstituting the poverty stricken and stagnating rural sphere into a forward moving and prosperous rural sphere can be one of the justifications for introducing FDI in multi-brand retailing. To actualize this goal it can be stipulated that at least 50% of the jobs in the retail outlet should be reserved for rural youth and that a certain amount of farm produce is procured from the poor farmers. Similarly to develop our small and medium enterprise (SME), it can also be stipulated that a minimum percentage of manufactured products be sourced from the SME sector in India. PDS is still in many ways the life line of the people living below the poverty line. To ensure that the system is not weakened the government may reserve the right to procure a certain amount of food grains for replenishing the buffer. To protect the interest of small retailers the government may also put in place an exclusive regulatory framework. It will ensure that the retailing giants do resort to predatory pricing or acquire monopolistic tendencies. Besides, the government and RBI need to evolve suitable policies to enable the retailers in the unorganized sector to expand and improve their efficiencies. If Government is allowing FDI, it must do it in a calibrated fashion because it is politically sensitive and link it (with) up some caveat from creating some back-end infrastructure.
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Further, To take care of the concerns of the Government before allowing 100% FDI in Single Brand Retail and Multi- Brand Retail, the following recommendations are being proposed :Preparation of a legal and regulatory framework and enforcement mechanism to ensure that large retailers are not able to dislocate small retailers by unfair means. Extension of institutional credit, at lower rates, by public sector banks, to help improve efficiencies of small retailers; undertaking of proactive programme for assisting small retailers to upgrade themselves. Enactment of a National Shopping Mall Regulation Act to regulate the fiscal and social aspects of the entire retail sector. Formulation of a Model Central Law regarding FDI of Retail Sector.

LIMITATIONS OF THE PRESENT SETUP Infrastructure

There has been a lack of investment in the logistics of the retail chain, leading to an inefficient market mechanism. Though India is the second largest producer of fruits and vegetables (about 180 million MT), it has a very limited integrated cold-chain infrastructure, with only 5386 stand-alone cold storages, having a total capacity of 23.6 million MT. , 80% of this is used only for potatoes. The chain is highly fragmented and hence, perishable horticultural commodities find it difficult to link to distant markets, including overseas markets, round the year. Storage infrastructure is necessary for carrying over the agricultural produce from production periods to the rest of the year and to prevent distress sales. Lack of adequate storage facilities cause heavy losses to farmers in terms of wastage in quality and quantity of produce in general. Though FDI is permitted in cold-chain to the extent of 100%, through the automatic route, in the absence of FDI in retailing; FDI flow to the sector has not been significant.

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Intermediaries dominate the value chain

Intermediaries often flout mandi norms and their pricing lacks transparency. Wholesale regulated markets, governed by State APMC Acts, have developed a monopolistic and non-transparent character. According to some reports, Indian farmers realize only 1/3rd of the total price paid by the final consumer, as against 2/3rd by farmers in nations with a higher share of organized retail.

Improper Public Distribution System (PDS)

There is a big question mark on the efficacy of the public procurement and PDS setup and the bill on food subsidies is rising. In spite of such heavy subsidies, overall food based inflation has been a matter of great concern. The absence of a farm-tofork retail supply system has led to the ultimate customers paying a premium for shortages and a charge for wastages.

No Global Reach
The Micro Small & Medium Enterprises (MSME) sector has also suffered due to lack of branding and lack of avenues to reach out to the vast world markets. While India has continued to provide emphasis on the development of MSME sector, the share of unorganized sector in overall manufacturing has declined from 34.5% in 1999-2000 to 30.3% in 2009-10. This has largely been due to the inability of this sector to access latest technology and improve its marketing interface.

Rationale behind Allowing FDI in Retail Sector

FDI can be a powerful catalyst to spur competition in the retail industry, due to the current scenario of low competition and poor productivity. The policy of singlebrand retail was adopted to allow Indian consumers access to foreign brands. Since Indians spend a lot of money shopping abroad, this policy enables them to spend the same money on the same goods in India. FDI in single-brand retailing was permitted in 2006, up to 51 per cent of ownership. Between then and May 2010, a total of 94 proposals have been received.

