MBA Tech IV Year

Trimester XI

Research Project
ON THE IMPACT OF FDI ON RETAIL INDUSTRY

(Part I)

Faculty Mentor: MR.SIBA

by AASHI UPADHYAY ROLL NO 184 MBA.TECH I.T

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INDEX

1) ABSTRACT

2) INTRODUCTION

3) LITERATURE REVIEW

4) GAP ANALYSIS

5) REFRENCES

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Abstract
FDI have made a lot of efforts in the retail industry for a longer time now. Around 10 percent of gross domestic price of India is contributed by the retail trade. Impact on the retail industry service by FDI has a lot of negative as well as positive factors. The impact of FDI on the retial industry will help Indian economy to integrate with the world economy. Focusing on the specific areas the work will help understanding the impact that FDI has created in the indian retail sector.

Introduction
In the multi brand retail segment the opening of foreign direct investment has brought a lot of opputunities for the industry , farmers and the consumers. FDI has a impact upto 51 percent on the industry with single brand only , bringing an expected investment of INR 400 billion. Foreign direct investment has been given 100 percent for carry and cash trading of wholesale with export trading which is aloowed under a route that is automatic. The consumerism has flourished and the growth in gross domestic price is very high. The creation of infrastructure , the efficient supply chain management , the products offered of higher quality and job offerings directly and indirectly. The grocery stores were the most convenient source of any Indian household , people were comfortable as they knew their preference of brand , the could return the product if any fault or could exchange it , credit was offered and the system of using the grocery stores i.e kirana stores was with condtions that were flexible and accessibility that was provided. In retail market India with 1.2 billion people has one of the fastest growth. Now the game is expected to change as the foreign players are expected to bring changes in the game and create a win win situation for everyone including the income f the country , the consumers , the farmers , the suppliers and total economy. Government of india took a lot of thought and then after many considerations the foreign direct investment was given permit for multi brand products ie the daily consumerable items . there was a lot of opposition from the orginaztions of farmers , the politicians and the retails at a large level. In 2nd week of year 2012 the government of india gave a green signal to the single brand FDI. There were several meetings held discussing the pros and cons of the impact on the retailers with multi brands products coming in with foreing direct investments. According to the stats there are around 60 million farmers and around 77 percent population of india survives on less than 0.40 dollars per day.

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Literature Review
The definition of foreign direct investment is entering into a foreign country investing in it with either setting up a new operation site or acquiring or collaborating with a local company. The foreign assets are invested into the organizations , equipments and domestic structures, stock marets are not a part of this investment. there are several advantages to this such as we can have different international products , the economic growth rate will increase , it will create a lot of employment nearly about one million , a lot of amounts in billions would be invested in the Indian market , if farmers and agriculture people are collaborated with this then they would get good prices for their goods , a lot of export and import opputunities will open up . there are several disadvantages also like there are total 50 million merchants in india they will be highly affected with new retial stores comin in , the investment ratios are not fixed similarly for the profit distribution as well , losses will be faced by the grocery shops , and inflation could be suffered by india . There are two types of retailing in india one is organized and another is unorganized. In organized retailing the lisenced retailers do the trading activities that is they are registered for income as well as sales tax, this includes private owned retail businesses , hypermarkets and retail chains whereas unorganized retailing is the low cost retailing in traditional format i.e the grocery or kirana shops. 97 percent of business is assumed to be in the stores format in india.

The growing market value and industries in India drawing attention of global investors .Although recession is hitting the market and affecting the economy but India in global investment destination is recognised in 3rd place .The major factor that has been into consideration is making client assurance in market.In India government have the control over foreign direct investment in retailing sector .Investment into these sectors comes along with infrastructure for retailing these business.And there will be an added advantage to india economy because they will use india source which will lead to growth in india economy. It was a strong believe that single retailing stores are doing well in India.But in 2006 Government made a policy in which upto 51% FDI is allowed for single retail stores.In period of 2 years the total inflow share of foreign direct investment increases by 0-0.2%.And in 2010 the cumulative FDI from single retail store is US $190million.After that india government allows 51% FDI on single retail store and 100% on wholesale trades.Retail industries in India is mostly occupied by unorganised retailers around 96% stores are corner side stores,but now organised stores are opening with good pace these days.This is because of the GDP growth rate in India attracts Investors and FDI inflows.

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According to literature survey foreign investors which have better technologies with respect to host country causes damage to some local firms.It will be great to see the outcome if foreign owned firms and local firms both makes profit.For this local firms and foreign firms both have an impact on FDI and therefore should be taken into consideration . Foreign retailers showing there interest in entering india retail market and many more IT industries and retailers are generating profit at the same time.After the entry of the foreign investment there would be a significant effect on Domestic innovation, investment and economy.

Inflows of foreign direct investments in different sectors of India:

Sr.No 01 02 03 04 05 06 07 08 09 10

Sector Services Sector Construction Telecommunications Computer Software and Hardware Drugs and pharmaceuticals Chemicals Power Automobile Industries Metallurgical Industries Petroleum and Natural Gas

FDI Inflow in US$ from 2000-12 158252 97028 57188 51149 45440 39468 34936 34201 30142 24783

Percentage 19 12 7 5 5 5 4 4 4 3

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The inflow of foreing direct investments in India in the previous years : Due to heavy demands of the consumers , communication facilities and liberalized government policies the demand has increased at such a higher rate every year.

Sr.No 1 2 3 4 5

Financial Year 2004-05 2005-06 2006-07 2007-08 2008-09

Total FDI Inflows 6,051 8.961 22,826 34,362 35,168

% growth over previous years +40 +48 +126 +51 +2

Gap Analysis
As we know only single product retail was allowed to FDI upto 51% and recently they have entered into multi product retail but the government of india is still in a process of forming policies so that the indian retail sector flourishes.

References
http://www.assocham.org/arb/general/Background-FDI-Retail.pdf http://theglobaljournals.com/gra/file.php?val=NDcy http://www.ijemr.net/Jan2012/ForeignDirectInvestmentInRetailInINDIA(31-36).pdf

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