Fdi in Multi Brand Retail

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Risk and Return Analysis of FDI in Multi Brand Retail in India

Ms. Anita Nyati, Lecturer (Business Administration)

ABSTRACT

Foreign Direct Investment (FDI) is the outcome of the mutual interest of multinational firms and host countries. The current debatable issue in India is whether to permit FDI in Multi Brand Retail (MBR) or not. This paper provides a study of various aspects of FDI in Multi Brand Retail. Firstly the paper examines the present set up of retail sector in India. Further it focuses on the benefits of FDI which are expected in terms of better quality, better technology, better customer services and infrastructural development of India. The paper also discusses the major concerns / risk associated in form of unemployment or throat cut competition with FDI permission. To support the discussion, the experiences of other countries have also been included in the analysis. The last section prescribes the conclusion that the opening up the retail sector to foreign players will be a step to flourish the retail sector as well as society, on the condition to implement with proper strategies so that the returns can be maximised and risk can be minimised. Some riders may be applied on foreign entities like minimum investments in the back end infrastructure, caps on scale etc. Thus, if done in the right manner, FDI in Multi Brand Retail sector can prove to be a Boon and not a Curse.

Keywords

Foreign Direct Investment, Multi Brand Retail, Strategies.

Risk and Return Analysis of FDI in Multi Brand Retail in India

Ms. Anita Nyati, Lecturer (Business Administration)

Govt P G College, Pratapgarh

This is one of the burning issues to discuss in India. As the retail industry in India is the 2nd largest source of employment after agriculture, so policies related to retail sector should be well managed. Before we start analysis of impact of FDI in multi brand retail, it is better to have a look on current scenario of Retail Industry and FDI in India.

Overview

According to the Delhi High Court, Retail means sale for final consumption to the ultimate consumer. Indian retail industry can be categorized in two types – Unorganized and Organized. Unorganized retail sector consists of all small shops, kirana stores etc with low investments while organized retail sector consists of well managed retail chain or hyper market etc with large scale operation and heavy investment and infrastructure.

Current scenario of FDI in India

Foreign direct investment (FDI) refers to capital inflows from abroad that is invested in or to enhance the production capacity of the economy. Post liberalization according to GATS & WTO, India has also opened up many sectors including retail sector to foreign players partially.

The following development in FDI in retail sector in India –

1997 – 100% FDI allowed in cash and carry wholesale trading under govt approval route.

2006 – 51% FDI allowed in single brand retailing.

2011 - And pProposal for 100% FDI clearedin Multi Brand Retail by theby the parliament in the winter session.n 2011.

This journey has resulted in USD 194 million between 2006 and 2010. India is ranked as the 3rd most attractive nation for retail investment among 30 emerging markets.

At present - Discussion on FDI in Multi brand trading.

Multi bBrand rRetails (MBR) can be in different formats like super market, hyper market, compact hyper etc. Although this organised retail sector has a lot of potential yet this sector is constrained by several factors like highly restrictive licence regime and poor infrastructure. So the idea of getting FDI in multi brand retails becomes stronger.

Proposal for FDI in MBR –

• 51 % FDI permission in MBR.

• Minimum investment of $100 million.

• 50% of the investment is to be in backend infrastructure development.

• 30% of all raw materials have to be procured from India’s small and medium industries.

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