FDI IN RETAIL CLOTHING MARKET: A STUDY OF INDIAN PERSPECTIVE

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1 Tactful Management Research Journal ISSN : Vol. 3 Issue. 1 Oct 2014 Impact Factor : (UIF) FDI IN RETAIL CLOTHING MARKET: A STUDY OF INDIAN PERSPECTIVE P. B. Ashturkar Associate Professor & Head- Business Law, Research Guide In Commerce & Management Science Department Of Commerce, K.R.M.Mahila Mahavidyalaya, Nanded, M.S., India. Abstract:-FDI in retail magnetize investment improve the availability of goods for the consumers, and also persuade sourcing of goods from different parts of world and thereby boost competitiveness of Indian enterprises through access to global designs, technologies and management practices. FDI in India accounts for 14 to 15 per cent of GDP. The Indian retail market is estimated to be US$500 billion and one of the top live retail markets in the world by economic value. It is claimed that fresh investments in Indian organized retail will generate 10 million new jobs at the end of 2014 and about five to six million of them in logistic, even though the retail market is being opened to just 53 cities out of about 8000 towns and cities in India. This study is intended to explore the Indian Apparel Industry including both domestic and exports which is expected to grow from Rs. 3,27,000 crores in 2011 to Rs.10,32,000 crores by Domestic Apparel Retail market was worth Rs. 1,54,000 crores in 2009 and is expected to reach Rs. 4,70,000 crores by New technology and lifestyle trends, increase in rural income as well as urbanization, increase in easy access to credit and consumer awareness and rapid urbanization and growing trends towards nuclear families. It is observed that many global brands have already entered India by way of joint venture or a license agreement with an Indian franchise; hence FDI in this sector is recommended in single and multi brand retail under automatic route. Keywords:FDI, FDI in Retail, Competitiveness, Global Design, Global Brands, Indian Apparel Industries. 1.INTRODUCTION Retail is one of the financial pillars of Indian economy. Retail marketing is the range of activities undertaken by a retailer to promote awareness and sales of the company s products. Retail marketing makes use of the common principles of the marketing mix, such as Product, Price, Place and Promotion. It is an effective merchandising strategies, shopping and consumer behavior, branding and advertising. FDI in retail attracts investment in operations and marketing, improve the availability of goods for the consumers, encourage increased sourcing of goods from India and enhance competitiveness of Indian enterprises through access to global designs, technologies and management practices 2.FDI IN INDIAN RETAIL India is one of the fastest growing economies in the world and by 2030 india would be one of the top 5 economies in terms of GDP. FDI in India accounts for 14 to 15 per cent of GDP. The Indian retail market is estimated to be US$500 billion and one of the top live retail markets in the world by economic value. India is one of the fastest growing retail markets in the world about 1.2 billion people. India s retail industry employs about 40 million Indians i.e. 3.3 per cent of Indian population. Please cite this Article as : P. B. Ashturkar, FDI IN RETAIL CLOTHING MARKET: A STUDY OF INDIAN PERSPECTIVE : Tactful Management Research Journal (Oct ; 2014) 1

2 In June 2012, IKEA had applied for permission to invest $ 1.9 Billion in India and set up 25 retail stores. In September 2012, the Government of India announced the opening of FDI in multi-brand retail, subject to individual states. Government of India notified the FDI reforms for single and multi brand retail under Indian law. In December 2012, Government of India allowed 51 per cent FDI in multi-brand retail in India subject to approvals by individual states. Single brand retailers can own 100 per cent of their Indian stores, up from the previous cap of 51 per cent. It is announced that India requires single-brand retailers, with greater than 51 per cent foreign ownership, to source at least 30 per cent of the value of products from Indian small industries, village and cottage industries, artisans and craftsmen. All multi-brand and single brand stores in India must confine their operations to 53 odd cities with a population over one million. It is expected that these stores will have full access to over 200 million urban consumers in India. Multi-brand retailers must have a minimum investment of US$ 100 million with at least half of the amount invested in back end infrastructure, including transportation, packing, sorting. It is claimed that fresh investments in Indian organized retail will generate 10 million new jobs at the end of 2014 and about five to six million of them in logistic, even though the retail market is being opened to just 53 cities out of about 8000 towns and cities in India. FDI inflows in single brand retail sector are about 500 billion USD and is pegged to reach 1.3 trillion USD by The penetration level of modern retail is expected to grow about six times from the current 27 billion USD to 220 billion USD in Garmenting and technical textile are the most attractive segments within the apparel. Indian retail market is USD 470 Billion in 2011 and is expected to grow to US$ 675 Billion by RETAIL MARKETING IN CLOTHING FDI in retail clothing is an important aspect for Indian economy. It plays important role in foreign trade. Most of the players in this field are creating awareness of their brands as consumers are becoming brand conscious. India has huge unorganized market for clothing and retailing which mostly sell unbranded products. Consumers are moving from unorganized to organized channel. FDI in clothing grew from 16 per cent to Rs. 1 trillion. India remained the leading global clothing retailer. India has maximum number of clothing and footwear retail outlets globally. Raymond and Koutons are clothing retailers in India. Koutons started its operations in 2006 by franchising its two apparel outlet brands of Koutons and Charlie Outlaw. Franchised its outlets in North India targeting on middle class consumers. Multinational brands like Benetton, Pape and Van Heusen targeted at wealthy customers. A number of large, well-branded retailers are available in Indian apparel market. The larger apparel retailers have an advantage over smaller shops since they get better pricing from suppliers because they buy such large quantities of apparel. That means their profit margin is greater and they can offer better retail pricing to their customers. One of the major trends affecting the retail apparel industry is the increase in people who like shopping for apparel on the Internet from the comfort of their home. Emerging technology such as mobile applications are changing the way retailers do business. Staying on top of the latest styles of clothing is key to attract apparel shoppers. 2

