Download - FDI in Retail
FDI IN RETAIL
12201,12204,12212,12235,12256
Group-B5
What is FDI? What is FDI?
Modes Of FDI
Acquiring Shares
Modes of FDI
Merger & Acquisition
Joint Venture
Subsidiary
FDI Inflow worldwide
Source: Delloite
1 20
50
100
150
200
250
300
350
400
450
500
$ 218bn
$436bn
20122005
Source: Deloitte
The
Indi
an R
etai
l sec
tor h
as sh
own
CAGR
of 1
0%
Growth of investment in retail
6210
8
6
44
3 2 1
Food
Fashion
Leisure & entertainment
Fashion Accessories
Consumer Durables
Health, Beauty & Pharma
Furniture
Telecom
Books & MusicSource: Deloitte
Indian Retail Market Segment(2011)
Present Scenario
FDI in Multi-Brand
retailing
51 percent
FDI in Single-Brand retailing
100 percent with prior government approval.
FDI in ‘cash and carry’ wholesale trading
Permitted up to 100 percent under the automatic route. Products with refrigeration (cold storage)
Permitted up to 100 percent
under the automatic
route.
Current FDI Norms
1 2 3 4 5 610500
11000
11500
12000
12500
13000
13500
14000
11689
12049.8
12408.8
12770.8
13122.1
13448.5
Increase of retail outlets in India(2002-2007)
Source: Deloitte
The lacuna in retail sector: Where are we lacking behind?
13 million retail outlets that account for around 95-96% of the total Indian retail industry.
Rigid regulations, real estate costs, high personnel costs, lack of basic infrastructure, shrinkage, and highly competitive domestic retailer groups.
The per capita retail space in India is among the lowest in the world, though the per capita retail store is the highest.
Farmers
• 50% Of Production of food and vegetables is wasted at this level
Middlemen Consumers
Reasons for this loss: Rigid regulations Real estate costs High personnel costs Lack of basic infrastructure Shrinkage Highly competitive domestic retailer groups
What Impact FDI will make?
Food processing
Cold Storages
Transportation
“It is estimated that FDI in retail can create approximately 4 million direct jobs and almost 5 to 6 million indirect jobs including contractual employment within a span of 10 years, making it the largest sector in organized employment.”
What Impact FDI will make?
ASSOCHAM estimates suggest employment of one person per 350-400 sq.ft of retail space, which means nearly 1.5 million jobs will be created in the front-end alone in the next 5 years
Assuming that 10% extra people are required for the back end, the direct employment generated by the organized retail sector in India over the coming 5 years will be close to 1.7 million jobs
Benefits
Cut down inter-mediaries Give better
prices to farmers
Provide stabilityEconomies of scale which will benefit, both the farmers and consumers
BenefitsA 1% increase in infrastructure is associated with a 1% increase in GDP across all countries.
Provision of adequate and quality infrastructure is necessary for increasing the productivity and efficiency of agri value chain.
The entry of modern retail formats in India will undoubtedly bring with it an intensive infrastructure creation.
More focus will lie on cold chain infrastructure warehouse distribution in order to strengthen the supply chain.
Healthy Competition will be boosted and there will be acheck on the prices (inflation).
Benefits: Building an Efficient Supply Chain
Increase private investment in the area of supply chain infrastructure
Private Players
A boost from the various schemes of the Government to incentivize rural infrastructure creation
Government
COMPARATIVE ANALYSIS OF FARMERS’ SHARE IN FINAL PRODUCE
1 20%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
30
70
70
30
Series3Series2Series1
Break up of farmers share in developed and developing countries in food grains
India
1 2 30
10
20
30
40
50
60
70
80
90
100
2028
47
8072
53
Series2Series1
Farmers share in different areas in
India
Horticulture
Cereals and grains
Fresh fruits & vegetables
Developed countries
Source: ASSOCHAM
The other side of the coin
The Indian example of retailing: ITC’s ABD program AMUL Future Group Hypercity
ITC-ABD covers 10 states and 4 million farmers. The company’s e-Choupal and ‘Choupal Pradarshan Khet’ are initiatives that have been empowering farmers to improve productivity and deriving better returns.
Some other facts
Though India has a very healthy savings to GDP ratio, the investments are not sufficient to tackle the issue of a large population.
The opponents should realize that no foreign company can come to India on its own and will need a local partner to bring in 49% investment in the venture.
Will bring investments in rural India in the form of cold storages, food processing industries and transportation.
Today there is no restriction on how many Kirana shops can be opened in a locality and number of shops per say 1000 people. All Kirana shops are doing business and making money.
At least 10 million jobs will be created in the next three years in the retail sector.
FDI in retail will help farmers’ secure remunerative prices by eliminating exploitative middlemen.
Huge investments in the retail sector will see gainful employment opportunities in agro-processing, sorting, marketing, logistics management and front-end retail.
Sourcing of a minimum of 30% from Indian micro and small industry is mandatory.
Policy mandates a minimum investment of $100 million with at least half the amount to be invested in back-end infrastructure, including cold chains, refrigeration, transportation, packing, sorting and processing.
In any case, organized retail through Indian corporate is permissible. Experience of the last decade shows small retailers have flourished in harmony with large outlets.
A strong legal framework in the form of the Competition Commission is available to deal with any anti-competitive practices, including predatory pricing.
This will have a salutary impact on food inflation from efficiencies in supply chain.
Thailand has experienced
tremendous growth in the agro-processing
industry.
There has been impressive growth in retail and wholesale
trade after China approved 100% FDI
in retail.
In Indonesia, even after several years of
emergence of supermarkets, 90%
of fresh food and 70% of all food is still
controlled by traditional retailers.
S U C C E S S S T O R I E S
Conclusion
If anything, the entry of retail giants is likely to hot up competition, giving consumers a better deal, both in prices and choices.
Mega retail chains need to keep price points low and attractive - that's the USP of their business.
This is done by smart procurement and inventory management: Good practices from which Indian retail can also learn.
In addition, the fear of major job losses is also highly exaggerated. There will not be job losses, but job redistribution along with a spurt in jobs.
So we can easily sit back and be assured that FDI in retail is going to help Indian economy and Indian Peasantry grow.
FDI in retail is a BOON for India.
References:
http://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD
http://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD/countries?display=map
http://www.euromoneycountryrisk.com/Home/Return/Analysis/Country-Risk-Asia-trading-places-with-the-west
http://en.wikipedia.org/wiki/Retailing_in_India
FDI in Retail - Advantage Farmers report by Food & Agribusiness Strategic Advisory and Research (FASAR) Team - YES BANK and ASSOCHAM (Oct 2012)
Research paper on Foreign Direct Investment : The Big Bang in Indian Retail by Arun Kr. Singh and P.K. Agarwal
http://www.timesjobs.com/jobskill/FDI-Jobs
http://www.anilagashe.com/2011/12/fdi-in-retail.html
The Role of the Multilateral Trading System in the Recent Economic Crisis Pascal Lamy.
BRIC spotlight report 2011.
Thank You