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Of these, 57 proposals have been approved. An FDI inflow of US$196.46 million under the category of single brand retailing was received between April 2006 and September 2010, comprising 0.16 per cent of the total FDI inflows during the period. Retail stocks rose by as much as 5%. Shares of Pantaloon Retail (India) Ltd ended 4.84% up at Rs 441 on the Bombay Stock Exchange. Shares of Shoppers Stop Ltd rose 2.02% and Trent Ltd, 3.19%. The exchanges key index rose 173.04 points, or 0.99%, to 17,614.48. But this is very less as compared to what it would have been had FDI up to 100% been allowed in India for single brand. The policy of allowing 100% FDI in single brand retail can benefit both the foreign retailer and the Indian partner foreign players get local market knowledge, while Indian companies can access global best management practices, designs and technological knowhow. By partially opening this sector, the government was able to reduce the pressure from its trading partners in bilateral/ multilateral negotiations and could demonstrate Indias intentions in liberalizing this sector in a phased manner. Permitting foreign investment in food-based retailing is likely to ensure adequate flow of capital into the country & its productive use, in a manner likely to promote the welfare of all sections of society, particularly farmers and consumers. It would also help bring about improvements in farmer income & agricultural growth and assist in lowering consumer prices inflation. Apart from this, by allowing FDI in retail trade, India will significantly flourish in terms of quality standards and consumer expectations, since the inflow of FDI in retail sector is bound to pull up the quality standards and cost-competitiveness of Indian producers in all the segments. It is therefore obvious that we should not only permit but encourage FDI in retail trade. Lastly, it is to be noted that the Indian Council of Research in International Economic Relations (ICRIER), a premier economic think tank of the country, which was appointed to look into the impact of BIG capital in the retail sector, has projected the worth of Indian retail sector to reach $496 billion by 2011-12 and ICRIER has also come to conclusion that investment of big money

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(large corporate and FDI) in the retail sector would in the long run not harm interests of small, traditional, retailers. In light of the above, it can be safely concluded that allowing healthy FDI in the retail sector would not only lead to a substantial surge in the countrys GDP and overall economic development, but would inter alia also help in integrating the Indian retail market with that of the global retail market in addition to providing not just employment but a better paying employment, which the unorganized sector (kirana and other small time retailing shops) have undoubtedly failed to provide to the masses employed in them. Industrial organizations such as CII, FICCI, US-India Business Council (USIBC), the American Chamber of Commerce in India, The Retail Association of India (RAI) and Shopping Centers Association of India (a 44 member association of Indian multi-brand retailers and shopping malls) favor a phased approach toward liberalizing FDI in multi-brand retailing, and most of them agree with considering a cap of 49-51 per cent to start with. The international retail players such as Walmart, Carrefour, Metro, IKEA, and TESCO share the same view and insist on a clear path towards 100 per cent opening up in near future. Large multinational retailers such as US-based Walmart, Germanys Metro AG and Woolworths Ltd, the largest Australian retailer that operates in wholesale cash-and-carry ventures in India, have been demanding liberalization of FDI rules on multi-brand retail for some time. Thus, as a matter of fact FDI in the buzzing Indian retail sector should not just be freely allowed but per contra should be significantly encouraged. Allowing FDI in multi brand retail can bring about Supply Chain Improvement, Investment in Technology, Manpower and Skill development, Tourism Development, Greater Sourcing From India, Up gradation in Agriculture, Efficient Small and Medium Scale Industries, Growth in market size and Benefits to government through greater GDP, tax income and employment generation.

