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ACKNOWLEDGEMENT

A journey is easier when you travel together. This project report is the result of two
months of work whereby, we accompanied and supported by many people. We
would like to extend our gratitude to Mr. Mandeep Hayer who kindly accepted to
guide us in the project. We are thankful to him for spending his valuable hours to
review and analyze our project at every stage and suggested necessary changes.
We feel our self extremely fortunate to have had the opportunity of associating our
self with him. His constant encouragement and positive words were greatly
instrumental in making this work a success.
For most, we would like to thank God for His grace and blessings. Last but not the
least I would like to thanks my parents and family members for their affection and
inspiration all the time.

Introduction:
Foreign direct investment (FDI) is direct investment into production in a country
by a company in another country, either by buying a company in the target country
or by expanding operations of an existing business in that country. Foreign direct
investment is done for many reasons including to take advantage of cheaper wages,
and/or for special investment privileges such as tax exemptions offered by the
country as an incentive to gain tariff-free access to the markets of the country or
the region. Foreign direct investment is in contrast to portfolio investment which is
a passive investment in the securities of another country such as stocks and bonds.
Inward and outward direct investment (FDI) stocks and flows tend to go together,
across countries and over time. The countries that invest extensively abroad are
usually also large recipients of FDI. There is little evidence that flows of FDI are a
major influence on capital formation.
One of the advantages of foreign direct investment is that it helps in the economic
development of the particular country where the investment is being made.
But as we all know every coin has two sides, same way FDI do possess pros and
cons to a country. It can be seen when 51% approval is proposed by Indian
government a debate in parliament is held which is concluded below:
Favor:

This will bring a modern technology to a country


Improve rural infrastructure
Help create competitive market
Reduce wastage of agricultural produce
Enable our farmers to get better price for their jobs
Consumer will get low price commodity

Biggest beneficiary will be small farmers, who would be able to improve


productivity and realize higher remuneration by selling directly to large
organized players and shorten the chain from farm to consumers
Government too stands to gain by this move through more transparent and
accountable monitoring of goods and supply chain management systems. It can
expect to receive an additional US$25-30 billion by way of taxes
Against:
Our interest rates today are as high as 14% to 16% how do we compete with the
economies which have a 4% interest rate. Our infrastructure our trade
facilitations our labor laws, all these factors collectively dont make India low
cost. So do you want India to become a center where we allow foreign
companies to come in and set up these large chains which eventually instead of
selling domestic products outsourcing internationally the cheapest sources and
selling those products. Please remember the domestic retail normally sources
domestically, international retail sources internationally because the source
from the cheapest sources.
Even if big retail companies help the farmers in resurrecting their economy,
what plan does the government has for millions of middlemen who are part of
the business process chain that ensures manufactured products reach end users.
We engage millions of uneducated and semi educated people of various stages
of retail business spread across towns and cities but we are afraid that Tesco and
Wal-Mart will only engage smart and educated work force in small strength,
comparatively.
Conclusion:
Government is taking decision in good faith. Few persons and lobbies controlling
the rates of food commodities in India. And bringing more competition in market
will bring better prices for buyers as well as sellers of commodities. Parties
protesting against FDIs in retail have choice to not to allow FDIs in the states they
are ruling. Government should make a regulatory body for commodity trade as we
have for cellular services.

Objectives of project

1. Comparison of vegetable prices in modern versus traditional


2. Benefits to farmer of high prices
3. Benefits to consumer of low prices

FDI in India

FDI in retail

FDI in setting-up
Agri suppy
com chain
paris
ion
of
price
s

FDI in India

Benefits of FDI to a country


One of the advantages of foreign direct investment is that
it helps in the economic development of the particular country
where the investment is being made.
This is especially applicable for developing economies. During the 1990s, foreign
direct investment was one of the major external sources of financing for most
countries that were growing economically. It has also been noted that foreign direct
investment has helped several countries when they faced economic hardship.
An example of this can be seen in some countries in the East Asian region.
It was observed during the 1997 Asian financial crisis that the amount of foreign
direct investment made in these countries was held steady while other forms of
cash inflows suffered major setbacks. Similar observations have also been made in
Latin America in the 1980s and in Mexico in 1994-95.

