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CHAPTER-I

INTRODUCTION

Business is an economic activity which is related with continues and regular


production or purchase and sales of goods undertaken, with an objective of earning
profit and acquiring wealth through the satisfaction of human want.

The scope of “Business” is wider than of the terms “Trade” and “commerce”. The
term trade and commerce are often used synonymously. This usage is not correct
with exchange of goods and service. It performs the function of acting as an
intermediary and thereby it transfers goods from the producer to the consumer. On
the other hand, commerce is a wider term. It includes “Trade” as well as “Aids to
trade” i.e. the various activities which facilitates trade.

The term business may be classified into “Industry” and “Trade and commerce”.
“Industry” is referred to as “production of goods and materials” while “trade and
commerce” referred to “distribution of goods and materials manufactured”.1

International Investment:

The strategy of selecting globally-based investment instrument as part of an


investment portfolio, International investing includes such investment vehicles as
mutual funds, American Depository Receipts, Exchange-Traded Funds (ETFS) or
direct investments in foreign markets. People often invest internationally for
diversification, to spread the investment risk among foreign companies and

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markets and for growth, to take advantage of emerging markets. Here we are going
to Study about FDI in retail market.2

Meaning of FDI

Foreign direct investment (FDI) in India has played an important role in the
development of the Indian economy. FDI in India has a lot of ways enabled India
to achieve a certain degree of financial stability, growth and development. This
money has allowed India to focus on the area’s that needed a boost and economic
attention, and address the various problems that continue to challenge the
country.FDI stands for foreign direct investment is also referred to productive
investment by any foreign investment actually means the flow of the total
investment in any enterprise or ongoing business, which is operating for the growth
of the country economy. The investment are the summation of long term money or
capital, equity capital earnings and also short term money. The investment is
incorporated in the various sectors like the infrastructure development projects.
These kinds of projects include areas like flyovers, bridges, offices, industries and
much more. The investments in other sectors include financial sectors that
incorporate insurance services and banking and also retail sectors and other real
estate development projects. India is a country that has been able to restore
investor confidence in its markets, even during the toughest of times. Increase in
capital inflows, foreign direct investments (FDI) and overseas entities’
participation reflect the fact that Indian markets have fared well in recent times.
Moreover, foreign companies are viewing the South-Asian nation as a strategic
hub for their operations and investments owing to investor-friendly policy
environment, positive eco-system and huge potential for growth.

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India Inc’s increasing presence over the global canvas and Indian government’s
consistent support to the FDI space has facilitated remarkable developments and
investments from overseas partners.

MEANING OF RETAIL MARKET

Retailing means a “piece of or to cut up”. This implies that retailers acquire large
quantities of product and divide them up to smaller units to be sold to individual
consumer. In the era of intense competition, most companies contemplate different
forms of distribution. Companies are able to sell direct to consumers from their
place of location. Stores combine direct marketing by use of advertisements,
catalogues telephone sales or electronic media with their retail outlet. Tourism
industry also makes use of these distribution channels in reaching out to its
customers.

1.1 RATIONALE FOR SELECTING THE TOPIC

In our day-to-day life we are engaged in several activities. In that, business is very
important activity of selling goods or services to the final consumer. If goods are
channelized to the consumers through foreign direct investment by the foreign
investor in home country is known as FDI in retail sector. While selecting the topic
for my project FDI in retail marketing is the hot topic. This issue was discussed
even in the parliament for longer period. So I am interested to analyze the pros and
cons of FDI in retail sector.

1.2 SCOPE OF THE STUDY

The techniques used for data collection was one-on-one interviews individual
responses to arrive at the opinion on various issues. The instrument for data
collection in the form of “structures questionnaire” was designed to elicit
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information demographic aspects. This study is conducted from the period of Jan-
march 2012. The survey is carried out in the semi-urban areas to the business
people, professionals, and retailers with a sample size of 50.

1.3 NEED AND IMPORTANCE OF THE STUDY

Consumption of various kinds of goods and services is the part and parcel of
human life. Almost every activity in which a human being may be engaged
involves that consumption of goods and services. Marketing is an integral financial
activity of the human being in their day-to-day. Presently marketing has occupied a
predominant role in the process of industrialization which is turning emerged as a
concept of economic development of traders. This study will explain the
advantages and disadvantages of FDI in retail market . The study summarizes
whether the FDI in retail market in boon or ban.

1.4 STATEMENT OF THE STUDY

This study deals with the proposal announced by the United Progressive Alliance
as 51% in FDI in multi-brand stores and 100% in single brand made by the central
government on 14th Nov 2011. In this context, an attempt is made to collect the
opinion of retailers in the Chennai city whether the proposed bill could be
implemented by the central government or not.

1.5 OBJECTIVES OF THE STUDY

In order to examine the FDI decision stated above the following are the specific
objectives of the study.

 To collect the opinion from the retailers about the proposal made the
government with regard to FDI in retail marketing.

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 To identify the constraints which would be faced by the retailers if the
proposal is implemented
 To analyze the positive and negative effects of FDI in retail marketing
from the retailers perspective in Chennai

1.6 LIMITATIONS OF THE STUDY

 Due to time and resources constraints, the sample size and restricted to 50
retailers, business people, professionals and so scientific method was used
in arriving at it.
 The study is restricted to retailers in Chennai city only. The findings are
based entirely upon the research conducted in Chennai and hence may not
be applicable directly too other metropolitan areas on counts of socio-
cultural diversity and contractual factors.

1.7 RESEARCH METHODOLOGY

Descriptive Study is used for the purpose of research. Descriptive research


includes surveys and a fact finding enquires of different kinds. The major purpose
of descriptive research is the description of the state of affairs as it exists at
present. A descriptive study requires a clear specification of who, what, when,
were, why and how aspects of the research.

Convenience Sampling method is used in collecting the data in this study. The
date collected were classifieds, tabulated, analyzed and interpreted. From analysis,
conclusions are drawn and suggestions are also given.4

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Data collection:

The study is based on both primary and secondary data.

Primary Data: The primary data was collected from the 50 retailers, business
peoples and professionals with use of predetermined questionnaire directly and
face to face interview was conducted to elicit opinion from academician’s
bureaucrat and general public. The details of questionnaire are given in the
annexure. The survey was carried out between Jan to March 2012.

Secondary Data: In additions to the field research, secondary data were collected
from articles prescribed in dailies, magazines and through visits to libraries and
also from the World Wide Web.

Design of questionnaire:

The main tool used for this study is structured questionnaire. The questionnaire
contains different forms of question like

 Open ended questions


 Dichotomous form
 Multiple choice questions

Open ended question i.e. inviting free response. Here the respondents are free to
answer of their own words.

Dichotomous form i.e. yes or no answer. Her the question will have only 2 choice
‘yes’ or ‘no’ and the respondent have to choose any one.

Multiple choice questions will contain more choices from which the respondents
can select any one of their own.

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Tools for data analysis:

 Percentage analysis
 Charts
 Chi-square

This analysis shows the entire respondents in terms of percentage. It is used to


make comparison between two or more series of data.

Percentage = No of respondents x 100

Total respondent

Charts:

A chart is a visual representation of data, in which the data are represented by


symbols such as bars in a bar char and lines in the line chart.

 A bar chart uses bar to show frequencies or value for different categories
 A pie chart shows percentage values as a slice of pie.

Chi-square:

Chi-square symbolically written as an x2 (pronounced as ki square) is a statistical


measure with the help of which it is possible to assess the significance of different
between the observed frequency and the expected frequency obtained from some
hypothetical universe. Chi- square test enables us to test whether more than two
population proportion can be considered equal. In this test, assuming null
hypothesis (ho), the expected frequencies should be calculated. Then comparing the
calculated x2 value with tabulated x2 value, we can conclude the test of goodness.
The formula for computing chi-square is

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X2 = ∑ {(oi – EI) 2 / EI}

Oi- observed frequency

EI-Expected frequency

HYPOTHESIS:

It is an assumption to be proved or disproved. A research hypothesis is a predictive


statement capable of being tested by scientific methods that relates an independent
variable.

1.8 REVIEW OF LITERATURE

Foreign direct investment (FDI) in India has played an important role in the
development of the Indian economy. FDI n India has a lot of ways enabled India to
achieve a certain degree of financial stability, growth and development. This
money had allowed India to focus on the areas that added a boost and economies
attention, and address the various problems that continue to challenge the country.

India has continually sought to attract FDI from the world’s major investors. In
1998 & 1999 the Indian national government announced a number of reforms
designed to encourage and promote a favorable business environment of investors.

A number of projects have been implanted in areas such as electricity generations,


distribution and transmission, as well as the development of roads and highways,
with opportunities for foreign investors.

The Indian national government also granted permission for FDI to provide up to
100% of the financing required for construction of bridges and tunnels, but with a
limit to foreign equity of INR 1, 5000 crores approximately $352.5 million.

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Currently; FDI is allowed in financial services; including the growing credit card
business. There also include the non-banking financial services sector. Foreign
investors can buy up to 40% of the equity in private banks, although there is
conditioned that these banks

Must be multilateral financial organization up to 45% of the shares of companies in


the global mobile personal communication by satellite services (GMPCSS) sectors
can above purchased.5

What is foreign direct investment (FDI)?

Instead of investing in local business, putting money in the company functioning


or incorporated in another country in foreign direct investment for the country
which is attracting the investment. The investor is a considered a “foreign direct
investor”. The foreign direct investor can have influence in the management of the
companies invested in.

The foreign direct investor may have a varying amount of stake in the invested
company. Stakes can be as low as 10% or may also cross 49% of the stacks or
stock ownership. Some countries may have caps on the amount of equity a foreign
direct investor may hold. For e.g. The RBI allows foreign equity only unto 505 in
investment in specific mining sector in India. It totally forbids FDI in mining of
iron and manganese.

The flow of capital from the foreign investor to the company invested in becomes
an FDI inflow. FDI has three equity capital investment, reinvested earnings and
intra company loans.

Retailing means a “piece of or to cut up”. This implies that retailers acquire large
quantities of product and divide them up to smaller units to be sold to individual

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consumer. The definition of retailing emphasis the business activity of selling
goods or services to the final consumer.

