FDI and its impacts in Indian retail business. Author: Ila. NAKKEERAN M.Com., M.Phil.

, Research scholar and Assistant professor, in commerce Mohamed Sathak College of arts and science Sholinganallur, Chennai Co- Author: Dr.R.KANNAPPA M.C.om.,M.B.,A M.P.hil Ph.D Assistant Professor in Commerce,Periyar EVR college[Autonomous ] Kajamalai, Thiruchirapalli ABSTRACT This paper examines whether policies to promote foreign direct investmen t (FDI) is having a significant change in the Indian retail market or not. While allowing the global players in developing country like India we should consider the million of smaller retailers and their family because if anything goes wron g it will adversely affect the country s economic development and standard of living of people. So we should be clearer about the FDI policy and their positive and negative impacts Foreign direct investment - Meaning Foreign direct investment (FDI) refers to the net inflows of investment to acqui re a lasting management interest (10 percent or more of voting stock) in an ente rprise operating in an economy other than that of the investor. It is the sum of equity capital, other long-term capital, and short-term capital as shown in the balance of payments. It usually involves participation in management, joint-ven ture, transfer of technology and expertise. There are two types of FDI: inward f oreign direct investment and outward foreign direct investment, resulting in a n et FDI inflow (positive or negative) and "stock of foreign direct investment", w hich is the cumulative number for a given period. Direct investment excludes inv estment through purchase of shares .FDI is one example of international factor m ovements. Foreign direct investment in India Economic integration is a double-edged sword. FDI in Multi-Brand retailing is pr ohibited in India. FDI in Single-Brand Retailing was, however, permitted in 2006 , to the extent of 51%. Since then, a total of 94 proposals have been received t ill May, 2010. Of this, 57 proposals were approved. An FDI inflow of US $ 194.69 million (Rs. 901.64 corer) was received between April, 2006 and March, 2010, co mprising 0.21% of the total FDI inflows during the period, under the category of single brand retailing. FDI in cash and carry wholesale trading was first permi tted, to the extent of 100%, under the Government approval route, in 1997. It wa s brought under the automatic route in 2006. Between April, 2000 to March, 2010, FDI inflows of US $ 1.779 billion (Rs. 7799 corer) were received in the sector. This comprised 1.54 % of the total FDI inflows received during the period Starting from a baseline of less than $1 billion in 1990, a recent UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 2010 2012. As per the data, the sectors which attr acted higher inflows were services, telecommunication, construction activities a nd computer software and hardware. Mauritius, Singapore, the US and the UK were among the leading sources of FDI.Finally the union government gave its approval 51% FDI in multi brand and 100% in single Brand retail on 24 Thursday November 2 011. Single Brand Meaning: Nike Company opens outlets in Ahamedabad, Bangalore, Delhi and Mumbai Selling no thing but Nike Shoes, Nike Wrist watches and Nike T-Shirt only. This is single b rand retail. FDI in Single-Brand Retailing was permitted in 2006, to the extent of 51%. These were mostly outlets for sportswear, luxury goods, apparel, fashio n clothing, jewellery, hand bags, life-style products. But neither the Political parties nor Local Kiranawala raised any voice against this, why? Because these are high-end luxury items for brand conscious upper middle class and rich class people . It doesn t hurt population at large. It was not like people would stop purchasing from local garment store to get Nike or Adidas

