Available online at Journal of Retail Marketing & Distribution Management Vol. 1, Issue, p, April, 2017

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1 Available online at Journal of Retail Marketing & Distribution Management Vol. 1, Issue, p, April, 2017 National Research & Journal Publication Review Article FDI in Multi Brand Retail in India Reetika Arora* Department of Commerce, Amarnath Girls Degree College, Mathura, Uttar Pradesh. Abstract This paper explains that government of India is firm to implement the FDI in multi-brand retail in India. Government has decided to allow 51% FDI in multi-brand retails.fdi in retail sector in India will lead to economic growth and creation of new jobs along with rural infrastructure development. Passing the proposal has cleared the floor for welcoming the multi brand retail chain like wall mart, Tesco & Carrefour in the country for setting up of their shop and retail outlets. It can be said that the advantages of allowing unrestrained FDI in the retail sector evidently outweigh the disadvantages attached to it and the same can be deduced from the examples of successful experiments in countries like Thailand and China where too the issue of allowing FDI in the retail sector was first met with incessant protests, but later turned out to be one of the most promising political and economic decisions of their governments and led not only to the commendable rise in the level of employment but also led to the enormous development of their country s GDP. Key words: GDP, FDI. Retail Sector, Growth, Investment. Copyright 2017, Reetika Arora. This is an open access article for the issue release and distributed under the NRJP Journals License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. Introduction The minimum investment of FDI in multi brand retail is $100 million. The 50% of the investment is to be in backed infrastructure development in FDI in cash and carry with 100% ownership was allowed under the government approval route. It was brought under the automatic route in 2006.government has the first right to procure material from the farmers(1). Farmers get only 10 to 15% of the price we pay. 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) Cite This Article: Arora R. FDI in Multi Brand Retail in India. Journal of Retail Marketing & Distribution Management. 2017;1(1):7-12. The FDI policy is notified through Press Notes by the Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion (DIPP). 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) would be required. Huge post produces losses for farmers due to inadequate facilities. A poorly managed food supply infrastructure was proposal of foreign direct investment [FDI] for 51% in multi brand retail. The 49% of FDI allowed in aviation and power exchanges will bring in funds for the domestic carriers on a verge of death and will help in enhancement of power availability and distribution management(2). JRMDM (2017) 7-12 NRJP Journals All Rights Reserve Page 7

2 FDI in Multi Brand Retail in India Reetika Arora Need For the Study The announcement of opening of FDI in multi brand retail market for international operators with 51% equity holding has evoked mixed reactions from individuals and Organizations across the country(3). Objective The main objectives to study under the present scenario of papers are: To study the sector wise distribution of the FDI in Indian multi brand retail market. (1) To study various strategies and instruments of entry and exit used by the multinational companies (MNCs) (2) To examine the risk factors associated and legal framework formulated by the government of India, to encourage FDI in Indian multi brand retail market. (3) Investing in FDI in Indian multi brand retail market. (4) To analyze the attitude and perception of retailers and consumers in relation to FDI in multi brand retail market. Research Methodology The present study based on secondary data only. Secondary data are collected from Central Statistical Organization, and other sources like magazine, Government report. Large amount of secondary data is available in the forms of articles, manuals and previously conducted researchers on the similar topic(4). Government of India Table 1 clearly indicates the FDI inflows in different sector for the period Of April 2000 August Most of the foreign countries were liked to invest their amount in service sector, Construction Industry, Telecommunications and Computer software and Hardware, because these sectors earn more profit compared to others(5). Table 2 Shows that top ten countries investing in India. Out of this Mauritius plays major role in FDI inflow in India. The main reason for higher Levels of investment from Mauritius was that the fact India entered into a double taxations avoidance agreement (DDTA) with Mauritius were Protected from taxations in India. Singapore and U. K. equally invest (10 Per cent) in India during the study period Japan and U.S.A. following countries 8 per cent and 6 per cent respectively(6). Table 1: FDI Inflows in Different Sector in India. S.No Sectors FDI Inflows August in $ % 01 Services Sector Construction Telecommunications Computer Software and Hardware Drugs and Pharmaceuticals Chemicals Power Automobile Industries Metallurgical Industries Petroleum and Natural Gas Source: DIPP, Federal Ministry of Commerce & Industry, JRMDM (2017) 7-12 NRJP Journals All Rights Reserve Page 8