From the above paragraph we can clearly understand the meaning for FDI in
Indian retail market. It is nothing but investment of foreign countries like USA,
UK etc in our Indian Retail market.

L. Natarajan in his book Retail Marketing discussed about organized and


unorganized retail sector. Organized retailing refers to trading activities undertaken
by licensed retailers, that is, those who are registered foe sales tax, income tax, etc.
these include the corporate-backed hypermarkets and retail chains, and also the
privately owned large retail businesses. Unorganized retailing, on the other hand,
refers to the traditional formats of law-cost retailing, for example, the local kirana
shops, owner manned general stores, paan/beedi, 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 retail
however is at a very nascent stage. The sector is the largest source of employment
after agriculture, and has deep penetration into rural India generating more than 10
per cent of India’s GDP.6

FDI policy in India

FDI as defined in dictionary of economics is investment in a foreign country


through the acquisition of a local company or the establishment there of an
operation on a new (Greenfield) site. To put in simple work, FDI refers to capital
inflow abroad that is invested in or to enhance the production capacity of the
economy.

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Foreign Investment in India is governed by the FDI policy announced by the
government if India and the provision of the Foreign Exchange Management Act
(FEMA) 1999. The Reserve Bank of India (‘RBI’) in this regard had issued a
notification which contains the foreign exchange management (transfer or issue of
security by a person resident outside India) regulations, 2000. This notification has
been amended from time to time.

The ministry of commerce and industry, government of India is the nodal agency
for motoring and reviewing the FDI policy on continued basis and changes in
sectoral policy/sectoral equity cap. 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.

FDI policy with regard to retailing in India

It will be prudent to look into press note 4 of 2006 issued by DIPP and
consolidated FDI policy issued in October 2010 which provide the sector specific
guidelines for FDI with regard to the conduct of trading activities.

a) FDI up to 100% for cash and carry wholesale trading and export trading
allowed under the automatic route.
b) FDI up to 51% with prior government approval (i.e.FIPB) for retail trade of
‘single brand’ product. Subject to press note 3 (2006 series)
c) FDI is not permitted in multi brand retailing in India.7

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Times of India issues that “the government feces a fierce political backlash over its
decision to allow FDI in multi-brand retail with traders. And also issued what’s
attractive about Indian retail? Current size of Indian market is $28b and estimated
size in 2020 will be $260b.8

The Hindu issued that according to the 2011 data on the census of India websites,
there are 46 cities that had a population of 10lakhs of which 25 are unlikely to
allow the likes of Wal-Mart, Carrefour and Tesco to open stores since the political
leadership in these states have gone on the offensive against the government’s
move. Slamming the center for its decision to allow FDI in multi-brand retail
sector “without consulting the state’s chief minister and AIADMK chief J
Jayalalithaa demanded immediate rollback. She charged the Manmohan Singh
government with taking “a wrong decision taken pressure from a few retail giants
who are starved for capital infusion for their future survival”.9

Times of India issued that FDI in multi-brand retail will help revive the “cash
strapped” domestic retail industry by attracting funds; feels India Inc. with FDI in
multi-brand sector expected to generate three to four million direct jobs and four to
six million jobs by 2020, most industry leaders are convinced that the move will
ensure parallel growth for both large retail chain as well as small Kirana stores.
They also allayed fear of exploitation by international retail chains.10

1.9 CHAPTERISATION:

The study report is presented in the five chapters.

Chapter I of this study will provide introduction, rational for selecting the topic,
scope of the study, need and importance of the study, statement of the study
objectives of the study, limitation of the study, research methodology, review of
literature and chapeterisation.
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Chapter II: Retail marketing in India.

This chapter is about organized retailing in India, Function of retailing,


Characteristic of retailing, classification of retailing, types of retailing and
branding in retailing.

Chapter III: FDI in India

This chapter is about Trend and pattern of FDI inflow, trends and pattern of FDI
inflow in the world, most attractive location of global FDI, Trends and pattern of
FDI flow in India, source of FDI in India and distribution of FDI in India.

Chapter IV: Analysis and interpretation.

The primary data was collected tabulated and interpreted in this chapter. And
some statistical techniques are also used.

Chapter V: Summary of findings, suggestion and conclusion.

Findings of the study will be presented in this chapter. And on the basis of
findings, suggestions and recommendations are made.

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Foot Notes:

1. Dr. Radha, 2005 Business Environment, first edition. Prasanna & co,
Chennai.
2. Gilberto juentes. International investment theory. Www. Ehow.com.
3. Dr. L. Natarajan, 2010 Retail Marketing, second edition, Margham
publication, Chennai.
4. C.R.Kothari, 2001 Research Methodology methods and Techniques,
Wiswa prakasham, New Delhi.
5. Singhal Arvind, A strong pillar of Indian Economy, www.ksa.techno park
.in.
6. Dr. L. Natarajan, 2010 Retail Marketing, second edition, Margham
publication, Chennai
7. Press information officer, press information bureau for uploading the press
note on DIP’S websites.
8. Times of India, Nov 25, volume- 4, issue-279
9. Hindu, Nov 28, volume- 5, issue-291.
10. Times of India Nov 29, volume-4, issue-282.

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CHAPTER- II

RETAIL MARKETING IN INDIA

Meaning:

Marketing is a managerial process of providing the right product, in the right


place, at the right time and at the right price. Kotler defines marketing as a “social
and managerial process by which individuals and groups obtain what they need
and want by creating and exchanging products and value with others.

Retailing is 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 customers. A
retailer is one who stocks the producer’s goods and is involved in the act of selling
it to the individual consumer, at a margin of profit. As such, retailing is the last link
that connects the individual consumer with the manufacturing and distribution
chain. The retail industry in India is of late often being hailed as one of the sunrise
sectors in the economy. AT Kearney, the well-known international management
consultancy, recently identified India as the ‘second most attractive retail
destination’ globally from among thirty emergent markets. It has made India the
cause of a good deal of excitement and the cynosure of many foreign eyes. With a
contribution of 14% to the national GDP and employing 7% of the total workforce
(only agriculture employs more) in the country, the retail industry is definitely one
of the pillars of the Indian economy.

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2.1 Organized Retailing in India

The retail industry in India is today transformed into a well developed retail hub.
The Indian retailing scenario has dual aspects- a large number of small retailers on
the one hand and a small number of large retail outlets on the other.

Unorganized retail sector comprises 98 per cent while the organized retail trade is
only two percent of the total trade. Super markets and hypermarkets fuel the
growth of retail trade in India. Food and grocery items account for 76 per cent of
the total consumer expenditure in the country.

Shoppers’ stop is a part of K. Raheja’s Group. It forayed into the retail industry.
The company operates more than 13 department stores across the country. It is the
most recognized brand in the retailing sector. The stores established in Mumbai
and Bangalore became successful. These stores turned into cash cow due to ‘first
mover’ advantage. Subsequently, store expansion in other markets like, Jaipur,
Chennai and Hyderabad resulted in accumulated losses. Then the company took
some corrective measures and reported modest profit.

2.2 Functions of retailing:

Generally, retailers are involved in the following functions:

1. Functions of breaking bulk.


2. Functions of creating place utility.
3. Stocking varieties of goods.
4. Providing credit facilities to customers.
5. Providing information to customers and wholesalers.
6. Estimating the demand and arranging the purchase of the product

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7. Acting as consumer’s agent.
8. Marketing functions.
9. Connecting link.

2.3 Characteristics of Retailing

1. Marketing orientation.
2. Multi-channel retailing.
3. Innovative method of thinking and planning.
4. Right environment.
5. Unique characteristics of a retailer.

2.4 Classifications of retailers by Philip Kotler

1. Store retailers

The important types of retail stores are:

1. Specialty store
2. Department store
3. Super markets
4. Convenience store
5. Off-price retailer
6. Discount store
7. Super store
8. Hyper markets
9. Catalogue showroom.

Non-store retailers

1. Direct selling

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2. Direct marketing
3. Automatic vending buying services

Retail organizations

1. Corporate chain store


2. Voluntary chain
3. Retailer cooperative consumer cooperative
4. Franchise organizations
5. Merchandising conglomerate.

2.5 Types of retailers

Retailing ranges from hawkers and pedlars to hyper markets. While we have seen
the classification of retailers by Philip kolter earlier, there is yet another
classification on traditional lines on the types of retailers which are given below:

I. Itinerant retailers
a) Pedlars and hawkers b) Cheap jacks c) Market traders d) street traders.
II. Fixed shop retailers
a) Street stall holders b) Second-hand gods dealers c) Specialty goods
shop d) General shops.
III. Small-scale retailers
a) Independent stores b) Automatic vending c) Discount houses d)
syndicate stores.
IV. Large scale retailers
a) Department stores b) Multiple shops c) Mail order shops d) Hire
purchase and installment e) Cooperative stores f) super markets g)
hyper markets h) franchising
g) Shopping malls.
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I. Itinerant retailers

Itinerant means travelling from place to place. Itinerant retailers have no


fixed place of business. They move from place to place for selling their selling
their goods to the consumers.

1. Pedlars and hawkers: Pedlars are those retailers who carry goods in hand
cart to sell them at the doors of consumers. To hawk means to sell goods in
the streets by knocking on people’s doors.
2. Cheap jacks: They have an independent shop. But, the shop is not a
permanent one. If business at one place is not profitable, cheap jacks will
choose some other location.
3. Market traders: They open their shops at different places, on different days
whenever the market is open. For example, ‘Sunday market’ in Pondicherry
is very popular among shoppers.
4. Street traders: Aiming at the floating population, they choose bus stops,
railway stations, government and commercial offices and educational
institutions to do business.

II. Fixed shop retailers

Fixed shop retailers have a permanent place of business.

1. Street stall holders: Street stall holders put up their stalls where there is
heavy pedestrian movement. Having selected a location with utmost care,
they retain that place of business.
2. Second hand goods dealers: these retailers sell second hand goods such as
book, furniture, television sets, radios, cloth, etc. Customers who cannot
afford to buy new goods at market price buy second hand goods at cheaper
prices.
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3. Specialty shops: Specialty shops deals in a particular variety of goods. They
sell only line of goods-books, leather goods, toys, watches, electronic goods,
furniture, kitchen articles, etc.
4. General shops: General shops sell goods that are required for day-to-day
use. General shops deal in a wide assortment of goods such as gift articles,
biscuits, plastics, foot wear, flasks soap, oil, etc.

