FDI IN RETAIL IN INDIA The modern retail sector is encompassing through difficult times in the face of insufficient money

backing and funds, lack of enough space for expansion and requirement of necessary talent, and growth is not as it was predicted. Also on top of that, contrary to expectations, consumer moods to modern retail has not increased at an accelerated pace. This is also a challenge posed from the consumer's point of view. There is a lot of talks and negotiations for big retail to come to India, but it cannot simply be taken for granted and mimic something which is being pushed down our throats because investors and the government which collectively make the policy appear to be landed in No man's land, to be more precise "Alice in the Wonderland "who do not have the Blur Picture on how retail really works in India. If there was a clear picture then heated arguments and debates were not held based on these grounds. Definition of Retail Retail is referred as the sale of goods and services from individuals or businesses to the end-user or consumers. Retailers are part and parcel of an integrated system called the supply chain. A retailer purchases goods or products in large quantities from manufacturers or directly through a wholesaler, and then sells smaller quantities to the consumer for a profit. Retailing was done in either fixed locations traditionally or online in modern days. Retails Means in Simple Terms "A sale to the ultimate consumer". Shops may be on residential streets, streets with few or no houses or in a shopping mall. Shopping in streets may be for pedestrians only. Sometimes a shopping street has a partial or full roof to protect customers from precipitation. Online retailing, a type of electronic commerce used for business-to-consumer (B2C) transactions and mail order, are forms of non-shop retailing. Online Retailing is an Emerging trend in the LPG Era. LPG era is Liberalization, Globalization and Privatization Trend.

Classification of Retail Industry The retail industry is classified into OrganizedRetailing. Unorganized Retailing.

Selling activities done by licensed retailers, those who are registered for sales tax, income tax, who has the License to do Trading etc. These include the corporate-backed business company's, and also the privately owned large retail businesses and also some of the

retailers whose investment is more. Selling activities done byNon- licensed retailers, those who are not registered for sales tax, income tax, who do not have the License to do Trading etc. These are traditional formats of low-cost retailing in India, for example, the local shops i.e., Provision stores Etc., owner manned general stores, hand cart and Vegetable vendors, etc. The Indian retail sector is highly dominated by business being run by the unorganized retailers. The organized retail however is at a very Minimal and most of the Organized Retailers are in urban sector of India, whereas unorganized sector is the largest source of employment after agriculture, and has huge domination into rural India. Advantages and Disadvantages of FDI in India FDI: - Foreign Direct Investment Capital inflows from abroad that is invested in or to enhance the production capacity of the economy. Development Industrial Policy and Promotion activities. Increase in Export and Import. Multi Brand options for Indian Customers. More Franchise's to Indians Cash and Carry Wholesale Trading. Employment Opportunities to Indians. Farmers will get good price of their agricultural goods. Upgradation of Technology.

Disadvantages of FDI Merchants in India Rural Sector will be affected. Distributions of Profit and investment ratios are not fixed. Economically backward class Population suffers from price rise. Local Retailer faces tuff competition and suffer loss in business. Travelling and Transportation Expenses will be increased. Safety and Health concerns will Increase. Inflation may be increased India may become slaves because of FDI in retail sector. Heritage Culture of India may be jeopardized.

Conclusion India needs investments to sustain high-quality economic growth, particularly in the urban Part of India. Government Policymakers are looking at FDI as the primary source of funds. It is important to keep in mind that FDI on its own is not a catalyst for rapid growth and development. At the same time,FDI is a big threat to sovereignty of host and domestic business houses. Faster exploitation of natural resources for profit may deprive host from such resources in long run.

FDI IN RETAIL IN INDIA

00:49 OPEP IIMRAIPUR 2 COMMENTS

FDI (Foreign Direct Investment) is an investment in a foreign country with an intention to gain managerial interest in a company operating in that country. There are many foreign players who have invested and are investing in this way in India.