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ADVERSE IMPACT OF FDI IN RETAIL ON EMPLOYMENT

In the absence of any substantial improvement in the employment generating capacity of the manufacturing industries in our country, entry of foreign capital in the retail sector is likely to play havoc with the livelihood of millions. It has been argued by some advocates of FDI in retail trade that since the retail sector is growing at a fast pace in India, entry of the multinational retail chains far from causing any lab our displacement would actually generate more quality jobs. Such rosy pictures are painted on the basis of overenthusiastic projections of economic and consumption growth on the one hand and conveniently hypothesized market share for the organized retailers on the other. For instance, a McKinsey Report on Indian Growth projects an addition of 71 lakhs jobs in the retail sector between 2000 to 2012 with the modern format retailers (e.g. supermarkets) accounting for 8 lakhs jobs. However, the projection is based upon a projected 10% GDP growth for the 10-year period and assumes a 20% market share for the modern format retailers. In the case of a more realistic scenario of a lower GDP growth (current GDP growth is around 6%) and a greater market share for the labor-displacing modern format retailers which is likely if FDI is permitted, total employment in the retail sector would actually shrink. A back-of-the-envelope calculation can substantiate the point. If we take the total Retail sales in India to be Rs. 312180 crore approximately turnover per employee for the Indian retail sector comes to around Rs. 78045 (taking total employment of 4 crore). In contrast, the turnover per employee for Wal -Mart International comes to around Rs. 7418332 (Annual Report 2005 of Wal-Mart puts the total sales figure for Wal-Mart International at $ 56277 million, which at the current exchange rate comes to Rs. 244804.95 crore approximately; total number of employees of Wal Mart International according to their website is around 330000).

Predatory Practices of the Multinational Retail Chains

The case for FDI in retail is often made on the basis of the need to develop modern supply chains in India, in terms of the development of storage and warehousing, Transportation and logistic and support services, especially in order to meet the requirements of agriculture and food processing industries. While the infrastructure and technology needs are undeniable, the belief that the entry of the multinational food retailers is the only way to build such infrastructure or upgrade technology is unfounded.

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That can also be achieved by increasing public investment and government intervention. Moreover, the pitfalls of relying upon an agrarian development strategy driven by food retail chains and giant agribusinesses have already become clear through the experiences of several developing countries like Malaysia, Thailand and Vietnam. Small horticultural farmers find it almost impossible to meet the private quality and safety standards set by the food retailers, which are generally much higher than the national standards. Even the big farmers have to bear high risks while supplying their produce to the food retailers and many get eliminated Under the preferred supplier system. A FAO paper based on the proceedings of a FAO/AFMA/FAMA workshop states, Farmers experience many problems in supplying supermarkets in Asia and in some cases this has already been reflected in fairly rapid declines in the numbers involved, as companies tend to delist suppliers who do not come up to expectations in terms of volume, quality and delivery. Moreover, farmers also face problems related to depressed prices due to cutthroat competition among the food retailers, delayed payments and lack of credit and insurance. The emergence of such problems in India, especially in the context of the deep crisis that has engulfed the agrarian economy, is totally avoidable. It is often argued that in case FDI is allowed in retail, the Indian consumers would benefit from the low prices offered by the multinational retailers. It is also argued that if the multinational retailers are allowed to operate in India they would develop an efficient supply chain, not only to cater to the Indian consumers but also the international market and therefore our manufacturing and agriculture sector would benefit from their entry. The ability of the multinational retail chains to sell at low The case for FDI in retail is often made on the basis of the need to develop modern supply chains in India, in terms of the development of storage and warehousing, transportation and logistics and support services, especially in order to meet the requirements of agriculture and food processing industries. While the infrastructure and technology needs are undeniable, the belief that the entry of the multinational food retailers is the only way to build such infrastructure or upgrade technology is unfounded. That can also be achieved by increasing public investment and government intervention. Moreover, the pitfalls of relying upon an agrarian development strategy driven by food retail chains and giant agribusinesses have already become clear through the experiences of several developing countries like Malaysia, Thailand and Vietnam. Small horticultural farmers find it almost impossible to meet the private quality and safety standards set by the food retailers, which are generally much higher than the national standards.

