Fdi in India

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n International Journal of Engineering and Management Research, Vol. 2, Issue-1, Jan 2012 ISSN No.: 2250-0758
Pages: 31-36
www.ijemr.net

FOREIGN DIRECT INVESTMENT IN RETAIL IN INDIA
Dr. Gaurav Bisaria
Assistant Professor, Faculty of Management & Research, INTEGRAL UNIVERSITY, Lucknow, INDIA. gaurav_or@rediffmail.com

I. INTRODUCTION
FDI
Foreign direct investment (FDI) or foreign
investment refers to the net inflows of investment to
acquire a lasting management interest (10% or more)
in an enterprise operating in an economy other than
that of the investor. Foreign direct investment is the
sum of equity capital, reinvestment of earnings and
other long or short term capital as shown in the
balance of payments. It usually involves participation
in management, joint venture, transfer of technology
and expertise.
There are two types of FDI: (a) Inward
foreign direct investment and (b) Outward foreign
direct investment. Foreign direct investment excludes
investment through purchase of shares. Foreign direct
investment can be used as one measure of growing
economic globalization.
SINGLE BRAND
Single brand implies that foreign companies
would be allowed to sell goods sold internationally
under a ‘single brand’, viz., Reebok, Nokia and
Adidas. FDI in ‘Single brand’ retail implies that a
retail store with foreign investment can only sell one
brand. For example, if Adidas were to obtain
permission to retail its flagship brand in India, those
retail outlets could only sell products under the
Adidas brand and not the Reebok brand, for which
separate permission is required. If granted
permission, Adidas could sell products under the
Reebok brand in separate outlets.
MULTI BRAND
FDI in Multi Brand retail implies that a
retail store with a foreign investment can sell
multiple brands under one roof. Opening up FDI in
multi-brand retail will mean that global retailers
including Wal-Mart, Carrefour and Tesco can open
stores offering a range of household items and

grocery directly to consumers in the same way as the
ubiquitous ’kirana’ store.
PRESENT SHAPE OF FDI
The retail industry in India is the second
largest employer with an estimated 35 million people
engaged by the industry. There has been opening of
Indian economy to foreign organization for foreign
direct investment through organized retail. The union
government has sanctioned 51% foreign direct
investment in multi-brand like Wal-Mart, Carrefour,
Tesco and upto 100% in single brand retail like
Gucci, Nokia and Reebok. This will make foreign
goods and items of daily consumption available
locally, at a lower price, to Indian consumers. The
new policy will allow multi-brand foreign retailers to
set up shop only in cities with a population of more
than 10 lakhs as per the 2011 census. There are 53
such cities. This means that big retailers can move
beyond the metropolises to smaller cities. The final
decision will however lies with the state
governments. Foreign retailers will be required to
put up 50% of total FDI in back-end infra-structure
excluding
that
on
front-end
expenditures.
Expenditure on land cost and rentals will not be
counted for the purpose of back-end infra-structure.
Big retailers will need to source atleast 30% of
manufactured or processed products from small
retailers. The government will go for surprise checks
and if found irregularities then the deed will be
broken with a second of time. Home grown retailers
have not muscles and the reach to go for the big game
like Subiksha and Vishal Retail. They have expanded
their retail chain but did not have the resources to
manage the backend across several cities. If we look
rationally at the FDI in retail sector then it will be a
win-win situation for all.

31

II.

THEME

Figure1: A view of organized retail
According to the news-paper Indo-Asian
News Service, Washington, (dated December 09,
2011) U.S. has said that they respect...
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