The government of the host country may limit the percentage of foreign stake in any company with the intention to avoid foreign control over its countrys economy and people. This percentage varies from industry to industry depending on how crucial the industry is for the country. Even India limits the percentage of foreign stake. The industry-wise limitations are 100% for tourism, hospitality, education, roads and highways, pharmaceuticals, petrochemicals; 51% for multi-brand retail; 49% for civil aviation, insurance, D2H, public sector banks; and 26% for print media, defence, etc to name a few. Retail industry in India is on of the most developing industries and has a huge potential to grow further. It contributes about 15% to GDP and 8% to employment of the country. It can be classified into single-brand and multi-brand retail. Only 4% of the retail in India is organised. The FDI limit for single-brand retail and multi-brand retail in India was increased to 100% and 51% respectively in 2012. The increase in the FDI limit in retailing by the Indian government has led to top brands from various countries trying to enter India. Few foreign brands like Zara, Mango, Tommy Hilfiger are already present in the country as joint ventures, franchises, etc. Success stories of these companies are further attracting the investors more. More than a dozen brands are said to be eyeing Indian market for entry. Few of the brands seeking to enter the country are IKEA, Gap, H&M, Sketchers, Celio, Prada, Uniqlo, Decathlon SA, Lotus Arts de Virve, etc. Germany's Esprit, which decided to exit India last year, is now once again evaluating the markets to relaunch its brand. Increasing the limit of FDI in retail has both advantages and disadvantages. Let us first look at the positive side of it. The rationale behind the decision might be: 1. For the wholesalers, one advantage is to reduce transaction costs to consumers of finding out prices of different qualities of end products. 2. Results in positive changes in the organisation of supply chain as it happened in the case of automobile industry and thus leads to in low procurement costs. 3. Producers would get better prices for their products because of elimination of middlemen. 4. The efficient supply chain would increase produce rs surplus and thus release people from agricultural sector to manufacturing. Thus both the sectors are improved. 5. Improvement in supply chain also results in low cost end products. This is an advantage for low and medium income consumers. 6. Because of the presence of large retail stores, revenue (in the form of service tax and VAT) of the government due to computing billing is followed in the organised sector 7. Foreign retailers add to the choices available to the consumers. Competition also leads to availability of end products at low prices and better 8. Infrastructure would be improved. 9. Cash-deficient organised domestic retailers can raise capital from foreign investments in the form of joint ventures, etc. 10. It leads to improved technology in the spheres of processing, grading, handling, etc and also improved logistics. 11. Quantity and quality of employment opportunities would increase. 12. The traditional mom and pop stores would not be affected because of the proximity to households, selling on credit, home delivery, choice of unpacked items and customer relations.

13. The knowledge that comes from the foreign players is huge. This may be in the field of management or operations or technology. Once the industry demands, the education systems would change accordingly to provide the skills. So indirectly the education standards would improve.

Now let us look at the flip side of it i.e. the disadvantages of having increased FDI limit in the retail sector. 1. The main losers would be middlemen. As the large retailers but directly from producers, the middlemen would lose their jobs. 2. The MNCs might form a cartel and the buying power of a single buyer would leave lesser profits to the farmer. 3. The competition might be so high that the mom and pop stores might find it difficult to sell at such low prices. 4. We 5. The 6. There suppliers. However, the government has a role to play to see the success of this policy. It must implement effective regulations to ensure healthy competition, welfare of employees and environmental protection. It must put in place a law related to retail so that there are no ambiguities. It must also provide credit to small domestic players in this sector at lower interest rates so that they can compete with the giants. The government should support the suppliers to develop these large retailers so that the MNCs would not go for imports. This would result in a win-win situation. The main interest of any person interested in operations in this issue would be supply chain. The large retailers would complement the investment of government in supply chain i.e. roads, energy. This would lead to decrease in transaction costs of business- both B2B and business to customer such as information costs, search costs, transport costs, communication costs, contractual costs, distributional costs might war are lose the for self competitive space chances of strength for the Indian the of organised Indian retail sector. costs. culture. might increase distortion real-estate

7. The foreign players might import goods from their mother countries that is against the interest of domestic