3 Journal of Retail Marketing & Distribution Management Vol. 1, Issue, Table 2: Shares of Top Ten Investing Countries FDI Inflows in India. S.No. Country Cumulative FDI % of total Rank inflows( august) inflows $ 01 Mauritius 3,03, Singapore 82, U.K 77, Japan 64, U.S.A 49, Netherlands 37, Cyprus 31, Germany 23, France 13, U.A.E 10, Total 8,19,586 Source: DIPP, Federal Ministry of Commerce & Industry, Government of India Table 3: Comparison of Norms under Single-brand and Multi-brand Retail in India. Parameters Multi brand Single-brand Ownership Investment Requirement Minimum investment of US$ 100 million by the foreign investor The foreign investor should be an owner of the brand. Investment towards At least 50% of the investment by No condition back and infrastructure the foreign company to be in backend infrastructure. Location of stores sourcing Stores to be restricted to cities with a population of one million or more(53 cities as per 2011 census): Given constraints around real estate, retailers are allowed to set up stores within 10km of such cities At least 30% of manufactured items procured should be through domestic small and medium enterprises(smes) No condition In respect of proposals introducing FDI beyond 51%, 30% sourcing would mandatorily have to be done from domestic SMEs and cottage industries artisans and craftsmen. Sales No condition Products to be sold should be of a single brand (only those brands which are branded during manufacturing) only, sold under the same brand name internationally. Approval of state governments required While the proposals on FDI will be sanctioned by the center, approvals from each state government would be required While the proposals on FDI will be sanctioned by the center approvals from each state government would be required JRMDM (2017) 7-12 NRJP Journals All Rights Reserve Page 9

4 FDI in Multi Brand Retail in India Impact of FDI in Multi Brand Retail The Standing Committee on Industry presented its report on the impact of Foreign Direct Investment (FDI) in multi-brand retail on Micro, Small and Medium Enterprises (MSMEs).The Confederation of Indian Industry (CII) conducted a survey during December 2011 to January 2012 on the impact of FDI on Small and Medium Enterprises (SMEs) based on a large sample size of 250 companies covering different categories of SMEs according to sales turnover [9-11]. A majority of the SME companies, surveyed have supported the government s decision and the notification allowing 100% FDI in single brand retail and about 52 percent of respondents hope for early implementation of 51% FDI in multi-brand retail shown in Table 3(7). Effect on Traditional Mom and Pop Stores Traditional retailing has been established in India for many centuries, and is characterized by small, family-owned operations. In contrast, players in the organized sector have to cover big fixed costs, and yet have to keep prices low enough to be able to compete with the traditional sector. Getting customers to switch their purchasing away from small neighborhood shops and towards large-scale retailers may be a major challenge. The experience of large Indian retailers such as Big Bazaar shows that it is indeed possible. The kirana stores operate in a different environment catering to a certain set of customers and they will continue to find new ways to retain them(8). Effect on Farmers The fact is that the giant retailers would have far greater buyer power vis-à-vis the farmers compared to the existing intermediaries. The entry of giant MNCs into agricultural procurement would make Reetika Arora the problems worse for the farmers. As against the mandis that operate today, where several traders have to compete with each other in order to buy the farmers produce, there will be a single buyer in the case of the MNCs. This will make the farmers dependent on the MNCs and vulnerable to exploitation. The advocates of FDI believe that FDI in retail in the agriculture will help in improving supply chain, infrastructure and ensure economic security for farmers through the elimination of middlemen in the country(4, 9). Effect on Consumers At present, foreign retailers operate in India through both store and non-store formats in terms of the shopping behavior of Indian consumers across different retail outlets, traditional outlets are preferred as consumers can bargain while modern outlets are preferred because they link entertainment with shopping(10). Those who purchase at modern outlets have reported better product quality, lower prices, one-stop shopping, choice of more brands and products, better shopping experiences with family and fresh stocks as some of the reasons for their choice of outlet. On the other hand, proximity to residence, goodwill, credit availability, possibility of bargaining, choice of loose items, convenient timings, home delivery, etc., are some of the benefits of traditional outlets. In terms of the shopping behavior of Indian consumers across different retail outlets, traditional outlets are preferred as consumers can bargain while modern outlets are preferred because they link entertainment with shopping(11). Those who purchase at modern outlets have reported better product quality, lower prices, one-stop shopping, choice of more brands and products, better shopping experiences JRMDM (2017) 7-12 NRJP Journals All Rights Reserve Page 10

