... AURANGABAD. 2011-2012 PROJECT REPORT on “FDI in indian retail sector” Submitted By Mr. Sagar P. Mahalkar Mr.Sachin Shinde Mr. Shrikant Gaikwad Mr.Akshay Shisode Guided By Prof. Ramesh Sardar DEPARTMENT OF MANAGEMENT SCIENCE, UNIVERSITY CAMPUS, AURANGABAD. 2011-2012 “CERTIFICATE” This is to certify that the project report entitled ”FDI IN INDIAN RETAIL SECTOR” is the confide work of the candidate satisfactorily completed during the academic year 2011-2012 as the partial fulfillment of requirement for the M.B.A.(F.Y.) in the Department of Management Science. Submitted by Mr. Sagar P. Mahalkar Mr. Shrikant Gaikwad Guided by DIRECTOR Prof. Ramesh Sardar Prof. Abhijeet Shelke Acknowledgement We would specially like to thank to the people who directed, encouraged, and advised us for the whole project. This is a real project we are getting something new information about various problems of FDI in retail sector in India. This project clarifying our views about FDI what we thought and problems of FDI in retail sector in India what actually is. We are very thankful to my guider that, he given us his valuable time and advised us time to time for this project. I am also very thankful to all the people who...
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...RETAIL MANAGEMENT FOREIGN DIRECT INVESTMENT Done By: Jesni Moideen 14010221129 Marketing Specialization Sector Specific Foreign Direct Investment in India 1. Hotel & Tourism: FDI in Hotel & Tourism sector in India: 100% FDI is permissible in the sector on the automatic route. 2. Private Sector Banking: * Non-Banking Financial Companies (NBFC): 49% FDI is allowed from all sources on the automatic route subject to guidelines issued from RBI from time to time. a. FDI/NRI/OCB investments allowed in the following 19 NBFC activities shall be as per levels indicated below: i. Merchant banking ii. Underwriting iii. Portfolio Management Services iv. Investment Advisory Services v. Financial Consultancy vi. Stock Broking vii. Asset Management viii. Venture Capital ix. Custodial Services x. Factoring xi. Credit Reference Agencies xii. Credit rating Agencies xiii. Leasing & Finance xiv. Housing Finance xv. Foreign Exchange Brokering xvi. Credit card business xvii. Money changing Business xviii. Micro Credit ...
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...Contents Introduction 3 Literature review 4 Research methodology 9 Analysis 11 Case study: Tata’s Croma 16 Findings 20 FDI in Retail in India 21 Growth drivers in India for retail sector 22 Discussion 23 FDI in INDIA SECTOR WISE 23 Conclusion 25 Bibliography 27 Introduction Foreign Direct Investment (FDI) is fund flow (inflow/outflow) between the countries wherein one gains benefit from their investment whereas another can exploit the opportunity to enhance the productivity and find out better position through performance. Foreign Direct Investment (FDI) is the flow of funds between countries wherein one country reaps benefits from the investments and the other can make the most of the opportunity to improve the productivity and stabilize their position through performance. The Dictionary of Economics has defined FDI as investment in an overseas country through the acquisition of a company there of an operation on a new site. In other words, the capital inflows from abroad that is invested in to improve the production capability of the economy. Two forms of FDI: * Inward FDI * Outward FDI FDI is an important factor for growth and development in both developed and developing countries. FDI has seen a spectacular growth in the last two decades globally. Policies are formulated in order to accelerate inward flows. FDI provides good opportunities and benefits for both the host and home countries in terms of investments. The “home” countries benefit...
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...http://realityviews.blogspot.in/2011/12/detailed-analysis-fdi-good-or-bad-for.html Detailed Analysis FDI Good or Bad for India Who will benefit in India if FDI is allowed in Multi Brand this is Kirana Business Few days back the Union Cabinet of India overcame years of indecision to allow up to 51% FDI in multi-brand retail. Government also increased the FDI limit in single-brand retail to 100% from 51% Government says it will benefit India. Traders fear the move. Opposition parties oppose the move as they know they will benefit if they support the traders. No one is touching the real issues and accepting the truth that today or tomorrow FDI, big global corporations will enter into India directly or indirectly. Today world is becoming a global village. Foreign Investment in India is governed by the FDI policy announced by the Government of India and the provision of the Foreign Exchange Management Act (FEMA) 1999. The foreign investors are free to invest in India, except few sectors/activities, where prior approval from the RBI or Foreign Investment Promotion Board (‘FIPB’) is required. In franchising and commission agents’ services, FDI (unless otherwise prohibited) is allowed with the approval of the Reserve Bank of India under the Foreign Exchange Management Act. Examples of Such Business - Pizza Hut or Nike or Spencer 100% FDI is allowed in wholesale trading. Wholesalers do the business with the Retailers. Wholesalers never do business with Consumers...
