Fdi in Retail in India

Topics: Retailing, Shopping mall Pages: 14 (5026 words) Published: March 27, 2012
FDI In Retail in India|
Under the Guidance ofMr. Ranjan ChaudhuriSubmitted ByRajkumar (80)Shristi Gupta (94)Swati Jain (112)| |

FDI in Retail in India: An Article

Abstract: As per the current regulatory regime, retail trading (except under single-brand product retailing — FDI up to 51 per cent, under the Government route) is prohibited in India. Simply put, for a company to be able to get foreign funding, products sold by it to the general public should only be of a ‘single-brand’; this condition being in addition to a few other conditions to be adhered to. That explains why we do not have a Harrods, or the cost leader Wal-Mart, or the awe-striking brands like Carrefour and Tesco in India. India being a signatory to World Trade Organization’s General Agreement on Trade in Services, which include wholesale and retailing services, had to open up the retail trade sector to foreign investment. In 1997, FDI in cash and carry (wholesale) with 100 percent ownership was allowed under the Government approval route. It was brought under the automatic route in 2006. 51 percent investment in a single brand retail outlet was also permitted in 2006. FDI in Multi-Brand retailing is prohibited in India and the debate is still on whether or not it should be allowed and what are the pros and cons for the decision. Literature review

* Definition of Retail
‘Retail’:- a sale for final consumption in contrast to a sale for further sale or processing (i.e. wholesale). ‘A sale to the ultimate consumer’[1]. Thus, retailing can be said to be the interface between the producer and the individual consumer buying for personal consumption. This excludes direct interface between the manufacturer and institutional buyers such as the government and other bulk customers. * Division of  Retail Industry

The retail industry is mainly divided into:- 1) Organised and 2) Unorganised Retailing Organised retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganised retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc. The Indian retail sector is highly fragmented with 97 per cent of its business being run by the unorganized retailers. The organized retail however is at a very nascent stage. The sector is the largest source of employment after agriculture, and has deep penetration into rural India generating more than 10 per cent of India’s GDP. [2]

* FDI Policy in India
FDI is defined in Dictionary of Economics (Graham Bannock et.al) as investment in a foreign country through the acquisition of a local company or the establishment there of an operation on a new site.[3] Foreign Investment in India is governed by the FDI policy announced by the Government of India and the provision of the Foreign Exchange Management Act (FEMA) 1999. The Reserve Bank of India (‘RBI’) in this regard had issued a notification,[4] which contains the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000. This notification has been amended from time to time. The Ministry of Commerce and Industry, Government of India is the nodal agency for motoring and reviewing the FDI policy on continued basis and changes in sectoral policy/ sectoral equity cap. The FDI policy is notified through Press Notes by the Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion (DIPP). The foreign investors are free to invest in India, except few sectors/activities, where prior approval from the RBI or Foreign Investment Promotion Board (‘FIPB’) would be required. * FDI Policy with Regard to...

Bibliography: [4] Notification No. FEMA 20/2000-RB dated May 3, 2000
[5]FDI_Circular_02/2010, DIPP
[6] http://siadipp.nic.in/policy/changes/pn3_2006.pdf
[7] Mohan Guruswamy, Implications of FDI in Retail, (Dec 16 2010) http://www.scribd.com/doc/36888679
[8] Discussion Paper on FDI in Multi Brand Retail Trading, http://dipp.nic.in/DiscussionPapers/DP_FDI_Multi-BrandRetailTrading_06July2010.pdf
[9]  National Accounts Statistics, 2009
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