FDI in Retail

Pros and cons of FDI in retail


Real benefits of retail FDI are limited:The political fallout of the governments
decision to increase the FDI limit in the retail sector continues. Yet Deep
Mukherjee, Director, India Ratings and Research, a unit of Fitch Ratings, believes
that the real benefit of retail FDI is limited. While the measures may benefit the
sector and the economy in the long run, India Ratings believes that the near term
impact is limited. India Ratings also says that it expects Indian retailers to reorganize business operations along geographical lines in order to take advantage of
the new rules

Farmers, consumers will benefit from policy reforms: The bold policy moves
made by the government are in the interest of farmers, manufacturers, consumers,
everybody. I feel that India is back on the move said Rajan Mittal. Large
investments will pour in and huge employment opportunities can be expected.

Rajan Mittal, Vice-Chairman and Managing Director of Bharti Enterprises, speaks


exclusively to NDTV on how the policy measures unleashed by the government
would plan out.

Comparison of impact of FDI in India and other Countries


Following key observations could be made from the comparison of FDI and other
countries (China, Brazil, Chile, Argentina, Russia, Thailand, and Germany)
Brazil, Chile, Argentina, Russia have sectoral caps higher than those of India
implying that their FDI policies are more liberal
The sectoral caps are lower in China than in India in most of the sectors like
agriculture, forestry, and insurance. A note worthy aspect is that China
permits 100% FDI in agriculture while completely prohibits FDI in media.
In 2009 starting of foreign business took around 46 days with 16
procedures in India as compared with 99 days with 18 procedures in China
and 166 days with 17 procedures in Brazil.
In terms of indicatoraccessing industrial landIndias position is mixed. In
China it takes comparatively less time to lease private and public land as
compared to other countries including India. This becomes an important
factor while making decisions on investment by the foreign companies.

In terms of the indicator arbitrating commercial disputes India is on par


with Brazil and Russian federation. Although the strength of the laws index
is fairly good, the extend of judicial assistance index is moderate.

Reasons for failure of FDI in Germany


Clearly dominating the US retail market, Wal-Mart expanded into Germany (and
Europe) in late 1997. Wal-Marts attempt to apply the companys proven US
success formulain an unmodified manner to the German market, however, turned
out to be nothingshort of a fiasco. Upon closer inspection, the circumstances of
the companys failure toestablish itself in Germany give reason to believe that it
pursued a fundamentallyflawed internationalization strategy due to an incredible
degree of ignorance of thespecific features of the extremely competitive German
retail market. Moreover, insteadof attracting consumers with an innovative
approach to retailing, as it has done in theUSA, in Germany the company does
not seem to be able to offer customers any compelling value proposition in
comparison with its local competitors. Wal-Mart Germanysfuture looks bleak
indeed.

Review of Literature
The review of past studies helps us in framing objectives, developing research
design, variable selection, interpreting the results and in drawing meaningful
conclusions. In accordance with the objectives of the study, a brief review of
literature is presented here under the following headings.
1. Foreign Direct Investment Flows to India
During the recent global crises FDI inflows to India did not show as much
moderation as was the case at the global level. However, when the global FDI
flows to EMEs recovered during 2010-2011, FDI flows to India remains sluggish
despite relatively better domestic economic performance ahead of global recovery.

2. The Agri Millionaires: A new generation of farmer entrepreneurs is on the rise


and it means business
India produces nearly 11 per cent of the worlds vegetables and 15 per cent of all
fruits. The country is the largest producer of mangoes, bananas and pomegranates,
globally, though its share in the international trade of fruits and vegetables
remains a meagre 1 per cent.. Indian farmers are mostly small and marginal with
fragmented landholdings. And the small size is making adoption of farm
mechanisation and modern techniques difficult. Until pooling of landholdings
becomes easy, achieving economies of scale will remain difficult, points out the
Economic Survey 2011-12.

