FDI in Retail - Copy

8/3/2019 FDI in Retail - Copy

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GRDI Position : 3rd

Size : $ 400 billion

Growth Rate : 13%

GDP contribution : 12%

Major sector : Food and Grocery

Employment : 2nd largest industry

(35.06 million)

Types: 1)Organized (2-4%)

2)Unorganized ( 96%)

Source: IBEF 2011 Report


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Retail Segment Percentage holding insector

Major retailers

Food and grocery 63% Reliance fresh, Caf brio,

food bazaar

Clothing, textile and

fashion

9% Westside, shoppers stop,

globus

Jewellery 5% Tanishq

Catering services 5% IRCTC

Consumer durable 4% Viveks, vijay sales, Croma

Pharmaceuticals 4% Piramal group

Entertainment 3% Bowling co.,

Furnishing, utensils 3% Hometown, Tangent

Concept

Mobile handsets 2% The mobile store,


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Format Description Retailers

Hypermarkets Offering basket of product Spencers, Big bazaar

Cash and Carry Bulk-buying requirement Bharti-wal-mart

Departmental stores Large layout, Wide merchandise

mix

Lifestyle , Globus

Supermarkets Household product as well as food

as integral part of the service

Apna bazaar , food

bazaar

Shop-in-shop Shops located in shopping malls Navras ( big bazaar)

Specialty stores Focus on individual product type Brand Factory

Category killers Particular segment The LOFT

Discount stores Branded product at discounted

prices

Subhiksha, levis

outlet

Convenience stores Small Retail stores In and out


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20%

8%

14%

6%

12%

USA

China

Japan

Brazil

India

Contribution Respective

to GDP


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Major challenge faced by Organized retail

sector: In Retail, over 70 per cent of

the labor force in both sectors combined

(organized and unorganized) is either

illiterate or educated below the primary level.

Labor Laws


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Technology

Online Shopping.

Retail media networks(RMN)

RFID.

ERP System.

CRM System.


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51%Single BrandRetailing

100%Cash andCarry Model

Current scenario :- FDI In Multi Brand Retail Trading (MBRT) Is

Prohibited.

- FDI, Up To 51%, In The Single Brand Retail Trading

(SBRT) Sector, Is Permitted, Under TheGovernment/FIPB Route


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FDI POLICY IN OTHER

COUNTRIES

CHINA - 100% FDI LIMITS

THAILAND - 100 % FDI LIMITS RUSSIA - 100% FDI LIMITS

INDONESIA- 100 % FDI LIMITS

Brazil,Argentina,Singapore & Chile allow 100%FDI in retail sector while Malaysia permits FDI to

a certain limit.


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Proposed policy: FDI In Multi Brand Retail Trade (MBRT)

May Be Permitted Up To 51%, With

Government Approval. In respect of proposals involving FDI

beyond 51%, 30% sourcing would

mandatorily have to be done from SMEs/village and cottage industries artisans

and craftsmen.


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FDI in single brand retail trading may

be permitted up to 100% with

Government approval.

The foreign investor should be the

owner of the brand.


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Benefits of FDI :

Foreign investment:

Minimum Amount To Be Brought In, As FDI, ByThe Foreign Investor, Would Be US $ 100 Million

foreign investment. Better returns to farmers:

In the present dispensation, there is a complexchain of procurement involving several middlemen.

FDI in retail will create the enablingenvironment which will ensure direct procurement,at least of horticultural produce from farmers toenable them secure remunerative price


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Employment generation:

Huge Investments In The Retail Sector Will SeeGainful Employment Opportunities In Agro-

processing, Sorting, Marketing, LogisticManagement And The Front-end Retail Business.

About 1.5 Million Jobs Will Be Created In TheFront-end Alone In The Next 5 Years.

Back-end, the direct employment generated bythe organized retail sector in India over thecoming 5 years will be close to 1.7 million jobs.


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Supply chain efficiency:

Foreign Retail Majors Have Gained Decades OfExperience, Technologies And Management

Practices Which Will Ensure Supply ChainEfficiencies.

Impact on food inflation

The opening up of Multi Brand Retail will also havea salutary impact on food inflation as it wouldcontribute to savings to the food which perishes onaccount of inadequate infrastructure.


