FDI IN INDIA Presented By Shruti Shah
Contents Definition Overview in Retail Sector History Why FDI should be permitted?? Indian Retailers Effect in the Market Methods Pros & Cons Factors affecting FDI & Entry Routes Why Opposition is opposing the FDI in India??
What is FDI?? Foreign direct investment An investment by a company in a country other than that in which the company is based.
Overview in Retail Sector Retailing in India is one of the pillars of its economy and accounts for 14 to 15 percent of its GDP. The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value. Until 2011, Indian central government denied foreign direct investment (FDI) in multi-brand retail. In market reforms paved the way for retail innovation and competition with multi-brand retailers such as Wal-Mart, Carrefour and Tesco, as well single brand majors such as IKEA, Nike, and Apple.
History Domestic business houses, policies kept away foreign investment. Second economic plan, import substitution" encouraged private investment 1960's selective industries got foreign collaboration and JV mostly manufacturing-Indian participation retained After 1960s- devaluation of rupee encouraged socialist idealism banks and foreign oil majors nationalized. 1968 introduction of foreign investment board- encouraging investments on own terms and conditions a summary of the current situation
Why FDI should be Permitted?? Improve Competition Develop market Greater level of exports due to increase in out- sourcing. Provides access to global market for Indian producers. Sourcing by Wal-Mart from china improved multifold after FDI permitted China. Better Lifestyle
Indian Retailers Hypermarket Big Bazaar Star Department Store Big Bazaar Giants Entertainment Fun Republic PVR
Effect in the market Customers Farmer/Producer Government Labor Retailers
Methods The foreign direct investor may acquire voting power of enterprise in an economy through any of the following methods:- By incorporating a wholly owned subsidiary or company. By acquiring shares in an associated enterprise. Through a merger or an acquisition of an unrelated enterprise. Participating in an equity join venture with another investor or enterprise.
Pros Increase investment level and thereby income & employment. Increase tax revenue of government. Facilities transfer of technology. Increase exports and reduce import requirements. Improve quality and reduces cost of inputs. Increase competition and break domestic monopolies.
Cons Flow to high profit areas rather than main concern areas. Sometimes interfaces in the national politics. Sometimes engage in unfair and unethical trade practices. Through their power and flexibility, MNC can undermine economic autonomy and control.
Factors Affecting FDI Profitability: Attract where return on investment is high. Cost of Production: Encouraged by lower costs of production like raw materials, labor. Political Factors: Political stability, nature of important political parties and relation with other countries. Government Policies: Policies like foreign investment, foreign collaboration, remittances, profits and taxation.
Entry Routes of Foreign Retailers Distribution International company sets up local distribution office. Also sets up franchised outlets for brand like- Swarovski, Hugo Boss. Wholesale Trading Cash and carry operations Metro cash and carry
Franchise International company gives name and technology to local computer. In case master franchise is appointed for region or country has right to point local franchise's like- Nike, Pizza, Marks & Spencer. Manufacturing Company sets up Indian arm for production
Why opposition is opposing FDI?? Injustice to small traders. Not in favor to bring foreign companies to India. Corrupt practices and visionless leadership. Breakage of backbone of Indian economy.
The study assembled in this volume make important contributions to the understanding of how to disentangle the diverse impact of FDI on the host economy. Conclusion