FDI

FDI is generally defined as A form of long term international capital movement, made for the purpose of productive activity and accompanied by the intention of managerial control or participation in the management of foreign firm.

POLICY ON FDI
India has among the most liberal and transparent policies on FDI among the emerging economies. FDI up to100% is allowed under the automatic route in all the sectors except the following, which require prior approval of Government: Sectors prohibited for FDI. Activities that require industrial license. Proposals in which the foreign collaborator has an existing financial/technical collaboration in India in the same field. Proposals for acquisition of shares in an existing Indian Company in financial service sector and where SEBI regulations, 1997 is attracted. All proposals falling outside notified sectoral policy in which FDI is not permitted.

Aviation Telecom Infrastructure

Information Technology

Retail Traders
Banking Insurance

Pharma

Mining Steel

Professional
Education

RETAIL TRADE : BACKBONE OF ECONOMY

Retail trade is worlds oldest business. Retail trade consists of sale of goods & services to consumers for their personal, family or household use. Based on turnover and volume, retail trade is worlds biggest economic activity.

In the year 2000, world turnover in retail trade is estimated around Rs. 3,10,20,000 crores.
In India by investing nominal Capital a person can start retail business. In India Retail shops are generally owned and run by family. The whole family gets self employed.

WHAT WAS THE CRITERIA FOR FDI

Some time in 1991-92, the then Finance Minister and present Prime Minister Dr. Manmohan Singhji referred to certain criteria for allowing Foreign Direct Investment. These were : Establishment of basic industries requiring huge capital and advanced sophisticated technology. Infrastructure projects like electricity generation road building etc. Projects which would generate employment

1.

2.

3.

Incentives attract FDI. Market size and potential are sufficient inducers.

Tax breaks, import duty exemptions, land and power

subsidies, and other enticements.

FDI inflows from 2000-10 crossed $300 billion

FDI inflows from August 1991 to April2010 were $134.6 billion.

GRDI Position : 3rd Size : $ 400 billion Growth Rate : 13% GDP contribution : 12% Major sector : Food and Grocery Employment : 2nd largest industry (35.06 million) Types: Organized ( 5%) Unorganized ( 95%)

Corporate are increasingly coming into this sector.

Demand of branded goods on a large scale. Demand of new and varied products. High quality product is preferred . Varied window display.

 One of the world's largest industries exceeding US$ 9 trillion. Dominated by developed countries. 47 global fortune companies & 25 of Asia's top 200 companies are retailers. US, EU & Japan constitute 80% of world retail sales.

 Retail trade in Europe employs 15% of the European workforce (3 million firms and 13 million workers). The worlds population is poised to expand 50% by 2050.

The world currently comprises of 78% poor, 11% middle

income and 11% rich.

Contribution Respective to GDP

12% 6%
India Brazil Japan

14% 8% 20%

China USA

Increase in consumer class.

Consumer class will grow

from 50 million at present to 583 million by 2025. With more than 23 million people taking their place

Upper class Middle class Lower class

among the worlds

wealthiest citizens.

Employment generation.
Second-largest employer after agriculture.

Retail trade employing 35.06 million.

Wholesale trade generating an additional employment of 5.48 million.

Additional 1.6 mn jobs .

FDI in Retail sector will resolve problems regarding foreign exchange in India.

The life-long basic needs will keep on driving the Retail Industry.

WILL THIS HAPPEN WITH FDI IN RETAIL TRADE

Throughout the world it is known fact that huge investment is not required to open a retail shop. Investment is required to build infrastructure for shop, sophisticated technology is not required in retail trade. Small Retail shops provide more employment then large chain of Retail stores. There is no gestation period. Hence business starts from day one. Instead of developing under developed areas these stores capture prime commercial property in cities.

WHAT DO FOREIGN / MULTINATIONAL COMPANIES DO

In 60s Big foreign houses entered in retail trade in other parts of world. This is against our culture of One family One shop. These big companies, in order to crush competitors sell goods cheap. Later on effective prices of goods are increased.

These companies buy material from International market. Hence local producers are put to loss
These companies buy in bulk quantities directly manufacturers. The intermediaries loose business. from

After conquering the markets of Europe and America, these companies have now entered Asian markets.
After establishing their footings in Thailand, Indonesia, China, Japan, Philippines, etc in Asia, these companies are now targeting India.

WHAT HAPPENED IN OTHER ASIAN COUNTRIES

Other countries are also unhappy. started taking precautions. Many countries have

Indonesia and Malaysia have established zones within which these foreigners can do trade. In Japan Big companies have to discuss with small traders. There is Zoning system also. Hence these companies have to establish their shops outside city limits. There is wide discontent amongst shopkeepers & people in the countries to which these store belong. The city counselor of California & Chicago have refused to allow opening of new shops to WALMART. These shops are required to take permission in countries like France, Germany and America.

NOW ITS TURN OF INDIA

The tough stand taken till recently by Central Govt., Foreign Retail Traders could not enter India. It is unfortunate that Central Cabinet has given approval to FDI in Retail Trade. Shift of Major retail trade to these big companies will render small traders & their employees unemployed. Many companies with the help of contract farming will sell goods produced in farms directly from their chain of stores. These companies will keep only graduates and above in their employment. There will be no scope for employment to under graduate and others. In the event of non receipt of payment of supplies, it becomes impossible to reach owners.

PROPOSAL AS FINALISED BY GOVERNMENT

The latest FDI liberalization policies of India, in multi-brand retail sector, are the following conditions :
FDI in Multi Brand Retail Trade (MBRT) may be permitted up to 51%, with Government approval

Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million. Retail sales locations are allowed in only those cities of India whose population is at least one million. At least 30% of their goods and products will be procured from the Indian local companies and industries At least 50% of the total investment will be made on the Back-end Infrastructure Government will have the first right to procurement of agricultural products

CONCLUSION
The increased flow of FDI in a country has given a major boost to the countries economy. FDI has provided better access to technologies for local economy. FDI will be a powerful driver to curb inflation. Opportunity to urban and rural unemployed Hence measure must be taken in order to ensure that the flow of FDI in our country continues to grow.