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FDI can be a powerful catalyst to spur competition

in the retail industry.

It can bring about:

Supply Chain Improvement

Investment in Technology

Manpower and Skill development Efficient Small and Medium Scale Industries

Increase in exports


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Investment into warehouse and cold storage chainwill result in significant efficiency on supply chain.

Farmers benefited through direct marketing andcontract farming programme.

Improves farm production through modern

techniques.

Increasing availability of low interest credit forfarmers.


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News economic times India today assured global retail giants Walmart and Metro that its reforms agenda is

well on course and the decision to put on hold FDIin multi-brand retail is "just a

pause", forced by compulsions of coalition politics. This assurance was given by India's Commerce and Industry MinisterAnand Sharma

when he met Walmart President Doug McMillonand Metro's board

member FransMuller on the sidelines of the World Economic Forum meeting here.

This is for the first time that senior management of the US and German retailers met

any minister after Indian government suspended the controversial decision to open

Foreign Direct Investment (FDI) in multi-brand retail on November 24.

Sharma said the decision to open 51 per cent FDI in multi-brand retail "could not be

implemented because of the compulsions of coalition politics as also partisan

opposition.

"It is just a pause. The decision has only been put on a temporary halt... India growth

story is intact and the government is committed to take forward the reform agenda,"Sharma said.

He said while the government has restarted consultations taking on board concerns of

agrarian states, only the bona fide objections would be taken into account.

Walmart also expressed its willingness to abide by the proposed conditionalities to

open the sector for FDI.


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More news from economic times

Allowing foreign direct investment (FDI) in retail is thee first major step towards reforms

in agriculture sector. FDI will help the farm sector set up the much-needed backward

linkages. Today, the existing organised retail has not been able to supply fresh vegetablesto the consumers because they have not invested in the backward linkages.

When the farmers' produce reaches the end consumer directly (without going through

the middlemen) and it is sorted and packaged on the way to the cities, the farmers will

naturally be benefited. Once the government proves its commitment to the issue, then

the pace of implementation of the decision will not remain a major factor.

The government should not remove all the restrictions on futures trade.

The Commission of Agricultural Costs and Prices (CACP), the Food Corporation of India

(FCI) and the public distribution system (PDS) should all be abolished. CACP is not

needed when futures trade is open up because the farmer will know the price trend at

the time of sowing.

Agricultural scientist MS Sw

aminath

anh

as opposed th

e decision of

allow

ingFDI

inretail on the grounds that it might create monopoly.

When there are many players in the market, the question of monopoly will not arise.

Within two years, we will see (Gujarat chief minister) Narendra Modi and (Maharashtra

chief minister) Prithviraj Chavan competing for attracting FDI in retail in their states.

The concern that the Indian farmer is illiterate and hence more prone to exploitation is

not correct. Though the farmer is illiterate, he is wise.


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APMCs havebeentoutedasfarmers'organisations. What willbetheirfutureandrole

when FDI comes?

We have always said that the APMCs are nothing but slaughterhouses of farmers. They have

become the playgrounds for the children of established politicians. They occupy the prime

lands where the interest of the politicians lies. Despite all this, we are not calling forabolishing the APMCs.

If they have to be reformed, the only way is to let them compete with the national and

multi-national players. The fittest will survive.

WhatisyouropinionaboutthecottonMSP andthesugareconomy?

If the government procures cotton at the minimum support price (MSP) of Rs 3,300/quintal,it will have to bear heavy losses. The cotton prices are bound to decline. We have advised

farmers in Marathwada and Vidarbha not to stock cotton this year in the hope of price

appreciation. They should sell the cotton as soon as it is picked up from the fields.

About sugar, the Maharashtra State Cooperative Bank considers only the price of sugar while

giving pledge loans to the sugar mills. It should also consider the price of byproducts like

baggase and molasses while calculating the component of loan. If they do so, then the millswill be able to pay Rs 2,100/tonne as the first advance of cane payment.

How isthefinancial health ofthefarmersinthecountry?

Today, Indian farmer is heavily indebted. The cost of labour, electricity, diesel etc is all very

high. The government does not give good price to his produce. Land is being fragmented.

Our food security may come into danger if the farmers' financial health do not impro

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FDI in Retail - Copy