3. The Devil in the Retail


Man Mohan Singhs decision to open up the fast-growing organized multi-brand
retail sector to FDI will be one of the biggest game-changing reforms that will
touch everyones life: farmers, industries, traders, retailers, job-seekers and, not
the least, millions of consumers. This change may take years, even decades, to
play out to its full potential
4. Obama's FDI remark draws sharp criticism from Government, Opposition
Barack Obama's statement that the investment climate in India is
"deteriorating" seems to have politically united India and raised
hackles across party lines. On Twitter, the Prime Minister's Office
(PMO) pointed out that according to a recent UNCTAD report,
India is the third most desirable destination for Foreign Direct
Investment (FDI). "FDI inflows to South Asia turned around as a
result of higher inflows to India, the dominant FDI recipient in the
region. The two large emerging economies, China and India, saw
inflows rise by nearly 8 per cent and by 31 per cent,
respectively," the PMO tweeted.

5.Real benefits of retail FDI are limited: India Ratings


The political fallout of the governments decision to increase the FDI limit in the
retail sector continues. Yet Deep Mukherjee, Director, India Ratings and Research,
a unit of Fitch Ratings, believes that the real benefit of retail FDI is limited. While
the measures may benefit the sector and the economy in the long run, India Ratings
believes that the near term impact is limited. India Ratings also says that it expects
Indian retailers to re-organize business operations along geographical lines in order
to take advantage of the new rules
6. Farmers, consumers will also benefit from policy reforms: Rajan Mittal
The bold policy moves made by the government are in the
interest of farmers, manufacturers, consumers, everybody. I feel
that India is back on the move. Large investments will pour in and
huge employment opportunities can be expected. Rajan Mittal,
Vice-Chairman and Managing Director of Bharti Enterprises,
speaks exclusively to NDTV on how the policy measures
unleashed by the government would pan out.
7. India is not hostile to FDI flows, says Nilesh Shah
In a discussion with NDTV Profit, Axis Direct'sNilesh Shah shares
his views on how the Indian economy is going to perform ahead.
"The economic growth is under pressure. However, India is not
hostile to FDI flows. FII flows may resume once concerns over
GAAR are over," he said. He feels that the rupee will depreciate
further.

8.FDI in retail will bring investment of $ 700 million: Narayanasamy


Defending FDI in retail and other sectors, Union Minister V
Narayanasamy on Monday said the country was expecting an
investment of about $700 million besides provision of huge
employment and creation of agro-infrastructure.

Research methodology:
Data collection:

Data from retailers, farmers, distributors, shopkeepers from


different states.
Opinions of retailers, farmers and shopkeepers
Political data from media and newspapers
Voice of the people
Data analysis:
Comparison of prices of vegetables within and outside states
Debates
Surveys

Appendix:

Bibliography

NDTV. (2012, July 16). NDTV Business. Retrieved from www.ndtv.com:


http://www.ndtv.com/video/player/news/obama-s-fdi-remark-draws-sharpcriticism-from-government-opposition/239536

Outlook. Retrieved from www.outlookindia.com:


http://www.outlookindia.com/article.aspx?279187

NDTV.

(2012,

sepember

20).

NDTV

Business.

Retrieved

from

www.ndtv.comhttp://www.ndtv.com/video/player/news/real-benefits-of-

retail-fdi-are-limited-india-ratings/247552

NDTV. (2012, september 14). NDTV Business. Retrieved from www.ndtv.com:

http://www.ndtv.com/video/player/news/farmers-consumers-will-alsobenefit-from-policy-reforms-rajan-mittal/246873

NDTV. (2012, May 11). NDTV Business. Retrieved from www.ndtv.com:


http://www.ndtv.com/video/player/news/india-is-not-hostile-to-fdi-flows-saysnileshshah/231991

IBN. (2012,october 16). IBN Business. Retrieved from www.ibnlive.in.com:

http://ibnlive.in.com/news/fdi-in-retail-will-bring-investment-of--700million-narayanasamy/300628-3.html

IBN.

(2012,september

30).

IBN

Business.

Retrieved

from

www.ibnlive.in.com:http://ibnlive.in.com/videos/296664/retail-fdi-wont-

hit-small-traders-rajan-mittal.html

News from business world:


(The Agri Millionaries, 2012)
http://www.businessworld.in/en/storypage/-/bw/the-agrimillionaires/495501.37489/page/0