III. Small scale retailers

1. Independent stores: Independent stores are non-integrated retail


establishment. They are small in size and have lesser degree of
specialization in their management.
2. Automatic vending: Sale through vending machines has become the order of
the day in advanced countries. Vending machines automatically vend a
particular variety of merchandise.
3. Discount houses: These retail shops offer large discounts to customers on
certain types of merchandise. Goods like jeweler, household appliances,
furniture which carry a higher margin are offered at discounted prices.
Discount houses do not give importance to customer services.
4. Syndicate stores: syndicate stores are the extended forms of chain and mail
order houses. They operate on a small scale. They do not deal in national
brands of merchandise.
V. Large scale retailers

The large shop which operate on large scale include (i) Department stores (ii)
Chain or multiple stores (iii) Mail order shops (iv) Hire Purchase and
installment (v) Co-operative stores (vi) Supermarkets (vii) Hyper markets; and
(viii) Shopping malls.

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1. DEPARTMENTAL STORES

Departmental stores are of French origin. Departmental stores came into


existence in 19th century. Department stores are large scale retail stores selling less
than one roof under one roof under a single control. They deal in a variety of goods

2. CHAIN OR MULTIPLE STORES

Under this type, similar shops are established in many places by a same
management. Chain stores originated in America, it is known as multiple shops in
Europe and other western countries. It is a network of a number of branches
situated at different localities in the city or in different parts of the country. It is a
group of retail stores which are of similar kind.

3. MAIL ORDER SHOPS

Under mail order methods, products are sold through mail. So, in mail order
business, post office plays an important role. This system is also referred to as
shopping by post.

4. HIRE PURCHASE AND INSTALLMENTS

Under hire purchase system, the seller agrees to sell the article on the condition
that the buyer shall pay the purchase price through installments. Ownership in the
goods is transferred from seller to the buyer only on the payment of last
installment. So, if the buyer defaults to pay the installment amount, the goods will
be repossessed by the seller.

5. CO-OPERATIVE STORES

A consumer’s cooperative store is a retail unit owned and controlled by


consumers’ .Any consumer can join the consumer cooperative store by buying its

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shares. Each member has only one vote irrespective of his share holding. Members
get dividend in proportion to their shares held in the cooperative store. Cooperative
stores are run by the consumers themselves for their mutual benefits.

6. SUPER MARKETS

A super market is a large retailing ship where goods are displayed in such a way
that buyers select products for themselves. Buyers collect their product off the
shelves invariably in a trolley and get them billed by the counter clerk.

7. HYPER MARKETS

Hyper market combines the features of a supermarket and a general


merchandise store. The self service basis is followed. A spacious building is
required for a hypermarket. A hypermarket deals in large varieties of merchandise.
Hypermarkets originated in France.

8. FRANCHISING

Franchise means privilege. A franchise is a conditional right given to a retailer


to market the company’s products and services under the banner of the franchiser.
In franchising, the franchiser licenses his brand name, business process or format,
product, service or reputation to the franchisee in return for fees and royalties.

9. SHOPPING MALLS

They sell a large variety of merchandise to customers. Spencer plaza in


Chennai, crossroads in Mumbai, Anzal plaza in Delhi, shoppers’ city. Calcutta ,
and the Sahara mall, Gurgaon are some important shopping mall established in
retail business.

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2.6 BRANDING IN RETAILING

Definition of a brand

Kotler defines a brand as: “A name, term, sign, symbol or design or a


combination of them to identity the goods or services of one seller or a group so
sellers and to differentiate them from those of competitors”.

THE ROLE OF BRAND IN RETAIL TRADE

Brand is considered a pertinent marketing tool for retail companies in highly


competitive markets. The marketplace becomes mature. So, there is a need to rise
above the mass competing offers. The brand confers individuality on the product.
In a mature market, retailer’s experiences slow growth and declining returns. Each
retail organizations, will therefore attempt to defend its market share. It has to
encourage consumers’ purchase loyalty and differentiate its outlets and offers.

Brand name

The brand name is the pronounceable part of a brand. Brand name consists of a
word, letter, and group of words, letters, comprising a name which is intendment to
identify the goods or services of a seller or which is intended to distinctly identify
the goods from those of the competitors. In the other words, a brand name is that
part of the brand that can be vocalized.

RETAIL COMMUNICATION AND PROMOTION

Definition of retail promotion

“Retail promotion is the descriptive tern for the mix of communication activities
which retail companies carry out in order to influence those publics on whom their
sales depend.

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1. Window display(outside display)

Window display induces persons to enter into the shop. It arouses the interest of
passers-by and kindles a desire to buy the product on display.

2. Interior display

While window display is arranged outside, interior display is done inside the
shop. Products placed in interior display are often kept within the easy reach of
the buyers.

3. Show rooms
Show rooms play a crucial role in selling products like books, cars, two
wheelers, washing machines, refrigerators, air conditioners, etc. showroom
exhibit the products meant for sale.1

SALES PROMOTION

The most important tool used in promotion is sales promotion. Most consumers
relate ideas of marketing to the use of sales promotion techniques. The other main
forms are advertising and personal selling.

Kinds of sales promotion

Sales promotion can be divided as follows:

1. Consumers sales promotion 2. Dealers’ sales promotion and 3. Sales force


promotion

Consumer sales promotions are divided into i) samples ii) coupons iii)
Demonstration iv) contests v) cash refund offer vi) Premium vii) price off offer
viii) consumer sweepstakes ix) buy back allowances.

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Dealer sales promotion are divided into i) buying allowances ii) merchandise
allowance iii) price deals iv) push money or premium v) cooperative advertising
vi)dealer’s sales contests viii) point of purchase.

Sales force promotion are divided into i) bonus ii) sales force contests iii) salesmen
meetings and conferences.2

SUPPLY CHAIN MANAGEMENT

The retail product passes from the retailer to consumers. The retail product should
reach the consumers at the right time, in right quality and at the right place. This
needs an efficient supply chain distribution system. A distribution system is a
channel which brings products to the place of sale.

The supply channel and channel flows

Retail operations are growing in size. Controlling merchandise has become an


indispensable part of store operations. This goes beyond an administration system.
It is the total process by which retail offer reaches the end consumers for their
consumption. The supply chain structures from retailing point of view may be
divided into (1) extended channel, (2) limited channel; and (3) direct channel.

1. Extended channel: An extended channel is one where the manufacturer,


wholesaler and retailer provide a chain of facilitation services in order to sell
the right product to the final customers.
2. The limited channel: In the limited channel, the retailer works directly with
the producer. The retailer eliminates the wholesaler and the extra costs that
go with it.
3. Direct channel: The final option is the direct channel. The product is sold
directly either by the producer or retailer. There are different direct sales

25
marketing promotion methods such as (1) face to face selling, (2) direct
mail, (3) catalogue marketing, (4) telemarketing: and (5) Kiosk marketing.

The supply channel

The supply channel is defined as “The total process by which a product reaches
the end consumer as goods and services’’. It consists of a sequence of events which
involves strategic decisions over different resources. Relationships are focused on
delivering optimum value to the end consumer.

RETAIL LOGISTICS

The word logistics is derived from the French word ‘‘loger” which means ‘‘to
quarter and supply troops’’. When large number of troops and their equipment
move, meticulous planning is required to move volumes of goods and ammunition
in that direction. From a marketing point of view, customers are satisfied when
they get right product at the right place, at the right time and in the right quantity.
Retail logistics system ensure smooth flow of goods to consumers though efficient
movement of logistics

26
FOOT NOTES:

1. Dr. L. Natarajan, 2010 Retail Marketing, second edition, Margham


publication, Chennai.
2. SM. Jaw, 2010 Marketing management, first edition, Margham
publication, Chennai.
3. Dr. L. Natarajan, 2010 Service Marketing, second edition, Margham
publication, Chennai.

27
CHAPTER – III

TRENDS AND PATTERNS OF FDI INFLOWS

INTRODUCTION:

One of the most prominent and striking feature of today’s globalised world is the
exponential growth of FDI in both developed and developing countries. In the last
two decades the pace of FDI flows are rising faster than almost all other indicators
of economic activity worldwide. Developing countries, in particular, considered
FDI as the safest type of external finance as it not only supplement domestic
savings, foreign reserves but promotes growth even more through spillovers of
technology, skills, increased innovative capacity, and domestic competition. Now a
day, FDI has become an instrument of international economic integration.

