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The commitment of money or capital to purchase financial instruments or assets in order to gain profitable returns.
1. 2. 3. 4.
Refers to the physical Investment made by a foreign investor belonging to a certain country into a sector of foreign nation. It is the transfer of foreign assets into a countrys financial account. This can be done in four ways : By acquisitions and mergers By incorporating a wholly owned subsidiary By being part of a joint venture and By acquiring at least 10% share in the domestic company If the share acquisition is less than 10% then it wouldnt be called FDI then it would be known as PORTFOLIO
INVESTMENT.
Investment done by citizens and government of one country (home country) invest in industries of another country (host country).
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. It is 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.
FDI in Multibrand retail
Store Operations
Merchandising
Procurement / Purchase
Corporate Services
RETAIL SECTOR
Organized
Unorganized
Traditional formats of lowcost retailing Kirana stores Owner managed stores Hand cart/ pavement vendors Growing at 6% annually
100% 51%
December 2010: Carrefour opens its cash & carry wholesale store in Delhi. November 2011: India's central government announced retail reforms for both multi-brand stores and single-brand stores. These market reforms paved the way for retail innovation and competition with multibrand retailers such as Wal-Mart, Tesco as well single brand majors such as Nike, and Apple. December 2011: Under pressure from the opposition, Indian government placed the retail reforms on hold till it reaches a consensus. January 2012: India approved reforms for single-brand stores welcoming anyone in the world to innovate in Indian retail market with 100% ownership, but imposed the requirement that the single brand retailer source 30 percent of its goods from India.
The marketing of two or more similar and competing products, by the same firm under different and unrelated brands. While these brands eat into each others' sales, multi-brand strategy does have some advantages as a means of 1. Obtaining greater shelf space and leaving little for competitors' products. 2. Saturating a market by filling all price and quality gaps. 3. Catering to brand-switchers users who like to experiment with different brands. 4. Keeping the firm's managers on their toes by generating internal competition.
In-principle approval granted for increase in FDI in single brand retail from 51% to 100% under the approval route. This is subject to, inter alia, the following conditions: 1. Products to be sold under the same brand internationally. 2. Foreign investor must be the owner of the brand. 3. Single brand retail would cover only products branded during manufacture. 4. For FDI above 51%, 30% sourcing must be from SMEs.
Inprinciple approval has been granted for FDI in multi-brand retail up to 51% under the approval route. This is subject to, inter alia, the following conditions: 1. Minimum amount to be brought in by the foreign investor to be USD 100 million. 2. At least 50% of the total FDI must be invested in back-end infrastructure (includes capital expenditure on all activities, excluding front-end units. Excludes expenditure on land cost and rentals). 3. 30% procurement of manufactured/ processed products must be from SMEs. 4.Government to have first right on procurement of agricultural products.
It means that global retailers such as WalMart, Carrefour, Tesco and others can set up mega deep-discount stores in the country through joint ventures with Indian firms, where the foreign partner can hold up 51% equity. The issue arises that Wal-Mart, Carrefour and Metro already have stores in India but these are wholesale cash-and-carry stores where only institutions or Kirana shops can buy not consumers.
At least 50% of total FDI brought in shall be invested in 'back-end infrastructure. At least 30% of the procurement of manufactured/ processed products shall be sourced from Indian 'small industries' which have a total investment in plant & machinery not exceeding US $ 1.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. Retail sales locations may be set up only in cities with a population of more than 10 lakh as per 2011 Census and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities. Government will have the first right to procurement of agricultural products.
Employs 8% (35 million) of the working population. Could yield 12 to 15 million retail jobs in the coming five years.
Out of which organized segment is about 0.3 million. Retail sector grew at 9.4% on real terms & 15.4% on nominal terms.
FDI in Multi-Brand retailing is prohibited in India. FDI in Single-Brand Retailing was, however, permitted in 2006, to the extent of 51%. Since then, a total of 94 proposals have been received till May, 2010. FDI in cash and carry wholesale trading was first permitted, to the extent of 100%, under the Government approval route, in 1997. Trade is an important segment in India's Gross Domestic Product (GDP).As per the National Accounts, released by the Central Statistical Organization (CSO), GDP from trade (inclusive of wholesale and retail in organized and unorganized sector), at current prices, increased from Rs 4,33,963 crore in 2004-05 to Rs 7,91,470 crore, at an average annual rate of 16.2 per cent.
As per the National accounts, private final consumption expenditure, increased from Rs 19,26,858 crore in 2004-05 to Rs 32,26,826 crore in 2008-09, at an average rate of 13.8 per cent per annum However, expenditure on some items like transport and communication; expenditure on food in hotels and restaurants; expenditure on rent, fuel and power; and expenditure on education and recreation are distinct from trade. When seen at constant 2004-05 prices, however, private final consumption expenditure increased from Rs 19,26,858 crore in 2004-05 to Rs 26,51,786 crore at an average rate of 8.3 per annum. Private consumption expenditure adjusted for items like transport and communication etc. increased from Rs 11,92,045 crore in 2004-05 to Rs 16,67,286 crore in 2008-09, at an average rate of 8.8 per cent.
Yeh sarkar vikaas ki seedhi nahi, vinaash kar gaddha hai. Sushma Swaraj
FDI in Multibrand retail
INFLATION
SKILLED WORKERS
TAXATION POLICIES
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.
COMPETITION
A strong competition from mom and pop shops:Easily accessible & approachable. Provide services like Free home delivery and goods on credit. They change consumer focus.
MARKET POWER
Unorganized Organized
Potential of Indian Market is US$ 200 billion whereas India is just earning its 3%.
95%
5%
FDI in Multibrand retail
Liquidity pressure
1. 2. 3. 4.
OPPORTUNITIES GALORE. BENEFITS FOR FARMERS. IMPROVED TECHNOLOGY AND LOGISTICS. IMPACT ON REAL-ESTATE DEVLOPMENT.
1. Domestic companies may lose their ownership to overseas companies. 2. Small enterprise may not compete with the foreign players and may ultimately be edged out of business. 3. Large giants of the world may monopolies the highly profitable sector.
In the final analysis, for India, FDI in multi-brand retail should be seriously considered by the government and, as with many other sensitive sectors (like defense), a gradual opening up could be made possible. Despite country wide speculation on the plight of small retailers, India needs to take a lesson from China where organized and unorganized retail seem to co-exist and grow together. In our view, the government has an opportunity to utilize the liberalization for achieving certain of its own targets: improve its infrastructure; access sophisticated technologies; generate employment for those keen to work in this sector FDI would lead to a more comprehensive integration of India into the worldwide market and, as such, it is imperative for the government to promote this sector for the overall economic development and social welfare of the country. If done in the right manner, it can prove to be a boon and not a curse.