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Even the big farmers have to bear high risks while supplying their produce to the food retailers and many get eliminated under the preferred supplier system. A FAO paper based on the proceedings of a FAO/AFMA/FAMA workshop states, Farmers experience many problems in supplying supermarkets in Asia and in some cases this has already been reflected in fairly rapid declines in the numbers involved, as companies tend to delist suppliers who do not come up to expectations in terms of volume, quality and delivery. Moreover, farmers also face problems related to depressed prices due to cutthroat competition among the food retailers, delayed payments and lack of credit and insurance. The emergence of such problems in India, especially in the context of the deep crisis that has engulfed the agrarian economy, is totally avoidable. It is often argued that in case FDI is allowed in retail, the Indian consumers would Benefit from the low prices offered by the multinational retailers. It is also argued that if the multinational retailers are allowed to operate in India they would develop an efficient supply chain, not only to cater to the Indian consumers but also the international market and therefore our manufacturing and agriculture sector would benefit from their entry. The ability of the multinational retail chains to sell at low prices is often attributed to their efficiency in sourcing goods from their lowest cost producers around the world. What underlies this so-called efficiency or cost reduction through better inventory and cost management is the ability of these retail chains to squeeze producers across the globe using their monopsony power. The sheer size of a giant retail chain like Wal-Mart enables it to exercise buyer power over the producers of all kinds of goods, from agro products to FMCGs, across the globe. If these retailers are to sell goods to Indian consumers at prices, which are cheaper than what prevails today while sourcing their goods from Indian producers, the latter are definitely going to be at the receiving end in terms of declining incomes. In case the multinational retailers import the cheaper goods from abroad, domestic producers would be displaced anyway. It is difficult to understand therefore how the domestic producers would benefit from these multinational retailers. It can of course be argued that the Indian farmers and manufacturers are going to enjoy access to international markets by supplying commodities to these multinational retailers. However, the experience of the producers, especially those producing primary commodities in the developing world, is not encouraging in this regard.

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Distortion of Urban Development and Culture The promotion of large retail stores with huge retail space also fosters a different kind of urban development than what we have followed in India till date. Large shopping malls with all known retail chains with their showrooms as a part of urban development is familiar in the US where the consumer lives in suburbs, drives long distances for his/her shopping and lives in a community that hardly knows each other. Instead of this atomized existence and high transport costs, we have chosen a model of mixed land area where every small urban cluster has local markets and local facilities for their needs. It is this model of urban development that is sought to be changed in favor of a mall culture with huge retail chains and branded products. The problem with this model is that it neglects the simple Indian reality where most households do not have cars and need local markets. The malls that have already come up in our metropolitan cities are failing to attract consumers who find local shopping much more attractive. The myth of a huge and fast growing affluent middle class is counter to the reality that this section is still too small to support the remodeling of the urban landscape as is being planned with malls, large retail chains and branded products. Unfortunately, the failure of the mall-retail chain -brand culture does not only affect the real estate developers and the Wal -Marts. The East Asian crisis was triggered precisely by this kind of distorted urban development, which saw a real estate boom and then a collapse, dragging down developers and the banks that had funded that process. The issue here is not only of FDI in retail alone. This entire model of branded products sold through high-powered ads and dominant retail chains coupled with lopsided urban development would promote monopoly in the market, kill diversity and displace small producers on a large scale. This model of development would fail in India, as it has done over much of Asia, but not before it does enormous damage.

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SOME RECENT HAPPENINGS IN CASE OF FDI Small traders oppose allowing FDI in multi-brand retailing
Millions of small retail traders vigorously oppose competing with foreign giants, potentially providing a lightning rod for criticism of the ruling Congress party ahead of crucial state elections next year. Food Minister K.V. Thomas said the government will allow foreign direct investment (FDI) of up to 51 percent in multibrand retail as supermarkets are known in India. It will also raise the cap on foreign investment in single-brand retailing to 100 percent from 51 percent, he added.