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...FDI in India’s retail sector: Is it win-win game? By: Sharad Pandey Foreign Direct Investment (FDI) is defined as cross-border investment, where investment is made by a foreign country or organization in another country’s domestic market. The issue of FDI has been a debatable topic in India for years now, since government started promoting it. But is it really going to help the Indian economy? Yes, it will, as it will help farmers. In fact, farmers are not the only ones who will benefit from it, society as a whole will be a beneficiary. For the past few years opposition governments have, and are still opposing FDI in India’s retail sector. Watching political parties switch position on the issue of FDI in the retail sector is a bit interesting, and a drama to watch. It is interesting to note that, when BJP was in power, they came up with the idea of allowing FDI in the retail sector, but was opposed by ”Congress'’, which was then serving as opposition political party. When Congress came to power few years ago, it wanted to adopt a policy of allowing FDI into India’s retail sector, but this policy has met stiff resistance from the BJP. The changing position of the Country’s top political parties suggests that both the parties know that FDI it is good for the country. Each political party wants the policy to be effectuated under its leadership so that most of the benefits...
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...The whole FDI in retail fiasco has been topping news papers and various magazines almost all through this year. In September this year, finally, the Indian Government did approve FDI entry into retail but with a 51% cap! There are varied opinions of people about this, the most important being, this would help bring in the economics of market efficiency through a better and more competitive market. This would be the very basis for the premise for capitalisam; so that the Indian peers could work towards working more efficiently. Such a system would pose challenge for the otherwise lazy Indian marketeers. From the individual consumers’ viewpoint, this would help them by getting better prices of goods along with the promises of assured quality. Something that constantly knocks my mind, when I think of FDI coming in India, is its timing. Why has this to be accepted when our country is facing economic distress and not during 2007 or even 2010, when we had better numbers to showcase to the World? Why did FDI not come in when the world was under a recession and we were the better markets internationally? Even before this news was formally announced I have been trying to find reasons behind this “51% “cap, other than of course, those pertaining to ownership issues. How would a roadside vendor or a kirana shop owner still benefit with the 49% that rests with an Indian partner. Not that the Indian partner is making promises to share his profits with them or entering into contracts...
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...WORKING PAPER NO: 366 Foreign Direct Investment in India’s Retail Sector: Some Issues Murali Patibandla Professor Corporate Strategy & Policy Indian Institute of Management Bangalore Bannerghatta Road, Bangalore – 5600 76 Ph: 080-26993039 muralip@iimb.ernet.in, m_patibandla@yahoo.com Year of Publication June 2012 1 Foreign Direct Investment in India’s Retail Sector: Some Issues Abstract Foreign direct investment (FDI) plays an important role in India’s growth dynamics. There are several examples of the benefits of FDI in India. FDI in the retail sector can expand markets by reducing transaction and transformation costs of business through adoption of advanced supply chain and benefit consumers, and suppliers (farmers). This also can result in net gains in employment at the aggregate level. This paper brings forth a few conceptual issues and analysis of qualitative information, data and stylized facts on these issues. Key words- India, Foreign direct investment, Retail, Supply chain, Farmers 2 INRODUCTION In applying transaction-cost logic to political aspects of the reform process in less-developed economies, Dixit (2003)) characterizes three phases in the formation of interest groups under information asymmetry: ex ante, interim, and ex post. At the ex ante stage, each individual is uncertain about his own type as well as the types of others because there is no private information. At the interim stage, each individual knows his own type but not the type...
