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Submitted By

Arun Sen Arjun Anakha Keerthi Ashok Hima Lavanya Suraj T Febin

Indian Economy
Eleventh largest in the world by nominal GDP. Third largest by purchasing power parity (PPP). The country's per capita income stood at $3,693 IMF, 129th in the world, thus making a lower-middle income economy. One of the fastest-growing economies in the world. India has recorded a growth of over 200 times in per capita in a period from 1947(Rs 249.6) to 2011

Indian Economy ( contd.)

India is the nineteenth largest exporter and tenth largest importer in the world. Economic growth rate stood at around 6.5% for the 2011-12 fiscal year. The fall is mainly because of poor performance of Secondary sector which grew by a mere 2.8% in 2011-12. However Services sector grew by 9.4%, unaffected by global trend. India's GDP stands at Rs.52.2 trillion as of 2011-12.

Indian Retail Industry

The Indian retail industry is the fifth largest in the world. Comprising of organized and unorganized sectors, India retail industry is one of the fastest growing industries in India. India retail industry is one of the fastest growing industries with revenue in 2011 to amount US$ 320 billion and is increasing at a rate of 5% yearly. A further increase of 7-8% is expected in the industry of retail in India by growth in consumerism in urban areas, rising incomes, and a steep rise in rural consumption.

AT Kearney, the well known international management consultancy, recently identified India as the second most attractive retail destination globally from among 30 emergent markets. With a contribution of 14 per cent to the national GDP and employing 7 per cent of the total workforce (only agriculture employs more) in the country, the retail industry is definitely one of the pillars of the Indian economy. Unorganised retailing is by far the prevalent form of trade in India constituting 98 per cent of all retailing trade, while the organised trade accounts for the remaining 2 per cent.

Challenges facing Indian retail industry

The tax structure in India favors small retail business Lack of adequate infrastructure facilities High cost of real estate Dissimilarity in consumer groups Restrictions in Foreign Direct Investment Shortage of retail study options Shortage of trained manpower Low retail management skill

The Future of Indian Retail Industry

The retail industry in India is currently growing at a great pace and is expected to go up to US$ 833 billion by the year 2013. As the country has got a high growth rates, the consumer spending has also gone up and is also expected to go up further in the future. In the last four year, the consumer spending in India climbed up to 75%. As a result, the India retail industry is expected to grow further in the future days.

What is FDI ???

Investment directly into production in a country by a company located in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Investment is done for many reasons including to take advantage of cheaper wages in the country, special investment privileges such as tax exemptions offered by the country as an incentive to gain tariff-free access to the markets of the country or the region.

Positive Side of FDI

Opportunities galore:- Indian companies are exporting different types of products to numerous retailers across the globe Difference in the quality of the products sold to foreign retailers and the same products sold in the Indian market. There is an increasing tendency to pay for quality and ease and access to a one-stop shop The consumers will benefit in the form of potential lower prices due to enhanced and, possibly, tough competition in the market.

Positive Side of FDI (cont)

Benefits for the farmers: the onset of multibrand retail, the food and packaging industry will also get an impetus. Very limited integrated cold-chain Infrastructure There could be a complete overhaul of the currently fragmented supply chain infrastructure. Extensive backward integration by multinational retailers, coupled with their technical and operational expertise, can hopefully remedy such structural flaws. Farmers can benefit with the farm-to-fork ventures with retailers which helps (i) to cut down intermediaries ; (ii) give better prices to farmers, and (iii) provide stability and economics of scale which will benefit, in the ultimate analysis, both the farmers and consumers.

Positive Side of FDI (cont)

Improved technology and logistics: In the sphere of processing, grading, handling and packaging of goods and further technical developments in areas like electronic weighing, billing, barcode scanning etc. Further, transportation facilities can get a boost, in the form of increased number of refrigerated vans and pre-cooling chambers which can help bring down wastage of goods.

Positive Side of FDI (cont)

Impact on real-estate development: retailer will require substantial spaces for setting up business. Real estate in India has gone through a revamp due to the demand of high-end retail malls and peoples changing perception towards an enjoyable shopping experience. real estate can get a further facelift in India and receive more investment with the opening up of FDI in multi-brand retail


Critics of FDI
The unorganized retail sector and would adversely affect the small retailers, farmers and consumers. Give rise to monopolies of large corporate houses which can adversely affect the pricing and availability of goods. Retail sector in India is one of the major employment providers and permitting FDI in this sector can displace the unorganized retailers leading to loss of livelihood.


1.) India is severely constrained by limited availability of bank finance. The government and RBI need to evolve suitable lending policies that will enable retailers in the organized and unorganized sectors to expand and improve efficiencies. Policies that encourage unorganized sector retailers to migrate to the organized sector by investing in space and equipment should be encouraged

2.) A national commission must be established to study the problems of the retail sector and to evolve policies that will enable it to cope with FDI as and when it comes. 3.) Set up an Agricultural Perishable Produce Commission (APPC), to ensure that procurement prices for perishable commodities are fair to farmers and that they are not distorted with relation to market prices.

4.) Entry of foreign players must be gradual and with social safeguards so that the effects of the labor dislocation can be analyzed and policy fine-tuned. Initially allow them to set up supermarkets of a specified size only in the metros to make the costs of entry high and according to specific norms and regulations, so that the retailer cannot immediately indulge in predatory pricing.


The optimum level could be defined as that level of FDI which generates a targeted growth rate of national income. There is also the suggestion that in India, at present, it is not FDI which promotes growth but it is growth which attracts foreign firms. This may be so but FDI could accelerate the growth process in progress. FDI, however, is but one of the several factors which contribute to growth. As we have argued elsewhere FDI is not a panacea for the development problem, it is a catalyst in the growth process. It enhances the efficiency of other inputs in the growth process through its well known role as a supplier of technology and know-how.

FDI in multi-brand retail should be seriously considered by the government and, as with many other sensitive sectors (like defence), a gradual opening up could be made possible. India needs to take a lesson from China where organized and unorganized retail seem to coexist and grow together. Indias local enterprises will potentially receive an upgradation with the import of advanced technological and logistics management expertise from the foreign entities.

Thank You