3 Indian Apparel Industry including both domestic and exports is expected to grow from Rs. 3,27,000 crores in 2011 to Rs.10,32,000 crores by Domestic Apparel Retail market was worth Rs. 1,54,000 crores in 2009 and is expected to reach Rs. 4,70,000 crores by Men s wear has the majority share of Apparel market currently (43 per cent). However, women s wear is growing at a higher rate of 12 per cent compared to men s 9 per cent, boys wear 10 per cent and girls wear 11 per cent. Due to high growth, women s wear share is expected to reach 43 per cent in 2020 from the current 37 per cent share. 3

4 Indian Textile market is estimated at Rs crores in 2009 and expected to reach Rs. 40,000 crores by per cent CAGR. Technical Textile market is estimated to Rs. 49,000 crores in 2009 and expected to reach Rs. 1,46,000 crores by per cent CAGR. The main drivers of domestic growth are increasing population, increasing income levels, rapid urbanization, improving demographic, increased organized players and increasing penetration of retailers into smaller cities. The growth in trade is driven by increased outsourcing of western developed countries towards lower cost countries in Asia. Indian Textile and Apparel export and domestic industry size is valued at Rs. 3,27,000 crores in 2009 and estimated to 11 per cent CAGR to reach Rs. 10,32,000 crores by Indian domestic Apparel market is expected to 11 per cent CAGR. Indian Apparel Retail currently Men s wear is the biggest segment of the market; however women s wear is growing faster than other apparel segments and is expected to gain majority shares in future. Kids wear is also growing rapidly with higher growth in girls wear. 4.CONCLUSION Indian government announced retail reforms for both multi-brand stores and single-brand stores. These market reforms paved the way for retail innovation and competition. The announcement sparked intense activism both in opposition and in support of the reform. Indian government approved reforms for single-brand stores welcoming anyone in the world be innovate in Indian retail market with 100 per cent ownership, but imposed the requirement that the single brand retailer source 30 per cent of its goods from India. It is claimed that the opening of retail industry to global competition is expected to spur a retail rush to India. It has potential to transform the retailing landscape and the nation s infrastructure. FDI in retail clothing in India is important for increasing business of clothing. FDI in clothing retail requires because of changing consumption patterns of Indian customers, New technology and lifestyle trends, increase in rural income as well as urbanization, increase in easy access to credit and consumer awareness and rapid urbanization and growing trends towards nuclear families. It is observed that many global brands have already entered India by way of joint venture or a licence agreement with an Indian franchise hence FDI in this sector has recommended in single and multi brand retail under automatic route. 5.BIBLIOGRAPHY 1.Vyas Preeta h.(2007) Sales promotion practices in apparel retail sector and challenges ahead, Indian institute of Management, Ahmadabad. 2.Raha Shubh (2012) Apparel Retail in India, Manager, production planning, Bhartiya International limited. 3.Dey Anindita (2014) Textile Ministry for FDI in multi-brand retail, but only in Indian apparel, Business standard Business today (2014) Why the future of FDI in multi-brand retail looks bleak after polls. 5.Tandon Suneera ( 2014) Retail FDI : government may scrap 30 % local sourcing clause, Live mint the Wall street Journal Bhattacharyya Rajib (2012) The opportunities and challenges of FDI in retail in India, Journal of Humanities and social science, Vol 5 (5) 7.Dhillon S.S. & Kaur M (2007) Foreign Institutional Investment & returns on Indian stock market indices: A causality analysis, The Indian Journal of Commerce, Vol 60(2), pp Om Prakash (1997) Foreign investment & India s fragile economy, The Indian Journal of Commerce,Vol L(1) No.190 pp Qureshi N.Z &Amin M.M (2007) FDI in India s Retail sector: Projects and Hurdles, The Indian Journal of Commerce, Vol 60(4) pp Srinivas Rao (2006) Foreign Direct Investment in Indian Retail Business, The Indian Journal of Commerce, Vol 59(2) pp Sahoo Pravakar (2004) FDI & Export Competitiveness in India, Economic Reform and 4

5 perspectives, Serial Publication, New Delhi. 12.Jaya Krishna & Venugopal (2004) Private foreign investment in liberalized India, Economic reforms and perspectives, Serials Publications, New Delhi. 13.Yadapadithaya P.S. (2001) Foreign investment: Boon or Bane: Business environment and policy, Deep & Deep Publications Pvt ltd., New Delhi www. rbi.org.in P. B. Ashturkar Associate Professor & Head- Business Law, Research Guide In Commerce & Management Science Department Of Commerce, K.R.M.Mahila Mahavidyalaya, Nanded, M.S., India. 5