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...What is Retail sector? 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). The Retail Industry is the sector of economy which is consisted of individuals, stores, commercial complexes, agencies, companies, and organizations, etc., involved in the business of selling or merchandizing diverse finished products or goods to the end-user consumers directly and indirectly. A retailer is involved in the act of selling goods to the individual consumer at a margin of profit. Thus, retailing can be said to be the interface between the producer and the individual consumer buying for personal consumption. According to the Investment Commission of India, the retail sector is expected to grow almost three times its current levels of $250 billion to $660 billion by 2015. The Indian Retail Industry is the 5th largest retail destination and the second most attractive market for investment in the globe after Vietnam as reported by AT Kearney‘s seventh annual Globe Retail Development Index (GRDI), in 2008 Retail sector contributes to maximum percentage of employment after agriculture. In spite of the recent developments retail sector is assumed to possess huge growth potential. The retail industry is mainly divided into:- 1) Organised and 2) Unorganised Retailing Organised retailing- refers to trading activities undertaken by licensed retailers, that is, those who are registered...
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...Government Policy, Fiscal Deficit and Infrastructure. Emergence of FDI in Retail in India FDI in single brand retail was first introduced in 2006 and it was first in 2010 that the idea of FDI in multi-brand retail was proposed by the government as a step to boost the economy of the country. The Indian Retail industry is being seen as a concrete pillar to boost the economy. Currently the retail industry accounts to 14-15 % of the GDP and employs 6-7%of the total nation’s population. It is expected to reach 16-18% of the total market within the next five years. At the time when FDI in single brand retail was introduced in 2006 the limit was set to 49% ownership rights but in the fiscal year 2011-12 government of India agreed to reform its policy on the single brand retails and increased the ownership rights to 100%. Also in 2012, the Indian government allowed FDI in multi-brand retail in which the company has 51% ownership. Following are some of the points of proposed FDI in retail: * Minimum investment to be done is $100 million. * 50% of the investment should be done in improving the back end infrastructure. * 30% of all raw materials have to be procured from the small and medium enterprises ( this rule has been recently reformed as government has made exception for IKEA). * Permission to set retail stores only in cities with a minimum population of 10 lakhs. * Government has the first right to procure material from the farmers. Political Opposition: ...
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...SYMBIOSIS CENTRE FOR MANAGEMENT STUDIES Theme: - “Issues and Challenges in Retail Sector and Foreign Direct Investment India and across the World” FDI AND RETAIL TOGETHER: An Overview By Rakesh Soni (11bbl114@nirmauni.ac.in) PH. NO- 8690976530 Peeyush Purohit (11bbl091@nirmauni.ac.in) PH. NO- 7597907007 INSTITUTE OF LAW NIRMA UNIVERSITY AHMEDABAD INTRODUCTION INDIAN RETAIL MARKET Retailing can be defined as a business activity, which offers products or services in small quantities to ultimate consumers, at a place where consumers prefer to buy. India is one of the largest emerging markets, with a population of over one billion. India is one of the largest economies in the world in terms of purchasing power and has a strong middle class base of 300 million. Around 70 per cent of the total households in India (188 million) reside in the rural areas, where mostly traditional retail outlets, commonly called “kirana” stores exist. These are unorganized, operated by single person and runs on the basis of consumer familiarity with the owner. However, recently organized retailing has become more popular in big cities in India and most of the metropolitan cities and other big cities are flooded by modern organized retail stores. India’s growing retail boom is a success story. With strong fundamentals developing in the Indian economy in the liberalized environment since 1991 with changes in income levels, lifestyles, taste & habits...
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...FDI in multibrand Retail earlier cleared 100 per cent FDI in single brand retail, though there have been few takers for it; it has now gone ahead with 51 per cent FDI in multi-brand retail. This means that any global giant investing in the country would have to first tie up with a local partner, new or existing. Little wonder then that stocks of companies engaged in the retailing business are zooming. It, however, might not be as simple as it seems. The devil as they say lies in the detail. We take a closer look at the notification issued by the Department of Industrial Policy & Promotion (DIPP) with regard to multi-brand retail.The notification says that FDI will be permitted subject to certain conditions. Here are some of the main conditions cited: • Minimum amount to be brought in as investment by the foreign investor would be $100 million. At least 50 per cent of this amount should be invested in ‘back-end’ infrastructure, which will include investments in processing, manufacturing, distribution, design improvement, warehouse, logistics, storage, etc. Investment in rentals and land cost will not be counted. Little money will thus be available for the existing listed retailers to bring down their debts, which is a bigger worry for almost the companies. The government is sending a clear signal that the funds are to be deployed for asset creation. • At least 30 per cent of the procurement of manufactured/processed products purchased shall be sourced from small...