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The new rules may commit supermarkets to strict local sourcing requirements and minimum investment levels aimed at protecting jobs, according to local media. A heavyweight member of Singhs coalition government warned on Thursday it totally opposed opening the sector allowing FDI. The move is politically risky. Fears of potential job losses could heighten popular anger at the Congress party ahead of key state polls next year that will set the stage for the 2014 general election. But slowing growth and investment in India, with the rupee currency around historical lows and government finances worsening, may have spurred the government into action. Manmohan Singh, after all the scams and the impression of government paralysis, has realized its time to take some bold steps. This is a very bold step that will please the middle class, said political analyst Amulya Ganguli.

Political Opposition to FDI

India previously allowed 51 percent foreign investment (FDI) in single-brand retailers and 100 percent for wholesale operations, a policy Wal-Mart and rival Carrefour, among others, had long lobbied to free up further. For international retailers, it will open up a $1.6 trillion market growing at 8-9 percent so its a big business opportunity for all of them, said Thomas Varghese, CEO of Aditya Birla Retail, an Indian supermarket chain. Indian retailers have operated supermarket chains in India for years, but their expansion has been hampered by a lack of funding and expertise as well as poor infrastructure which make the cold storage of food transported around the country practically impossible.

FDI A new tool for ballot wars

Political opponents of the proposal, with an eye to the ballot box, argue an influx of foreign players which could include Carrefour and Tesco Plc - will throw millions of small traders out of work in a sector that is the largest source of employment in India after agriculture. Indias biggest listed company, Reliance Industries, was forced to backtrack on plans in 2007 to open Western-style supermarkets in the state of Uttar Pradesh after huge protests from small traders and political parties. The main opposition Bharatiya Janata Party (BJP) opposes allowing FDI in the retail sector, arguing that letting in foreign players with deep pockets would bring job losses in both the manufacturing and service sectors.

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Fragmented markets give larger options to the consumers. Consolidated markets make the consumer captive, the BJPs leaders of the upper and lower houses of parliament said in a statement before the decision. International retail does not create additional markets, it merely displaces (the) existing market.

FDI (Foreign Direct Investment) To Open For Multi Brand Retail recommends High Level Government Panel
FDI A high level inter-ministerial group has recommended opening up of multibrand retail sector to FDI (foreign direct investment) at the earliest to check price rise. But, the panel appointed by the Prime Minister and headed by chief economic advisor Kaushik Basu has suggested allowing FDI (Foreign Direct Investment) in a properly regulated fashion. The IMG was constituted by Prime Minister Manmohan Singh in February to suggest ways to check inflation. RBI, even at the cost of economic growth, has been hiking interest rates since March 2010 to tame inflation still hovering over 9%. In India, the gap between farm gate price and retail price is exceedingly high. The share of organized retail in India is just over 4%. The sector, employing millions of people, is dominated by small, local shops. For government to try to achieve modernization in retail through hands-on intervention at every stage and for every product is to court failure.

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FDI (Foreign Direct Investment) should be allowed, says paper by IMG

The paper, first in the series, said that one way of playing an enabling role is to allow FDI (Foreign Direct Investment) in multi-brand retail which could provide remunerative prices for farmers and fair prices for consumers especially during the peak marketing season. We must guard against the risk of these new corporations becoming monopolistic and charging high prices, a working paper of the panel has said. Outdated technology and managerial methods used in moving farm products leads to excessive value erosion and in turn, raises the price that consumers have to pay, the IMG said making out a case for modernization of the supply chain infrastructure. The IMG deems that it is time for India to allow FDI (Foreign Direct Investment) in multi brand retail and proposes that the Government consider allowing FDI (Foreign Direct Investment) at the earliest(it) believes that reform in this sector can be an effective inflation busting measure, it said. Apart from the recommendation on FDI (Foreign Direct Investment), the IMG has also recommended reform of Agriculture Produce Marketing Committee (APMC) law to enable farmers to bring their products to retail outlets and also allow retailers to directly purchase from the farmers, without facing blockades by incumbent traders.

