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Agenda

What is FDI? Indian retail : An overview Retail Scenario in India

Why No FDI in Indian retailing


Case study : Retail in Thailand

Is Wal-Mart good for India?


Alternative Options
2

WHAT IS FDI?
Movement of capital across national frontiers in a manner that grants the investor control over the acquired asset.

Indian Retail : An Overview


Historic/Rural Reach Traditional/Pervasive Reach Government Supported Modern Formats/ International

Exclusive Brand Outlets Hyper/Super Markets Department Stores Shopping Malls PDS Outlets Khadi Stores Cooperatives Convenience Stores Mom and Pop/Kiranas Weekly Markets Village Fairs Melas
Source of Entertainment Neighborhood Stores/Convenience Availability/ Low Costs / Distribution Shopping Experience/Efficiency

Unorganized Retail 98%

Forced employment sector

Retail Scenario in India

14% of National GDP

Fragmented

Employment to 7% of workforce
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Affects unorganized players Increasing Poverty

Drawback s of FDI

Kind of employment
Promotion of cartels and monopoly creation. Increase in real estate prices. Absence of proper regulations would lead to unfair trade practices. Predatory Pricing
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Effects on unorganized players


Form a majority of Indian Retail business
Contribution to National Income Employment to ~ 3.98 million people

FDI will affect


Sales Employment

Increasing Poverty
Dislocation of millions from their occupation.
Pushing families below the poverty line.

Employment in Retailing
Limited jobs in manufacturing. Cannot provide employment to semiliterate people
Form majority of population

Creation of Monopolies
Supermarkets will typically sell everything,
vegetables to the latest electronic gadgets, at extremely low prices

foreign company will buy big from India and abroad and be able to sell low

Real Estate Prices


Sky rocketing real estate prices
Increase in space requirements Growth of organized sector Requires an additional 220 million sqft by 201011

Melas

Wal-mart

Predatory Pricing
Given their economies of scale and huge resources Establishment of monopoly Turn into buying low and selling high.

Problems in terms of:


-- volume, quality and delivery -- depressed prices due to cutthroat competition

Retailing In Thailand Good or Bad?

Entry of foreign capital


increased share of organized retailing to 40%

Widespread closure of small and traditional retail outlets Increase in poverty Government forced to enact new laws.

Is Wal-Mart good for India?

What Wal-Mart can do?


35 Indian towns with Population over 1 million
Average size & Average Performance Wal-mart stores

Total FDI 20% retail trade => Rs.800 billion / 43,540 persons Displacement = 8 million
Displace 4,32,000 persons
Average Turnover Rs 81000 million Employees - 10195

What other alternatives does India have?

General Recommendations

Food Retail

Availability of bank finance

Creation of infrastructure

Improvement of manufacturing sector

Quality regulation

Establishment of National Commission

Government intervention

Setup of Cooperative Stores

Regulations for foreign players

Conclusion
FDI in retail is fundamentally different from Greenfield foreign investment in manufacturing.

Negative effects of Foreign retailers:


Job loss Establishment of monopolies Disruption of supply chains So do we still need FDI in Indian Retail?

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