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...Definition of Retail In 2004, The High Court of Delhi[1] 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. Thus, retailing can be said to be 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 customersRetailing is the last link that connects the individual consumer with the manufacturing and distribution chain. A retailer is involved in the act of selling goods to the individual consumer at a margin of profit. Division of Retail Industry – Organised and Unorganised Retailing The retail industry is mainly divided into:- 1) Organised and 2) Unorganised Retailing Organised retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganised retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc. The Indian retail sector is highly fragmented with 97 per cent of its business being run by the unorganized retailers. The organized...
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...FDI in Retail India: Impact on Farmers, Consumers and Industry Nilesh Kate, Research Scholar Sinhgad Institute of Management and Computer Application, Pune nileshkate503@gmail.com 9096714133 ****************************************************************************** Abstract: The retail sector in India is expanding and modernizing rapidly in line with India's economic growth. It acts as a major catalyst in the development of a country through up-gradation of technology, managerial skills and capabilities in various sectors. Rise in purchasing power, growing consumerism and brand proliferation has led to retail modernization in India. The growing Indian market has attracted a number of foreign retailers and domestic corporate to invest in this sector. FDI in the retail can expand markets by reducing transaction and transformation costs of business through adoption of advanced supply chain and benefit consumers and suppliers (farmers). The overall retail market (organized and unorganized) is expected to grow at a compounded rate of 15% over the next 5 years from INR 23 trillion in 2011-12 to INR 47 trillion in 2016-17. Rising incomes will be the primary driver of this growth. Favorable demographics, increasing urbanization and nuclearisation of families are other factors which will drive retail consumption in India. Organized retail, which constituted a low 7% of total retail in 2011-12, is estimated to grow at a CAGR of 24% and attain a 10.2% share of total retail by...
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...FDI IN RETAIL: BENEFICIAL OR DETRIMENTAL AND IT’S FUTURE AFFECT ON INDIAN ECONOMY BY HARJOT KAUR PARMAR (UGC NET, MBA, PGDM, BBA,) ABSTRACT FDI is a type of investment that involves the injection of foreign funds into an enterprise that operates in a different country of origin from the investor. Regardless of today’s crisis, India is considered as one of the most superlative place by foreign investors because of its increasing young population and rising disposable income among the middle class society, that is why large corporations like walmart are showing keen interest in initiating there retail operations in India. But mass round of discussions and debate has started after Government decision on 14 September 2012 allowing FDI in aviation up to 49%, in the broadcast sector up to 74%, in multi-brand retail up to 51% and in single-brand retail up to 100% with high level of disagreement and resistance from the opposition who believe that entry of Big Corporations in retail sector will badly effect the crores of retail shopkeepers and vendors resulting in depart of kirana stores, Whereas government is in favor and believe that it will generate large scale of employment, benefit both farmers as well as consumers and will help in reducing inflation. This research paper aim is to find why foreign investors are attracted towards India, find arguments in favor and against of FDI and what will be its effect on Indian economy in future, whether FDI will be favorable...
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..."Will Foreign Direct Investment (FDI) in multi-branding retail improve the condition of Indian agriculture?" Team : - Avatars Members :- Niloy Roy ( p12niloyr@iimahd.ernet.in / 9974184587 ) Pakki Lakshman Vivek ( p12pakkiv@iimahd.ernet.in / 9974189224) The Indian agricultural sector’s plight makes me recall one of the outstanding scenes of Indian cinema through Ashutosh Gowarikar’s Swades where the protagonist , Mohan Bhargava meets a poor Indian family fallen on hard times who earn their living through selling of clay pots. The unawareness of the real market prices of their goods makes the family suffer losses. Drawing parallels, the chief concerns of farmers in India have been the lack of price security of their produce which I believe, the FDI tries to resolve. The cabinet’s insistence in allowing Foreign Direct Investment in multi branding retail has met with mixed responses all across the nation with different people having varied opinions regarding its impact. With the prime minister oozing confidence over this reform, he has met a lot of opposition from people who believe this is going to harm the unorganized sector of the Indian retail while some feel that the constraints of 51% and the wave of oppositions that it faces will actually make no difference to anyone out there. The supporters of multi brand retail feel that agriculture is the sector which is going to be highly affected in a positive light by this reform. They are not wrong as the impacts are unmistakeable...
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