Located in South Asia, India is the 7th largest, and the 2nd most populated
country in the world. India has long been known for the diversity of its culture, for
the inclusiveness of its people and for the convergence of geography. Today, the
world’s largest democracy has come to the forefront as a global resource for
industry in manufacturing and services. Its pool of technical skills, its base of an
English – speaking populace with an increasing disposable income and its
burgeoning market has all combined to enable India emerge as a viable partner to
global industry. Recently, investment opportunities in India are at a peak.
This chapter covers the trends and patterns of FDI inflows at World, Asian and
Indian level during 1991-2008. 1

28
TRENDS AND PATTERNS OF FDI FLOW IN THE WORLD

The liberalization of trade, capital markets, breaking of business barriers,


technological advancements, and the growing internationalization of goods,
services, or ideas over the past two decades makes the world economies the
globalised one. Consequently, with large domestic market, low labour costs, cheap
and skilled labour, high returns to investment, developing countries now have a
significant impact on the global economy, particularly in the economics of the
industrialized states. Trends in World FDI flows depict that developing countries
makes their presence felt by receiving a considerable chunk of FDI inflows.
Developing economies share in total FDI inflows rose from 26% in 1980 to 40% in
1997. However, the share during 1998 to 2003 fell considerably but rose in 2004,
again in 2006 and 2007 it reduces to 29% to 27% due to global economic
meltdown. Specifically, developing Asia received 16 %, Latin America and the
Caribbean 8.7 %, and Africa 2 %. On the other hand, developed economies show
an increasing upward trend of FDI inflows, while developing economies show a
downward trend of FDI inflows after 1995.2

MOST ATTRACTIVE LOCATION OF GLOBAL FDI

It is a well-known fact that due to infrastructural facilities, less bureaucratic


structure and conducive business environment China tops the chart of major
emerging destination of global FDI inflows. The other most preferred destinations
of global FDI flows apart from China are Brazil, Mexico, Russia, and India. The
annual growth rate registered by China was 15%, Brazil was 84%, Mexico was
28%, Russia was 62%, and India was 17% in 2007 over 2006. During 1991-2007

29
the compound annual growth rate registered by China was 20%, Brazil was 24%,
Mexico was 11%, Russia was 41% (from 1994), and India was 41%. India’s FDI
need is stood at US$ 15 bn per year in order to make the country on a 9% growth
trajectory (as projected by the Finance Minister of India in the current Budget74).
Such massive FDI is needed by India in order to achieve the objectives of its
second generation economic reforms and to maintain the present growth rate of the
economy. Although, India’s share in world FDI inflows has increased from 0.3%
to 1.3% from 1990-95 to 2007. Though, this is not an attractive share when it is
compared with China and other major emerging destinations of global FDI
inflows.
TRENDS AND PATTERNS OF FDI FLOW IN ASIA

In the South, East, and South – East Asia block India is at 3rd place after China
and Singapore. South, East, South – East Asia block registered an annual growth
rate of 19% in 2007 over 2006 and compound annual growth rate of 17% on an
annualized basis during 1991-2007. India’s share has increased from 1.5% in 1990-
95 to 9.2% in 2007 while China’s share was decreased to 33 per cent in 2007 from
43.4 per cent in 1990-95. It is found that there is an increment of 5.8% in case of
India while there is a decrement of 9.8% in case of China. It is evident from that
India’s share among developing countries in FDI inflow was 1.4% in the last
decade and 2.8% in 2000-2007 while China’s share was 22.6% in 1991-99 and
21.7 per cent in 2000-07. When the shares of these two countries are compared it is
found that China’s share is 21.7% in the present decade while India’s share is
miniscule (i.e. 2.8%).
The “doing business” conducted by World Bank put forward certain indicators
where China beats India in attracting high FDI inflows. High trade and transaction
costs are mainly due to the country’s lack of quality infrastructure. This lack of

30
infrastructure discourages resource – seeking and export – oriented investment.
The reason for the low level of FDI in India as compared to China could be any but
the fact is that China opened its door to foreign investment in 1978 while India in
1991.There is an appreciable increase in the level of FDI inflows in the South
Asian Region. Asia registered an annual growth rate of 17% in 2007 over 2006 and
compound annual growth rate of 18% on an annualized basis during 1991-2007.
India, Pakistan, Bangladesh are receiving higher volume of inflows since 1990.
According to World Investment Report77 2007 (WIR), India has emerged as major
recipient of FDI in South Asia. Its share is nearly 75% of total FDI flow to South
Asia. In fact, the Comprehensive Economic Cooperation Agreement (CECA) with
Singapore, Free Trade Agreements (FTAs) with Singapore and Thailand and by
becoming the member of ASEAN Regional Forum India has made its presence felt
in East Asia region. India, is trying hard so that the largest free Trade Area, even
larger than the existing EU-NAFTA combined area, could come up in the East
Asia region. This suggested largest FTA would make the bilateral trade to the new
heights in the coming years. Due to CECA and FTAs with Singapore, it emerged
as the third biggest investing country in India. Its ranking improved by 4th place,
and if this pace of investment continued from Singapore it is hoped that it will
become the largest investing country in India in the coming years and Singapore
may prove to be a Hong Kong or Taiwan to India3.

TRENDS AND PATTERNS OF FDI FLOW IN INDIA

Economic reforms taken by Indian government in 1991 makes the country as one
of the prominent performer of global economies by placing the country as the 4th
largest and the 2nd fastest growing economy in the world. India also ranks as the
11th largest economy in terms of industrial output and has the 3rd largest pool of

31
scientific and technical manpower. Continued economic liberalization since 1991
and its overall direction remained the same over the years irrespective of the ruling
party moved the economy towards a market – based system from a closed
economy characterized by extensive regulation, protectionism, public ownership
which leads to pervasive corruption and slow growth from 1950s until 1990s.In
fact, India’s economy has been growing at a rate of more than 9% for three running
years and has seen a decade of 7 plus per cent growth. The exports in 2008 were
$175.7 bn and imports were $287.5 bn. India’s export has been consistently rising,
covering 81.3% of its imports in 2008, up from 66.2% in 1990-91. Since
independence, India’s BOP on its current account has been negative. Since 1996-
97, its overall BOP has been positive, largely on account of increased FDI and
deposits from Non – Resident Indians (NRIs), and commercial borrowings. The
fiscal deficit has come down from 4.5 per cent in 2003-04 to 2.7 per cent in 2007-
08 and revenue deficit from 3.6 per cent to 1.1 per cent in 2007-08. As a result,
India’s foreign exchange reserves shot up 55 per cent in 2007-08 to close at US
$309.16 billion – an increase of nearly US $110 billion from US $199.18 billion at
the end of 2006-07. Domestic saving ratio to GDP shot up from 29.8% in 2004-05
to 37.7% in 2007-08. For the first time India’s GDP crossed one trillion dollars
mark in 2007. As a consequence of policy measures (taken way back in 1991) FDI
in India has increased manifold since 1991 irrespective of the ruling party over the
years, as there is a growing consensus and commitments among political parties to
follow liberal foreign investment policy that invite steady flow of FDI in India so
that sustained economic growth can be achieved. Further, in order to study the
impact of economic reforms and FDI policy on the magnitude of FDI inflows,
quantitative information is needed on broad dimensions of FDI and its distribution
across sectors and regions.

32
The actual FDI inflows in India is welcomed under five broad heads: ( i )
Foreign Investment Promotion Board’s (FIPB) discretionary approval route for
larger projects, (ii) Reserve Bank of India’s (RBI) automatic approval route, (iii)
acquisition of shares route (since 1996), (iv) RBI’s non – resident Indian (NRI’s)
scheme, and (v) external commercial borrowings (ADR/GDR) route. An analysis
of the last eighteen years of trends in FDI inflows shows that there has been a
steady flow of FDI in the country up to 2004, but there is an exponential rise in the
FDI inflows from 2005 onwards.

The FIPB route – represents larger projects which require bulk of inflows
and account for government’s discretionary approval. Although, the share of FIPB
route is declining somewhat as compared to RBI’s automatic route and acquisition
of existing shares route. Automatic approval route via RBI shows an upward trend
of FDI inflows since 1995. This route is meant for smaller sized investment
projects. Acquisition of existing shares route and external commercial borrowing
route gained prominence (in 1999 and 2003) and shows an upward increasing
trend. However, FDI inflows through NRI’s route show a sharp declining trend. It
is found that India was not able to attract substantial amount of FDI inflow from
1991-99. FDI inflows were US$ 144.45 million in 1991 after that the inflows
reached to its peak to US$ 3621.34 million in 1997.
Subsequently, these inflows touched a low of US $2205.64 million in 1999 but
then shot up in 2001. Except in 2003, which shows a slight decline in FDI inflows,
FDI has been picking up since 2004 and rose to an appreciable level of US$
33029.32 million in 2008. The annual growth rate was 107% in 2008 over 2007,
and compound annual growth rate registered was 40% on an annualized basis
during 1991-2008. The increase in FDI inflows during 2008 is due to increased
economic growth and sustained developmental process of the country which
33
restore foreign investor’s confidence in Indian economy despite global economic
crisis. However, the pace of FDI inflows in India has definitely been slower than
China, Singapore, Russian Federation, and Brazil.
A comparative analysis of FDI approvals and inflows reveals that there is a
huge gap between the amount of FDI approved and its realization into actual
disbursements. A difference of almost 40 per cent is observed between investment
committed and actual inflows during the year 2005-06. All this depends on various
factors, namely regulatory, procedural, government clearances, lack of sufficient
infrastructural facilities, delay in implementation of projects, and non- cooperation
from the state government etc.4

DISTRIBUTION OF FDI WITHIN INDIA

FDI inflows in India are heavily concentrated around two cities, Mumbai (US$
26899.57 million) and Delhi (US$ 12683.24 million). Bangalore, Ahmedabad and
Chennai are also receiving significant amount of FDI inflows. These five cities
together account for 69 per cent of total FDI inflows to India. Mumbai and Delhi
together received 50 per cent of total FDI inflows to India during 2000 to 2008.