Proposal to open FDI (Foreign Direct Investment) gains momentum

Government sources said the proposal to open FDI (Foreign Direct Investment) has gained momentum, with both Prime Minister Manmohan Singh and finance minister Pranab Mukherjee backing it, and chances are that the Cabinet could clear the proposal in August, setting the stage for the entry of large chains by the end of the current financial year.
FDI (Foreign Direct Investm

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A Start Has Been Made

Walmart has a joint venture with Bharti Enterprises for cash-and-carry (wholesale) business, which runs the Best Price stores. It plans to have 15 stores by March and enter new states like Andhra Pradesh , Rajasthan, Madhya Pradesh and Karnataka. Duke, Wallmarts CEO opined that FDI in retail would contain inflation by reducing wastage of farm output as 30% to 40% of the produce does not reach the end-consumer. In India, there is an opportunity to work all the way up to farmers in the back-end chain. Part of inflation is due to the fact that produces do not reach the end-consumer, Duke said, adding, that a similar trend was noticed when organized retail became popular in the US. Many of the foreign brands would come to India if FDI in multi brand retail is permitted which can be a blessing in disguise for the economy .

Back-end logistics must for FDI in multi-brand retail

The government has added an element of social benefit to its latest plan for calibrated opening of the multi-brand retail sector to foreign direct investment (FDI). Only those foreign retailers who first invest in the back-end supply chain and infrastructure would be allowed to set up multi brand retail outlets in the country. The idea is that the firms must have already created jobs for rural India before they venture into multi-brand retailing. It can be said that the advantages of allowing unrestrained FDI in the retail sector evidently outweigh the disadvantages attached to it and the same can be deduced from the examples of successful experiments in countries like Thailand and China; where too the issue of allowing FDI in the retail sector was first met with incessant protests, but later turned out to be one of the most promising political and economical decisions of their governments and led not only to the commendable

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rise in the level of employment but also led to the enormous development of their countrys GDP.

Moreover, in the fierce battle between the advocators and antagonist of unrestrained FDI flows in the Indian retail sector, the interests of the consumers have been blatantly and utterly disregarded. Therefore, one of the arguments which inevitably needs to be considered and addressed while deliberating upon the captioned issue is the interests of consumers at large in relation to the interests of retailers. It is also pertinent to note here that it can be safely contended that with the possible advent of unrestrained FDI flows in retail market, the interests of the retailers constituting the unorganized retail sector will not be gravely undermined, since nobody can force a consumer to visit a mega shopping complex or a small retailer/sabji mandi. Consumers will shop in accordance with their utmost convenience, where ever they get the lowest price, max variety, and a good consumer experience. The Industrial policy 1991 had crafted a trajectory of change whereby every sectors of Indian economy at one point of time or the other would be embraced by liberalization, privatization and globalization.FDI in multi-brand retailing and lifting the current cap of 51% on single brand retail is in that sense a steady progression of that trajectory. But the government has by far cushioned the adverse impact of the change that has ensued in the wake of the implementation of Industrial Policy 1991 through safety nets and social safeguards. But the change that the movement of retailing sector into the FDI regime would bring about will require more involved and informed support from the government. One hopes that the government would stand up to its responsibility, because what is at stake is the stability of the vital pillars of the economy- retailing, agriculture, and manufacturing. In short, the socio economic equilibrium of the entire country.