5 Journal of Retail Marketing & Distribution Management Vol. 1, Issue, with family and fresh stocks as some of the reasons for their choice of outlet. On the other hand, proximity to residence, goodwill, credit availability, possibility of bargaining, choice of loose items, convenient timings, home delivery, etc., are some of the benefits of traditional outlets. This will increase consumer spending, which in turn, will drive growth in all sectors of the economy in a virtuous cycle shown in Table 4(12, 13). STRENGTH (1)Young and dynamic manpower to take the challenge. (2)High growth rate in retail and wholesale trade in India. (3)Highest shop density in the world so no fear for small outlet. OPPORTUNITY (1)Foreign capital inflows in small to large sector by MNC companies. (2)Increase the export capacity as per high demand of Indian goods in foreign market. (3)Quality improvement with cost reduction. (4)Big market with better technology and branding. Table 4: SWOT of Indian Retail Sector. WEAKNESS (1) Low capital investment in retail sector in Indian market. (2) Lack of fair competition in small as well as large scale industry. (3) Lack of trained and educated force. (4) Poor infrastructure. THREATS (1) FDI in multi brand retail may result in job losses in manufacturing sector. (2) Kirana and retailers may lose business in long run transactions. (3) Work will do by the Indian and profit will go to foreigners. Benefits of FDI Results of studies have shown that by resorting to FDI companies can achieve economies of scale and produce goods and services at lesser cost and also reduce threw transportation cost thereby providing goods and services at lesser price to the end user(14). (1) Expansion of business leads to creation of large number of job openings, thus benefitting the host country. (2) Increased production with better technology, labour and expanded markets may boost exports and help in reducing balance of trade of the host country. (3) FDI is expected to improve the GDP and growth rate of the host country, which in turn may enhance the living standard of masses in that country. (4) It is observed that, FDI enhances the competition at global level. FDI inflow develops the efficiency and sustains the growth rate of developing country. Conclusion Though an attempt has been made in this paper to analyze the system of foreign direct investment in multi brand retail market in India with reference to the latest economic reforms implemented by the government of India, there are some limitations like paucity of time, limited geographical coverage etc. since it is only a preliminary study, an elaborate study will be carried out in due course thereby covering all possible spheres of the problem. There is scope for further study in various aspects of the problem being studied. Reference 1. Singh H, Dave K. FDI in multi-brand retail: an empirical study of consumers in NCR region (India). International Journal of Indian Culture and Business Management. 2013;7(1): Mundra S, Mundra M, Singh M. A Review of the Impact of Foreign Direct JRMDM (2017) 7-12 NRJP Journals All Rights Reserve Page 11

6 FDI in Multi Brand Retail in India Investment on Indian Retailing. International Journal of Science: Basic and Applied Research. 2013;10(1): Venkatesh N. Indian retail industries market analysis: issues, challenges and its opportunity for the 21st century. International Journal of Application or Innovation in Engineering & Management (IJAIEM). 2013: Banerji S. Effects of Foreign Direct Investment (FDI) in the Indian Economy Vikram S, Mittal MP. FDI in Multi- Brand Retail Sector A Study Regarding Indian Context. Asia Pacific Journal of Marketing & Management. 2013;2(7): Pandey DK, Vashisht A. Growth of Retail in India: Assessment of Concerns of Small Retailers. International Journal of Retailing & Rural Business Perspectives. 2014;3(1): Rao NM. FDI in multi-brand retailingchallenges and opportunities. International Business Management. 2013: Singh AK, Agarwal P. Consumer Behaviour In Organized Retail: An Empirical Study of Noida. International Journal of Management Research and Reviews. 2013;3(8):3324. Reetika Arora 9. Chakrabarty AK. Contract Farming: Conceptual Framework and Indian Panorama. Journal of Economics and Business Research. 2015;21(1): Mahadevaswamy G, Nalini R. FDI in multi-brand retailing: A case study of Mysore. Indian Journal of Marketing. 2013;43(8): Kandpal V, Kavidayal P. An Overview of the Impact of Tax Incentives on Foreign Direct Investment in India. Journal of Commerce and Management Thought. 2014;5(4): Suresh B. Foreign Direct Investment in the Indian Scenario. Global Journal of Business Management. 2014: Malhotra B. Foreign Direct Investment: Impact on Indian Economy. Global Journal of Business Management and Information Technology. 2014;4(1): Tanwar S. Prioritizing Service Quality Attributes: A Study of Indian Apparel Retail Stores. Journal of Marketing & Communication. 2013;9(2). Corresponding Author Information Reetika Arora: Having Masters from Department of Commerce, Amarnath Girls Degree College, Mathura, Uttar Pradesh. JRMDM (2017) 7-12 NRJP Journals All Rights Reserve Page 12