Mumbai received heavy investment from Mauritius (29%), apart from U.K. (17%),
USA (10%), Singapore (9%) and Germany (4%).The key sectors attracting FDI
inflows to Mumbai are services (30%), computer software and hardware (12%),
power (7%), metallurgical industry (5%) and automobile industry (4%). Mumbai
received 1371 numbers of technical collaborations during 1991-2008. Delhi
received maximum investment from Mauritius (58%), apart from Japan (10%),
Netherlands (9%), and UK (3%).While the key industries attracting FDI inflows to
Delhi region are telecommunications (19%), services (18%), housing and real

34
estate (11%), automobile industry (8%) and computer software and hardware (6%).
As far as technical collaborations are concerned Delhi received 315 numbers of
technical collaborations during 1991- 2008. Heavy investment in Bangalore came
from Mauritius (40%) alone. The other major investing countries in Bangalore are
USA (15%), Netherlands (10%), Germany (6%), and UK (5%). Top sectors
reported the FDI inflows are computer software and hardware (22%), services
(11%), housing and real estate (10%), telecommunications (5%), and fermentation
industries (4%). Bangalore received 516 numbers of technical collaborations
during 1991-2008. Chennai received FDI inflows from Mauritius (37%), Bermuda
(14%), USA (13%), Singapore (9%) and Germany (4%). The key sectors attracting
FDI inflows are construction activities (21%), telecommunications (10%), services
(10%), computer software and hardware (7%), automobile industry (7%), As far as
technical collaborations are concerned, Chennai received 660 numbers of technical
Collaborations during 1991-2008.5

35
FOOT NOTES:

1. http://www.realtyplusmag.com/rpnewsletter/Fullstory_Newsletter.asp?news
_id=17729&cat_id=1

2. http://economictimes.indiatimes.com/opinion/policy-focus-should-be-on-
fdi/articleshow/11347045.cms

3. http://profit.ndtv.com/News/Article/fdi-in-pension-funds-to-source-infra-
requirements-assocham-295190

4. :http://www.realtyplusmag.com/rpnewsletter/Fullstory_Newsletter.asp?news
_id=18086&cat_id=1

5. compiled & computed from the various issues of Economic Survey, RBI
Bulletin, Ministry of Commerce

36
CHAPTER-IV

ANALYSIS AND INTERPRETATION

FDI IN RETAIL MARKETING IS BANE

The following are the arguments made by the people while taking survey

 It is a basic principle that creating competition in general is good for the


market. But we have a doubt that since proper procurement and distribution
system is not yet fixed, how will the rest fall in the place when the giant
retailers enter our market. Back-end procurement will still remain a big
problem.
 The debate that by introducing 51% FDI, a lot of money will flow out of our
country is an old school of thought. Lot of our Indian companies is operating
aboard and has successfully contributed to our economy. The bigger issue is
that with benefit we might end up paying a price hence we must work on a
reasonable solution.
 Customers feel that retail shares offer better deals but they sent realize that
they end up buying more.
 If 51% FDI is allowed in retail market, it will be a big trouble for the small
shopkeepers. The big giants entering the market will surely impact the small
stores owners. The government says that the farmers will benefit but I feel it
will just be a temporary benefit. Once these giant foreign retails have
monopoly, they will start exploiting the market. In the long run it is not
benefited to our economy. For e.g. in a country like France, walmark was
not permitted to set up its stores whereas in Germany, FDI is not allowed. If
the US is not allowing India goods to be sold in their market, why should

37
then we give them a chance to set up bare here. This discounts that there big
retail stores offer in order to cure customer are also now being offered by
our kirana stores. I feel that people should not fall prey to big retail stores
because it is a trap where in consumers end up buying more than what is
required. Customers feel that they are getting between deals, but they are at
the same time enticed to buy more.1

Suryakant Pathak; MD, Grahakpeth & secretary, grabak panchyat.

 The Government must discuss property about 51% FDI and have a law in
place to control unfair competition.
 We strongly oppose the government allowing 51% FDI as it will surely have
a negative impact on the small retailers in the market. There big companies
with huge investment capacity will buy goods at lesser rates and pass on big
documents to customer, wherein small local retailers will not be able to
stand against the competition by attracting customers and manufactures, they
will create their own monopoly in the market, which will not be good for the
retail market in the long run. We already have big malls then why do we
want foreign retail chains.
 Today the government intention is to remove middlemen and give better
price to farmers but why doesn’t it help in bring down transport cost which
is increasing due to rising full prices. The government must properly discuss
the pros and cons of allowing 51% FDI and have a law in place to control
unfair competition when foreign countries don’t allow important of food
products from India, then why should we allow them in our country.2
-Ajit setiya, president, porna merchant chamber
 Once monopoly set in market, small-time retailers, consumers and farmers
get exploited.

38
 I think that by allowing 51% FDI, it will have a negative impact on our retail
market monopoly; which is not good for economic growth. Brining in big
foreign players will, no doubt, give direct competition to big domestic retail
chains but small retailers will eventually get eliminated. Though farmers get
good rate for their produce and storage facilities will improve, there are only
temporary benefits, in the history of capitalization, the beginning, consumers
and farmers get exploited.

FDI IN RETAIL MARKETING IS BOON

Some people are favoring to the FDI. The following points are made by them.

 The 51% of FDI will obviously have a negative impact on small retailers,
but it will benefit the consumers as they will have wider choices at
competitive prices. It will accelerate the retail market growth and provide
more employment opportunities.
 Farmers will benefits from FDI us they will able to get better prices for their
produce.
 The FDI bill will definitely have appositive impact on the retail industry and
the country by attracting more foreign investment. With big retail giants
coming to India, it will surely improve our back-end storage and
procurement process. Once these multi-chain retailers establish themselves,
they will create infrastructure facilities, which will also propel the existing
infrastructure.
 The farmer will benefit from FDI as they will be able to get better prices for
their produce. The elimination of the intermediate channels in the
procurement process will bad to reduction of process for consumers.
 The regulation in the FDI bill that 30% of the total procurement has to come
from small and medium enterprises will benefit the domestic business off
course a policy is needed to protect the small and medium market channels
from Chinese invasion.
39
 The fear that FDI will have a negative impact on the small retailers is
completely wrong. It is not that everyone will run to their giant stores.
 Foreign brands will promote healthy competition in market every time the
government brings up the subject of FDI the domestic retailers with the
support of some politician jump to lobby against the bill. As we are initiating
the FDI there is bound to be some problems, which can definitely removed.
The government is near future can appoint a regular body to monitor the
retail sector just like other sector.
 By allowing 51% FDI in the Indian market, it will teach the local retailers
about the real competition and help in insuring that they give better service
to Indian consumers. It is obviously good for local competition and I don’t
see as a consequence, our local kirana stores disappearing. The kirana shops
operate in a different environment catering to a certain set of customers and
they will continue to find new ways to retain them. I don’t see a problem
with FDI as it will boost our economy.3

ADVANTAGES OF FDI IN RETAIL MARKETING

 Consumers to save 5-10%.


 Farmers to get 10-30% higher remuneration.
 Potential to add 3-4m new jobs, another 4-6m jobs in logistic, contract labor,
security etc.
 To help develop logistic and cold chains
 Government revenues to go up by $25-30 billion through various taxes.
 Huge investment in the retail sector will see gainful employment
opportunities in agro-processing, sorting, marketing, logistic management
and front-end retail.

40
 At least 10 million jobs will be created in the next three years in the retail
sector.
 FDI in retail will help farmers’ secure remunerative prices by eliminating
exploitative middleman.
 Policy mandates a minimum investment of $100 million with at at least half
the amount to be invested in base-end infrastructure, including gold chains,
refrigeration, transportation packing, sorting and processing. This is
expected to considerably reduce pose-harvest loosed.
 This will have a salutary impact on food inflation from efficiencies in supply
chain. This is also because food, which perishes due to inadequate
infrastructure, will not be wasted.
 Sourcing of a minimum of 30% from Indian micro small industry is
mandatory. This will provide the scales to encourage domestic value for
employment, technology up gradation and income generation.
 A strong legal framework in the form of the competition commission is
available to deal with any anti-competitive, practices predatory pricing.
 There has been impressive growth in retail and wholesale trade offer china
approved 100% FDI in retail. Thailand has experienced tremendous growth
in the agro-processing industry.
 In Indonesia, even after several years of emergency of supermarket, 90% of
fresh food and 70% of all food still controlled by traditional retailers.
 In any case, organized retail through Indian corporate in permissible.
Experience of the last decade show small retailers has flourished in harmony
with large outlet4.

41
DISADVANTAGES OF FDI IN RETAIL MARKETING

 Could drive kirana shops, local retailers out of business.


 Job may shrink or at best move from unorganized sector.
 Farmer will be at mercy of big chains, having burnt boats with mandis.
 Flood of cheap imports as retailers hunt best bargains.
 Companies have to invest $100 or more
 Company has to open stores only in towns with the population of 1 million
or more i.e. they can top 53 urban centers.
 Companies have to make 50% investment to be in back-end infrastructure
like warehouses, cold chains.
 More will lead to large-scale job losses. International experience shows
supermarkets invariably displace small retailers small retail has virtually
keen wiped out in developed countries like the US and in Europe. South East
Asian countries had to impose stringent joining and licensing regulations to
restrict growth of supermarkets after small retailers were getting displaced.
India has the highest shopping density in world with 11 shops per 1000
people. It has 1.2 crore shops employing over 4 crore people. 95% of there
are small shops run by self-employee people.
 Global retail giants will resort to predatory pricing to create
monopoly/oligopoly. This can result is essentials, including food supplies,
being controlled by foreign organizations.
 Fragmented markets give larger options to consumer’s consolidation
markets make the consumer captive. Allowing foreign players with deep
pockets lead to consolidation. International retail does not create additional
markets, it merely displaces existing markets.

42
 Jobs in the manufacturing sector will be last because structures international
retail makes purchases international and not from domestic sources. This has
been the experience of most countries which have allowed FDI in retail.
 Arguments that only foreign players can create the supply chain for farm
produce in bogus. International retail makers have no role in building roads
or generating power. They are only required to create storage facilities and
cold chains. This could be done by government in India.
 Comparison between India and china is misplaced. China is predominantly a
manufacturing economy. It is the largest supplier to Wal-Mart and other
international majors. It obviously cannot say no to their chains opening
stores in china when it is a global supplier to them. India in contract will lose
both manufacturing and service job. 5

1. FDI in retail is a non-critical area of intervention. Nobody in urban India


is suffering for lack of ‘accesses to food or grocery items. If at all it is the
public distribution system that is diseased with corruption and needs to be
replaced or removed. Access to food is an issue in the remote and rural
impoverished areas of the country, where as the fine print tells you, FDI in
retail will not be implemented. Comparative examples that try and portray
an opposition to FDI in retail as regressive are not only misplaced, they are
patently suspected. [Montek Singh Ahluwalia of the Planning Commission
included, who suggested that arguing against FDI in retail was like
complaining that the taxis would dislodge the Tonga]. To imagine that FDI
in retail exemplifies a progressive mindset shames us into thinking that an
ability to buy in the comfort of a twenty thousand square feet air
conditioned space is more indicative of progress than providing similar
quality housing for its citizen or schools for our children. The taxi took over

43
the Tonga for reasons of speed and protection from the elements. FDI in
retail projects no such benefit. We already get what we need for our daily
needs through local general stores and local big format stores. The gloss of a
shiny international brand name atop a store is not enough of a differential.