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RECOMMENDATIONS 1. The retail sector in India is severely constrained by limited availability of bank finance. The Government and RBI need to evolve suitable lending policies that will enable retailers in the organized and unorganized sectors to expand and improve efficiencies. Policies that encourage unorganized sector retailers to migrate to the organized sector by investing in space and equipment should be encouraged. 2. A National Commission must be established to study the problems of the retail sector and to evolve policies that will enable it to cope with FDI as and when it comes. 3. The proposed National Commission should evolve a clear set of conditionalitys on giant foreign retailers on the procurement of farm produce, domestically manufactured merchandise and imported goods. These conditionalitys must be aimed at encouraging the purchase of goods in the domestic market, state the minimum space, size and specify details like, construction and storage standards, the ratio of floor space to parking space etc. Giant shopping centers must not add to our existing urban snarl. 4. Entry of foreign players must be gradual and with social safeguards so that the effects of the labor dislocation can be analyzed & policy fine-tuned. Initially allow them to set up supermarkets only in metros. Make the costs of entry high and according to specific norms and regulations so that the retailer cannot immediately indulge in predatory pricing. 5. In order to address the dislocation issue, it becomes imperative to develop and improve the manufacturing sector in India. There has been a substantial fall in employment by the manufacturing sector, to the extent of 4.06 lakhs over the period 1998 to 2001, while its contribution to the GDP has grown at an average rate of only 3.7%17. If this sector is given due attention, and allowed to take wings, then it could be a source of great compensation to the displaced workforce from the retail industry.

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6. The government must actively encourage setting up of co-operative stores to procure and stock their consumer goods and commodities from small producers. This will address the dual problem of limited promotion and marketing ability, as well as market penetration for the retailer. The government can also facilitate the setting up of warehousing units and cold chains, thereby lowering the capital costs for the small retailers. 7. According to IndiaInfoline.com, agro products and food processing sector in India is responsible for $69.4 billion out of the total $180 billion retail sector. This is more than just a sizeable portion of the pie and what makes it even more significant is the fact that in this segment, returns are likely to be much higher for any retailer. Prices for perishable goods like vegetables, fruits, etc. are not fixed (as opposed to, say branded textiles) and therefore, this is where economies of scale are likely to kick in and benefit the consumer in the form of lower prices. But due attention must be given to the producer too. Often the producer loses out, for example, when the goods are procured at Rs.2 and ultimately sold to the consumer at about Rs.15 as in the case of tomatoes now. The Government themselves can tap into the opportunities of this segment, rather than letting it be lost to foreign players. And by doing so, they can more directly ensure the welfare of producers and the interest of the consumers. 8. Set up an Agricultural Perishable Produce Commission (APPC), to ensure that procurement prices for perishable commodities are fair to farmers and that they are not distorted with relation to market prices.

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CONCLUSION
It needs to be underscored that FDI in retail is fundamentally different from Greenfield foreign investment in manufacturing. While the latter enhances the Economys productive base, enhances technological capability and generates Employment in most cases, entry of multinational retail chains has few positive spinoffs. In fact the negative effects in terms of job loss and the displacement of small retailers and traditional supply chains by the monopoly/monopsony power of the multinational retailers far outweigh the supposed benefits accruing to the organized retail sector in terms of increased efficiency. Moreover, India does not have any prior commitments vis--vis the WTO to open up the retail sector. Therefore, the case for opening up of the retail sector to FDI does not seem to be justifiable.

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BIBLOGRAPHY
Websites

www.Legalserviceindia.com www.Manupatra.com www.Scribd.com www.cci.in www.rbi.org.in www.dipp.nic.in www.legallyindia.com www.icsi.edu

Reports/ Research Papers

A.T. Kearneys Report on Indian Retail, 2008 FDI Consolidated Policy Dr.R.KBalyan FDI in Indian Retail- Beneficial or Detrimental-research paper Damayanthi/S.Pradeekumar-FDI is it the Need of he Hour? Google search Dipakumar Dey-Aspects of Indian Economy-Google search

Newspapers

The Economic Times

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The Business Standard

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