Multi Brand Meaning: Big Bazaar opens mall in above cities: selling t-shirts of multiple-brands such as Reebok, Nike, Adidas, Allen Solley, Van Huesen, Peter England etc. and they a lso sell unbranded t-shirts (you know those buy one get three t-shirts free from unknown companies.) So this is multi-brand retail: when an outlet sells a product (t-shirt, tie, sh oes anything) of more than one brand. POLICY MEASURES REGARDING FDI: Companies will have to invest $100 million or more Open stores only in towns with population of I million or more that is they can tap 53 urban centers. At least 50 percentage investment to be in back-end infrastructure like ware hou se, cold chains. Procurement of 30 percentages of their products from small scale industries. for that cabinet describes small Industries as units which have a total plant and m achinery investment not exceeding $250000 (around 1.5 corer) Some of the key conditions for allowing 100%FDI in single- brand retail are, sel ling the brand under the same brand internationally: product retail will those p roducts that are branded during manufacturing and the foreign investor should be the owner of the product ARGUMENTS FOR AND AGAINST FDI 1. FDI adversely affect the formers As per the Global Players statement we will buy directly from farmers and elimin ate the middleman who snatches their major share of income. From that they try t o expose that they are also a unorganized one and the well-wishers of farmers. H ence FDI will help farmers secure remunerative prices by eliminating exploitativ e middlemen But in reality it is not like that ,they will buy directly from the mandies and not from the farmers so the benefits goes to the so called middleman , the mandies and not to the farmers. However the middle men are not snatching t he farmers profit instead they are the part of their supply chain who help the f armers to market their products. This will leads to monopoly market conditions in Indian retailing business consequently Small retailers hey will lose their b argaining power. Once after the elimination of the maximum small retailers in th e market the farmers and the others should depend wholly the foreign based compa nies like Tisco, Wal-Mart etc., and the Global Players start exploiting the far mers finally they will become king makers in Indian retailing business. Through the approval of new FDI policy in India the MNCs and TNCs will grow in a faster rate on the cost of small retailers in the hosting countries With the help of huge capital and professional personnel they try to portray the small retailers are inferior ones and global players are sophisticated one 2. Wal-Mart issues Regarding FDI in Other Countries: The new FDI policy will allow the Wal-Mart the large US based retail store in th e world in India instead of its trillion dollar business it is known for its not aries .Wal-Mart had to close down its business in Germany and Korea as it was fo und indulged in predatory pricing which is not allowed in these countries. In ad dition to that it was being ordered to pay more than 70 million dollar to worker s as compensation for forcing their workers during break.A huge segment of count ries population makes the livelihood from the kirena stores where they required a small amount of investment to setting up the corner stores. 3. FDI Adversely affect the Consumers: For the consumers the global players like Wal-Mart, Tissco and others will look like benefit able of course it is true, but only for a short period the Wal-Ma rt or any other MNC retail mall,( for example for the first 3-4 years )will give heavy discounts and seductive offers, and in the initial stages they will follo w the aggressive penetration strategy of pricing their products to capture the h uge market share and they gradually increase the price( that is they will move f rom penetration pricing strategy to skimming pricing strategies) as they elimina te the maximum number of small retailers out of the retail business. even if the y make loss in the deal. Result : all the customers in a particular city are hoo

ked to Wal-Mart only. The smalltime retail players cannot run business giving su ch heavy discounts, but soon after when the maximum number of small retailers th rown out of the market consequently the small ones are close down their business . Once all competition is eliminated with this predatory pricing Wal-Mart will slowly stop giving discounts and recover their losses by increasing the MRP, they have no other way except the big ones and they should pay more for their purchase So the consumers will lose their bargaining power as there are no sufficient altern atives and start paying more than before. Hence the Fragmented markets give larg er options to consumers. Consolidated markets make the consumer captive. Allowin g foreign players with deep pockets leads to consolidation. International retail does not create additional markets, it merely displaces existing markets. And t he other evil effects of FDI are consumer will spend their hard earned money vas tly. Because the foreign retailers will spend millions of dollars in creating de mand with that effect consumers will buy the products due to mere desire rather than necessary. The argument is that the small ones can compete with us and both can coexists as we have adequate demand to caters the needs of both small and large retailers a lso a wrong one because it is not possible for the small ones to compete with the foreign based large retailers having huge capital professional personnel and sophisticated stores . As for as the vegetables regards they are selling the fresh vegetables with pres ervative materials which is harmful to the humans where as the vegetables sold i n the local keranas stores are fresh one but the consumers perception about the local stores are not good one they think that the large retailers selling the hy giene ones where it is lake in local kerana stores.Finally the restriction regar ding Open stores only in towns with population of I million or more that is not a real restriction because these are the areas where the foreign players want es tablish their retail stores CONCLUSION: Though the corporate retailers create millions of employment opportunities it is less than percentage of loss of employment. Global retail players will resort t o predatory pricing to create monopoly/oligopoly. This can result in essentials including food grains, being controlled by foreign organizations.Even though it will create millions of jobs, it is only replacement of jobs and not newer one a nd the replacement happen on the cost of millions and millions of small retailer s who depend on their livelihood in retail business for necessary and not for ch oice.This move will lead to large-scale job losses. International experience sho ws supermarkets invariably displace small retailers. Small retail has virtually been wiped out in developed countries like the US and in EUROPE. South East Asia n countries had to impose stringent ---- and licensing regulations to resort gro wth of supermarkets after small retailers were getting displaced. India has the highest shopping density in the world with11 shops per m1000 people. It has 1.2 corer shops, employs over 4 corer people, and 95% of these small shops are run b y self employed people. FDI in India will pave the way to MNC s and TNC s like Wal-Mart, tisco and grow on the cost of host countries. So it is necessary to frame strict policies and r ules before we permit such foreign retailers in India. Finally to support this The all India democratic woman s association (AIDWA)has strongly opposed the congres s led government to through open the Indian retail market to foreign direct inve stment(FDI) to the tune of 51% in the multi brand retail sector .this will have a very serious and adverse impact on around 1.5 corer small retailers in our c ountry. The livelihood of more than 4 corer self employed people is being at ris k since the global retail giants are in the position to monopolies the markets w ith their predatory pricing policies