2. Middlemen are key to the distribution. The myth about ‘farm-to-store’


supply chain should end with the simple fact that middlemen will not be
removed from the operation but that existing middle men will be replaced by
bigger, more organized, more prosperous middlemen. Anyone who knows
the business of distribution knows that there is nothing called a direct sale
from farmer to retail, unless it is self-owned farm by the retailer. The process
requires a minimum of three transactions. From the farmer to the transporter,
to the distributor and to the end supplier. There are middlemen even if you
make a direct purchase and underwrite the farmer’s produce and each point
of contact costs something to keep his or her services going. The middleman
is not an enemy of the state. The middleman is being paid for services
rendered; his is not a free lunch. He is the conduit that makes delivery
possible. Removing middle men, as is being claimed by votaries of FDI in
Retail does nothing for the families of those who will be obliterated by the
new model that will take over: the retailer will have his own middle men in
the system, and that is all the difference there will be. The argument
advanced by many including some farmer lobby groups that there are 4 to 10
layers of middle men between producer and retail are not only humbugging
they are undermining free market movements where nobody can get in line
unless he performs a function. The other charge, that a policy failure
produced such layers of middlemen can be countered with a simple answer –

44
FDI in Retail cannot remedy a policy failure. It is the government’s job to
fix that, not Walmart’s.

3. Farmers will not get better prices. The idea that the farmer will get a better
price for his produce if FDI in Retail is allowed is a baseless suggestion. The
open market does not work on altruism and social service. It negotiates the
best for itself so it can corner the most for itself. Farmer suicides are not
because they cannot sell, as is being written about by irresponsible
columnists and business leaders but because they are unable to get
remunerative prices for their produce wing to poor quality produce due to
lack of proper crop management or crop failure, an inability to pay back
their loans or make ends meet and lose their land. To suggest that foreign
retailers would be so teary eyed at the plight of farmers that they would offer
a premium on produce which is available at less is plain childish. Fact is that
the markets, if allowed to function without controls, will take their own
route to price discovery. And remember, the more clout a buyer has, the
lesser the seller gets per capita. That is a law of the free market. FDI in retail
cannot do any more than local big format retailers are already doing. Those
that argue that FDI in retail will bring succor to farmers and reduce prices
for consumers need to explain why, when there are home grown large format
retailers, that is not already the case. How can you expand on a theme when
you admit that it is not working? The farmer is only an emotional hook in
the pro FDI lobbyist’s scheme. The truth is that more than 70% of revenues
of large format stores come from non-food items where the farmer does not
even figure. All the stories in media about farmer unions supporting the
move are motivated through two straight facts: lobbying with a generous
dose of cash infusion into these unions by food majors and retail chains and

45
the other more important fact – they are right about some farmers in their
areas, specially Punjab getting a better deal. But the cost of that is this: big
retail and food processors alter crop selection to have farmers produce to
order. So, because Pepsi needs potatoes for their chips, farmers skip the Dal
season and other such produce in favor of extensive cultivation and
specialization towards potato cultivation. Now they are right – that particular
farmer is doing well – contract farming is profitable, but in effect an entire
range of products are now in short supply. Precisely why Dal and cereals
and vegetables are becoming costlier by the day. This is apart from the other
real problem – corporate do not like dealing with a dozen small producers.
So they focus on one or two large producers and create conditions for the
rest to either submit to a larger contractor or just sell the land and move out
of business.

4. Brands compete to secure market share. Market share can only be


secured at the cost of another existing competitor. It is equally naive to
imagine that the anomalies of predatory pricing will be taken care of once
the sector is open to competition. Let us understand the idea of competition.
All competition starts from a baseline price point. The base line price
already exists with the current prices the farmer gets. All competition is
normally over and above that base line. Nobody sells below his purchase
price. But what is being debated here is the ability of the big retailer to
sustain losses for a long period of time by selling under cost to dismantle
competition owing to deep pockets. Brands will go on a losing spree to
corner market share. That is an old principle. Walmart will sustain losses to
counter Carrefour and a Carrefour will do the same to contain another
competitor. In a fight of such giants, the small retailer and the kirana shop

46
owner of today stand no chance. As a caveat, one should be wondering what
the local large format stores would face and why they are supporting a
policy shift that could hurt them. After all, Spencer and a number of smaller
retailers hardly stand a chance in the face of a Walmart. Well the reason is
simple: The only reason you hear some of them support the idea is because
[a] some want to raise money from markets abroad to run their unprofitable
enterprises for a little longer until they hope to break even [b] access cheaper
funds which the Government and its fiscal laws have made almost non
remunerative or [c] hope to be taken over and bought out. Note that the retail
business is cut throat and many large-format or branded stores have already
folded. Subhiksha in South India and Vishal and Sabka Bazaar in the North
come to mind immediately. Most of the existing local large format retailers
who support the idea are folks who are looking for a bail out or hoping to
sell their operations on the back of decent valuations.

5. Big Retail cannot co-exist with small retail. That big retail can coexist
with kirana is a flat impossibility. It can’t because big retail alters the
playing field permanently. The instruments of small retail are redundant in
the schema of big retail. The grammar of big format selling influences the
buying habits of people. The kirana sells on the basis of daily consumables
of a middle class. The big-format pushes for bulk sales, weekly big
purchases where you buy four when you need one simply because it is
priced in an attractive deal for the day. The kirana and the small retailer
cannot bundle promo packs because it can’t deal directly with producers.
Big retail is habit altering. It is not an alternate, not an expansion of choice
but a modification of the manner of consumption and sale. Big retail does
not encourage balanced consumption but exists on the principle of overuse,

47
and excess. Big retail altered the psyche of an entire generation of
Americans – consumers, producers and manufacturers alike. The idea that
shopping can be a weekend activity, where you load up on supplies for a
week comes from a country where joint families are not known, buying fresh
vegetables daily is unknown, where women don’t cook and burgers are
staple diet. Weekend buying leads to storage. Which leads to oversized
freezers; which lead to more frozen food, and to more heat-and-eat dishes,
and the spiral of the other problems of plenty? Indians don’t consume like
that and there is much to be said about buying fresh and local, as the world is
now discovering.

6. Big Retail is one big cause of food inflation. That food inflation will be
curtailed with FDI in Retail is a plain lie. Food inflation has to do with
supply side shortages and distribution bottlenecks that have mostly to do
with government policy in each case. The advent of big retail will not induce
any farmer to grow more food or make any dent in the fossilized
mechanisms of food procurement and distribution policies of Government.
The truth remains that agriculture has suffered for long, that farmers do not
get remunerative prices and that they are unable to pay back what they have
borrowed. Food inflation is a derivative of the paralysis of government and
states and nothing to do with FDI in retail. We’re talking about FDI in retail
for God’s sake, not FDI in agriculture. The other startling aspect of FDI in
retail is that it is being sold as the answer to India’s farming woes. Congress
MP Jyoti Mirdha has pointed out that the FDI introduced in the agriculture
sector in 2006 is yet to show any progress, so where is the basis for moving
on to FDI in retail. What FDI could not do for agriculture directly, it will do
through FDI in retail is a bit of a big joke.

48
7. Consumers do not get better prices. Consumers will get lower prices is
another figment of the lobbyist’s fertile imagination. Prices never come
down. Big bazaar or Walmart, prices never come down. The argument is a
facetious assault on the principle of growth and inflation. Big retail can at
best sell you cheaper potatoes or five such items carefully selected on
seasonal variations or bulk deals with producers cheap for only a week and
no more. For everything else you buy from them, you will pay more. That is
how big retail works. To qualify this, read this comment from a KPMG
expert who was arguing for FDI in retail: “To draw consumers, [big]
retailers squeeze suppliers and ensure efficiencies in categories that drive
foot falls. They balance it out by enjoying higher margins in categories
where impulse buying is high” [Anand Ramanathan quoted in Economic
Times,1st Dec 2011] The reason there is no data on this is because it is not in
the interest of big retail or big media to support the idea. Think about
infrastructure and overheads. A large format retailer, if it is not within an
existing mall and aims to be the size of Walmart stores will have to put up
its own air-conditioning plant, parking, galleys, staff, vans, transport,
machinery and processes that simply cannot offset any purchasing bulk deals
to support the idea of cheaper prices. That prices of food items are cheaper
at big retail outlets is also not without a serious caveat. Comparing prices is
not the only criterion: you have to compare quality as well. Has anyone ever
bought fresh vegetable produce from a big retailer – nobody will accept that
quality from a local vendor. The jargon about cereals and selected stuff
being cheaper is sketchy at best and the reason there is no data on this is
because nobody wants to reveal the modus operandi of selective discounting
by big retailers as a marketing tool rather than any real principle of lower
pricing. The survey published in a newspaper is an in-house attempt which
49
does not answer to the most fundamental discrepancy – why does every
survey attempt at comparing prices of chosen commodities at kirana stores
with big retail outlets: how about comparing one big retail outlet with
another and explain why they do not conform to the same price principle
across the board?

8. Big Retail kills small jobs. More jobs will be created when big retail comes
in is a fallacy and a purposeful falsehood. For an economy where 80% of the
population engaged in trade and local retailing is self employed, how do the
numbers stack up if you dislodge even 20% of that population? Does any
math support the theory that any number of big retailers in a city likeDelhi
will be able to support 5 lakh people who will progressively be thrown out
of business due to their advent? For a government that is unable to provide
employment in big cities with reasonable opportunities, the impact in
smaller ones will be unmanageable. The 30% caveat that is being bandied
about as a bulwark against large scale displacement of local producers is
also a charade because it does not concern itself with produce but
infrastructure investments that big retailers must make, [as a safeguard, in
the Government’s weak words] without explaining that these could be the
plywood and the roofing they use to set up their retail stores or the marble
tiling and the bathroom fixtures or even the trucks they buy. So what
protection is this worth? Then again, even if this were to be reworded to
ensure that the 30% limit pertained to produce and not infrastructure, which
gigantic micro management agency would pore over their account books to
determine this on a daily or monthly basis?

9. Big Retail is relative to Real Estate. Retail is a first cousin of the real
estate industry. Already the calculators are out fantasizing about the acreage
50
these new big format retail marts will need and the newer malls that will be
coming by design around such anchor stores. Big Retail loves Big
Development and vice versa. The upshot is that the already skewed real
estate market will only get more out of control and housing for middle
classes and the ordinary folks that much farther. Big retail creates the
grounds for large scale property price hike throwing up a new spiral of
inflation in real estate space – a totally unregulated, unbridled, black money
haven. Another reason why the smaller retailer will have to pack up and
move – can’t afford the real estate.

10.FDI in Retail is a political hot-potato and a non-issue. The political


expediency attributed to the opposition on the issue of FDI in Retail is
actually misdirected and it is the government of the day which should be
under a cloud of suspicion for the timing of this move. If this is about
proving that there is no paralysis in governance, it is plainly a bravura act
which should be set aside for the moment. On the other hand, if this passes
for reform, how about we discuss instead FDI in education, a sector that
holds the key to prosperity for this country and its future generations. If this
is a sop for thus and the rest of the west, let us learn from their mistakes –
profligacy in consumer spend and consolidation of business are dangerous
instruments in the economic life of a country. Let us not bail out those who
would take us down the precise route that landed them in hell. India must
decide if it wishes to trade its cultural, dietary and social habits for the old
western paradigm of conspicuous consumption and whether it can stave off
the easy charm of easy money and draw a new plan where the farmers are
attended to immediately, incentives woven into their crop cultivation habits,
offer remunerative prices which keep him engaged and allows him to

51
prosper. This pandering to the urban consumer with the idea that he will
have more choice and better pricing is a charade and its bluff must be called.
The urban consumer they are talking about probably earns Rs 5 Lacs
annually on average and is already spoiled for choice. If it is all about saving
a few rupees per kilo on a packet of Ariel detergent, is it worth sending a
man out of work for that? Can a Government which cannot provide jobs
afford to argue with that? All the media support for FDI in retail is
connected to their advertising potential and business cross holdings. Media
houses are naturally not saddled with the responsibility of finding
employment for the burgeoning population of the country and they must be
excused their fit of greed. The best way to test their integrity is to ask if they
are okay with FDI in media.6

52
ANALYSIS OF RESULTS
TABLE 4.1

AWARENESS TOWARDS FDI IN RETAIL MARKETING

No. of respondents Percentage of


respondents
Aware 45 90%
Un aware 5 10%
Total 50 100%

Source: Primary Data

INFERENCE:

 From the data collected, it was found that almost all of them, except very
few who are aware of FDI in retail marketing.
 Nearly 90% of total sample respondents aware of FDI.
 Only 10% of total sample respondents were unaware of FDI in retail
marketing.
 This reveals that FDI proposal grasp the attention of all the people.

53
FIGURE 4.1

AWARENESS TOWARDS FDI IN RETAIL MARKETING

PERCENTAGE

AWARE

UNWARE

54
TABLE: 4.2

PERCENTAGE OF FDI PREVAILING IN INDIA

Percentage of FDI No. of respondents Percentage


In India of respondents
Less 36 72%
More 14 28%
Total 50 100%
Sources: Primary Data.

INFERENCE:

 From the above table 72% of the respondents said that FDI is prevailing less
in India.
 Only 28% of the respondents said that FDI is prevailing more in India.
 This table implies that FDI is prevailing less in India.

55
FIGURE: 4.2

PERCENTAGE OF FDI PREVALING IN INDIA

80

70

60

50

40
percentage of repondents

30

20

10

0
Less More

56
TABLE: 4.3

HOW MUCH SHARE OF FDI COULD BE ALLOWABLE

PERCENTAGE NO.OF PERCENTEGE OF


OF SHARE RESPONDENTS RESPONDENTS

< 25% 17 34%


< 50% 32 64%
< 75% 1 2%
TOTAL 50 100%
Sources: Primary Data

INFERENCE:

 From the above table we came to know that 34% of the respondents ‘are of
opinion that < 25% of share is allowable in FDI.
 Nearly 64% of respondents opinion is < 50% of shares could be allowable in
FDI.
 Only 2% of respondents prefer < 75% of shares.
 The above table reveals that only < 50% of shares could be allowable in FDI
of India.

57
FIGURE: 4.3

HOW MUCH SHARE OF FDI COULD BE ALLOWABLE

70

60

50

40

percentage of respondents

30

20

10

0
< 25% < 50% < 75%

58
TABLE: 4.4
WHICH SECTION OF ENTERPRENEURES
WILL BE AFFECTED BY FDI

Entrepreneurs No. of respondents Percentage of respondents


Itinerants retailers 30 60%
Fixed shop retailers 5 10%
Small-scale retailers 10 20%
Large-scale retailers 5 10%
Total 50 100%
Source: Primary Data

INFERENCE:

 This table implies that about 60% of itinerants retailers will be affected by
FDI proposal.
 10% of fixed shop retailers will be affected by FDI proposal.
 Nearly 20% of respondents said that small scale retailers will be affected.
 Only 10% of respondents opinion is large-scale retailers will be affected.
 From this table we came to a conclusion that mostly itinerant retailers will
be affected by the FDI proposal.

59
FIGURE: 4.4

WHICH SECTION OF ENTERPRENEURES


WILL BE AFFECTED BY FDI

60

50

40

30

PERCENTAGE OF
20
RESPONDENTS

10

60
TABLE: 4.5

PERCENTAGE OF FAVOURINGS TOWARDS


THE FDI PROPOSAL

Favoring of proposal No. of respondents Percentage of


respondents
Favorable 12 24%
Unfavorable 38 76%
Total 50 100%
Sources: Primary Data

INFERENCE:

 From the above table only 24% of the respondents are favorable towards the
proposal of FDI in retail marketing made by the central government.
 Nearly 76% of the respondents are unfavorable to proposal made by the
central government.
 This table clearly implies that most of respondents opposing the FDI
proposal made by the central government.

61
FIGURE: 4.5

PERCENTAGE OF FAVOURINGS TOWARDS


THE FDI PROPOSAL

80%

70%

60%

50%

Percentage of
40%
respondents

30%

20%

10%

0%
Favorable Unfavorable

62
TABLE: 4.6

WHO WILL GET BENEFIT BY FDI PROPOSAL

Particulars No. of respondents Percentage of


respondents
Consumer 5 10%
Farmer 8 16%
Government 32 64%
Retailers 5 10%
TOTAL 50 100%
Source: Primary Data

INFERENCE:

 This table implies that 10% of the respondents said that consumer will get
benefit by FDI proposal.
 16% of respondents have an opinion on farmer will get benefit by FDI.
 Nearly 64% of the respondents said that government will get benefit by FDI
proposal.
 Only 10% of the respondents have the opinion of retailers will get benefit.
 From this table we came to know that majority of the respondent have the
opinion that government will get benefit by the FDI proposal.

63
FIGURE: 4.6

WHO WILL GET BENEFIT BY FDI DECISION

70%

60%

50%

40%

Percentage of respondents
30%

20%

10%

0%
Consumer Farmer Government Retailers

64
TABLE: 4.7

RESULT OF EMPLOYMENT OPPORTUNITIES

BY FDI PROPOSAL

Employment No. of respondents Percentage of


opportunities respondents

Shrink 38 76%

Expand 12 24%

Total 50 100%

INFERENCE:

 From the above table nearly 76% of samples said that employment
opportunities will shrink.
 Only 24% of samples prefer the opinion that employment opportunities will
get expand.
 This implies that employment opportunities will get shrink by the FDI
proposal.

65
FIGURE: 4.7

RESULT OF EMPLOYMENT OPPORTUNITIES

BY FDI PROPOSAL

80%

70%

60%

50%

40% Percentage of
respondents

30%

20%

10%

0%
Shrink Expand

66
TABLE: 4.8

EFFECTIVENESS OF THE SUPPLY CHAIN BY THE RETAILER

Particulars No. of respondents Percentage of respondents


Less effective 12 24%
Moderate 28 56%
effective
More effective 10 20%

Total 50 100%

Sources: Primary Data

INFERENCE:

 This table implies that 24% of the sample respondents have an opinion that
the supply chain is less effective.
 Nearly 56% of the respondents said that the supply chain will be moderately
effective.
 Only 20% of the respondents said that the supply chain will be more
effective.
 From this we came to know that majority of the respondents have the
opinion that the supply chain will be moderate effective.

67
FIGURE: 4.8

EFFECTIVENESS OF THE SUPPLY CHAIN BY THE RETAILER

60%

50%

40%

30%
Percentage of respondents

20%

10%

0%
Less Moderate More
effective effective effective

68
TABLE: 4.9

FDI POLICY PROPOSAL AND ECONOMIC GROWTH

Particulars No. of respondents Percentage of respondents


Yes 37 74%
No 13 26%
Total 50 100%

Sources: Primary Data.

INFERENCE:

 This table implies that 74% of the respondents have an opinion that FDI
don’t not help for the growth of our economy.
 Only 24% of the respondents told that FDI will help for our economic
growth.
 By this we came to a conclusion that FDI policy doesn’t help for our
economic growth.

69
FIGURE: 4.9

FDI POLICY PROPOSAL AND ECONOMIC GROWTH

80%

70%

60%

50%

40%
Percentage of respondents

30%

20%

10%

0%
Yes No

70
TABLE: 4.10

PROMOTIONAL TOOLS TO RETAIN THE CUSTOMERS

Promotional tools No. of respondents Percentage of respondents

Credit sales 4 8%
Providing gifts 15 30%
Facilities for their 26 52%
shopping
More advertisement 5 10%

Total 50 100%

Source: Primary Data

INFERENCE:

 This table shows that 8% of respondent’s idea is credit sales will help
to retain their customer.
 30% of the respondents idea is providing gift is tool to retain the
customer.
 Nearly 52% of the respondents advice is by providing facilities for
shopping will help to retain their customer.
 Only 10% of the respondents idea is by more advertisement, the
retailer can retain their customer.
 From this table we can come to a conclusion that by providing
facilities for their shopping the retailer can retain their customer.

71
FIGURE: 4.10

PROMOTIONAL TOOLS TO RETAIN THE CUSTOMERS

More advertisement

Facilities for their Percentage of


shopping respondents

Providing gifts

Credit sales

0% 20% 40% 60%

72
TABLE: 4.11

FDI PROPOSAL IS BOON OR BANE

Particulars No. of respondents Percentage of respondents


Boon 11 22%
Ban 39 78%
Total 50 100%
Sources: Primary Data

INFERENCE:

 The above table refer that only 22% of the respondent is favor to the FDI in
retail marketing proposal.
 Nearly 78% of the respondents are opposing the proposal of FDI in retail
marketing.
 This table clearly shows that most of the people not ready to accept the FDI
in retail marketing.

73
FIGURE: 4.11

FDI PROPOSAL IS BOON OR BANE

Percentage of respondents

Boon
Ban

74
TABLE: 4.12

SUGGESTIONS

Particulars No. of respondents Percentage


of
respondent
s
By strict rules 11 22%

Reducing the 39 78%


percentage of FDI

Total 50 100%

Source: Primary Data

INFERENCE:

 This table implies that only 22% of respondents told that by strict rules we
can overcome the FDI proposal.
 Most of the respondent that is nearly 78% of the respondent reported that by
reducing the percentage of the FDI we can overcome this problem.
 This implies that by reducing the percentage of the FDI in retail marketing
we can overcome this problem.

75
FIGURE: 4.12

SUGGESTIONS

Percentage of respondents

Reducing the percentage of FDI

By strict rules

0% 20% 40% 60% 80% 100%

76
HYPOTHESIS

CHI – SQUARE TEST- I

PERCENTAGE OF FDI vs. EDUCATIONAL QUALIFICATION

Educational No. of respondents Total


Qualification Less More
Under graduate 10 5 15
post graduate 20 5 25
professionals 6 4 10
Total 36 14 50

Step: 1 Let us take that null hypothesis (H0) is no significant difference between
the factor percentage of FDI and educational qualification.

Step: 2

Level of significance = 5%

Degree of freedom = (C-1) x (R-1) = (2-1) x (3-1) =2

Tabulated value at 5% level of significance and degree of freedom 2 is =5.991

77
Step: 3

Calculation of expected frequency and x2 value.

O E (O-E) (O-E)2 (O-E)2/E

10 10.8 -0.8 0.64 0.059


20 18 2 4 0.222
6 7.2 -1.2 1.44 0.2
5 4.2 0.8 0.64 0.152
5 7 -2 4 0.571
4 2.8 1.2 1.44 0.514
50 1.718

Step: 4

Calculated value Table value

1.718 < 5.991

Since calculated value is less than table value, so our hypothesis is accepted.

Therefore it can be concluded that there is no significant difference between the


factor, percentage of FDI and educational qualification.

78
CHI – SQUARE TEST-II

FAVORING OF FDI POLICY vs. SEX

Sex No. of respondents Total


favorable unfavorable
Male 8 27 35
Female 4 11 15
Total 12 38 50

Step: 1 Let us take that null hypothesis (H0) is no significant difference between
the factor favoring of FDI policy and sex.

Step: 2

Level of significance = 5%

Degree of freedom = (C-1) x (R-1) = (2-1) x (2-1) =1

Tabulated value at 5% level of significance and degree of freedom 1 is =3.84

79
Step: 3

Calculation of expected frequency and x2 value.

O E (O-E) (O-E)2 (O-E)2/E


8 8.4 -0.4 0.16 0.019
4 3.6 0.4 0.16 0.044
27 26.6 0.4 0.16 0.006
11 11.4 -0.4 0.16 0.014
50 0.083

Step: 4

Calculated value Table value

0.083 < 3.84

Since calculated value is less than table value, so our hypothesis is accepted.

Therefore it can be concluded that there is no significant difference between the


factor, Favoring of FDI policy and sex.7

80
FOOT NOTES:

1. Suryakant Pathak; MD, Grahakpeth & secretary, grabak panchyat


2. Ajit setiya, president, porna merchant chamber
3. Hemant Batra, Retailing Sector In India Pros Cons (Nov 30,
2010)http://www.legallyindia.com/1468-fdi-in-retailing-sector-in-india-
pros-cons-by-hemant-batra

4. Discussion Paper on FDI in Multi Brand Retail Trading,


http://dipp.nic.in/DiscussionPapers/DP_FDI_Multi-
BrandRetailTrading_06July2010.pdf

5. Sarthak Sarin, (Nov 23, 2010) Foreign Direct Investment in Retail Sector
http://www.legalindia.in/foreign-direct-investment-in-retail-sector-others-
surmounting-india-napping
6. Economic Times Retail News, FDI in retail to contain inflation (Dec 31,
2010) walmart http://retail-guru.com/allow-100-fdi-in-retail-to-contain-
inflation-walmart
7. Primary Data

81
CHAPTER-V

FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS:

On the basis of the above study carried out in preceding chapter, the relevant
findings are as follows.

 The research has been carried out in the selected towns of north
Tamilnadu comprising of urban and semi-urban areas. From the
analysis carried out, 90% of the respondents are aware about FDI and
only 10 % of the respondents are unaware.
 FDI policy is very much less, prevailing in India i.e. 72% of the
respondent’s view about FDI in our country.
 It is interesting to note that 64% of the respondent’s opinion is only <
50 % of share could be allowable in India.
 Itinerant retailers i.e. street traders cheap jacks will be affected by
allowing 51% in multi-brand and 100% in single brand FDI in retail
marketing.
 Nearly 76% of the respondents are opposing the FDI proposal made
by the central government.
 By allowing FDI in our retail marketing government will get benefit.
 If the government allowed FDI in our country the employment
opportunities will get shrink.
 By launching the FDI policy in retail marketing the supply chain will
be moderately effective.

82
 If the government took any decision means it should develop our
economy. But the FDI proposal doesn’t help for the growth of our
economy.
 Respondent’s suggestion to retailers to retain their customers is by
providing facilities for their shopping.
 Without thinking much majority of the respondents strongly ban the
proposal of FDI in retail marketing.
 Independent stores will close, leading to massive job losses. Walmart
employs very few people in the United States. If allowed to expand in
India as much as Walmart has expanded in the United States, few
thousand jobs may be created but millions will be lost.
 Walmart will lower prices to dump goods, get competition out of the
way, become a monopoly, and then raise prices. We have seen this in
the case of the soft drinks industry. Pepsi and Coke came in and
wiped out all the domestic brands.
 India doesn't need foreign retailers, since homegrown companies and
traditional markets may be able to do the job.
 Work will be done by Indians, profits will go to foreigners.
 Remember East India Company. It entered India as a trader and then
took over politically.
 There will be sterile homogeneity and Indian cities will look like
cities anywhere else.
 The government hasn't built consensus.
 Could drive kirana shops, local retailers out of business.
 Job may shrink or at best move from unorganized sector.
 Farmer will be at mercy of big chains, having burnt boats with
mandis.
83
 Flood of cheap imports as retailers hunt best bargains.
 Companies have to invest $100 or more
 Company has to open stores only in towns with the population of 1
million or more i.e. they can top 53 urban centers.
 Companies have to make 50% investment to be in back-end
infrastructure like warehouses, cold chains.

SUGGESTIONS :

Government can reduce the 51% of FDI in to 49%. By this foreign players can’t
dominate us. If 51% FDI is allowed in retail market; it will be a big trouble for the
small shopkeepers. The big giants entering the market will surely impact the small
stores owners. The government says that the farmers will benefit but I feel it will
just be a temporary benefit. Once these giant foreign retails have monopoly, they
will start exploiting the market. In the long run it is not benefited to our economy.
For e.g. in a country like France, walmark was not permitted to set up its stores
whereas in Germany, FDI is not allowed. If the US is not allowing India goods to
be sold in their market, why should then we give them a chance to set up bare here.
This discounts that there big retail stores offer in order to cure customer are also
now being offered by our kirana stores. I feel that people should not fall prey to big
retail stores because it is a trap where in consumers end up buying more than what
is required. Customers feel that they are getting between deals, but they are at the
same time enticed to buy more.

The debate that by introducing 51% FDI, a lot of money will flow out of our
country is an old school of thought. Lot of our Indian companies is operating
aboard and has successfully contributed to our economy. The bigger issue is that

84
with benefit we might end up paying a price hence we must work on a reasonable
solution.

CONCLUSION:

In our day-to-day life we are engaged in several activities. In that, business is very
important activity of selling goods or services to the final consumer. In the era of
intense competition, most companies contemplate different forms of distribution
Tourism industry also makes use of these distribution channels in reaching out to
its customers. If goods are channelized to the consumers through foreign direct
investment by the foreign investor in home country is known as FDI in retail
sector.

Foreign Direct Investment (FDI) in India has played an important role in the
development of the Indian economy. FDI in India has enabled India to achieve a
certain degree of financial stability, growth and development. This money has
allowed India to focus on the area that is needed to boost the economy. India needs
more capital in the infrastructure development projects. These kinds of projects
include areas like flyovers, bridges, offices, industries and much more. The
investments in other sectors include financial sectors that incorporate insurance
services and banking and also retail sectors and other real estate development
projects. During the 2012-2013 budgets, government has lowered the procedures
for investment in India and speed up the implementation process. This raises the
confidence of the investor in ease of doing business in India. The government also
announced the retrospective effect of DTAC that is also a burden for the investors.
In addition; external borrowings are allowed to restore investor’s confidence.
Increase in capital inflows, Foreign Direct Investments (FDI) and overseas entities’
participation reflect the fact that Indian markets have fared well in recent times.

85
The government can implement FDI with strict rules and regulation. Hence we
must work on a reasonable solution. Today the government intention is to remove
middlemen and give better price to farmers but why doesn’t it help in bring down
transport cost which is increasing due to rising fuel prices.. Government can reduce
the 51% of FDI in to 49%. By this foreign players can’t dominate us. It will not
have a negative impact on our retail market which is good for our economic
growth. Brining in big foreign players will, no doubt, give direct competition to big
domestic retail chains but small retailers will eventually get eliminated. Though
farmers get good rate for their produce and storage facilities will improve, they are
only temporary benefits. Since resistance arise from different corners of the
country the Government should not allow more than 49 percent FDI for single-
brand or multi brand products in retail sector.

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