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After a long and winding process, India opened the retail trade to foreign direct investment (RFDI) albeit with some caveats. The process, however, suggests that the case of RFDI provides a classic example of large global corporations succeeding in influencing public policy of developing countries and putting the regulatory system to stupor with the backing of powerful home governments. Starting from the mid-2000s when it started seeking to expand its global operations, there have been repeated attempts by Walmart to meet important relevant functionaries in India. Once the policy makers were convinced either on their own or due to the intense and sustained lobbying from abroad, the process has been unidirectional. The process also suggests that the protection offered by the safeguards could be illusory.
Scientific Essay from the year 2011 in the subject Business economics - Trade and Distribution, language: English, abstract: ABSTRACT With US President's visit, Planning Commission has given green signal to FDI in multi brand retailing. Only 51 per cent FDI in single-brand retail is permitted in India. Multi brand retailers were only allowed to operate wholesale outlets. The paper will cover how FDI in retail sector can be introduced, benefits of allowing FDI, how to have control over the global players, and how local retailers can survive in spite of the big players. The retail industry in India is of late often being hailed as one of the sunrise sectors in the economy. Emergence of organized retail sector in India has more to do with increasing purchasing power of buyers and modern supply and logistic management techniques. With a contribution of 14% to the national GDP and employing 7% of the total workforce (only agriculture employs more) in the country, the retail industry is definitely one of the pillars of the Indian economy. Keywords: Foreign Direct Investment, organized retail sector, single-brand retail, globalization, foreign retailers, Ministry of Commerce, Industrial policy and promotion, FDI's issues and prospects. *********
This note assesses India's policy of permitting foreign direct investment (FDI) up to 51 per cent in the multi brand retail-trading (MBRT) sector in light of India's bilateral investment treaties (BITs). This is assessed by examining whether India's BITs provide pre-entry national treatment protection to foreign investment or not. Based on this assessment, the note finds that this policy is consistent with India's BIT obligations. However, the note argues that given the current political opposition to this policy and other features of India's BIT like protection of foreign investment from both direct and indirect expropriation, reversal of this policy in future by a later government, after foreign investment has been made, might trigger BIT claims against India.
The retail industry in India has often been hailed as one of the sunrise sectors in the economy. The Indian government is mulling about allowing FDI in multi- brand retailing. While some people welcome this move, others oppose it. The study tries to identify the opinion of retailers towards this move. The study examines the issues related to various aspects of FDI including, product related, place related, process related, promotion related, people related, price related issues, physical evidence and environmental related issues. A sample of 200 retailers was selected from the Bangalore city. The statistical techniques which are used in the study include descriptive statistics, frequencies and percentages, reliability test, chi- square test, one- way ANOVA, two- way ANOVA and Correlation. The major findings of the study was that there is a mixed reaction among the retailers towards allowing FDI in multi- brand retail, a majority of them seems to directly or indirectly prefer the entry of foreign players. However the respondents prefer a calibrated and cautious approach towards the introduction of FDI thereby safeguarding the interests of small retailers.
The recent policy of allowing 100% FDI in multi-brand retail has generated political feuds with lot of “ifs and buts” rather than proper economic debates. The proposed policy is primarily an economic one and hence likely to affect significantly the national economy. This paper, therefore, looks into the pros and cons of FDI in retail from a purely economic point of view. While we accept the tremendous scope for organised retailing in India, two things need to be underscored: productivity and protection. Big business should not be allowed to ruin the small enterprises in the name of investment and integration. Therefore, we suggest both in-built safeguards and public support to the retail sector.
As India grows, driven by its success in information technology and services, there is another revolution waiting to happen in the Retail sector dependent on whether the Government of India can unshackle the various inefficiencies that are keeping this industry constrained. Retail in India is estimated at nearly US$ 400 billion and is growing at a CAGR of 9 percent (AT Kearney GRDI 2010). 96 percent of this sector remains un-organized and constitutes a workforce that have taken to self-employment for daily subsistence due to an overcrowded agriculture sector and lack of employment opportunities for lesser skilled workers in the manufacturing or services sectors. Food and groceries form nearly 60 percent of India's retailing followed by, among others, clothing and footwear at a distant 9 percent of retail. Despite the size of this market, retail and its food supply chain remains unorganized and inefficient. A lack of investment, technology and process control in the agriculture supply chain leads to tremendous waste accounting for nearly 25-30% of fruits and 10% of grains produced. Also, the related and supporting industries for food processing, cold chains and crafts remain nascent. In a grim reflection on the situation, a politician in India recently remarked that Indian consumers buy shoes in air-conditioned stores but food on the streets. Despite this scathing but accurate comment, the debate on whether to organize retail remains unresolved. This debate is further complicated by intellectual and political debate on the impact of Foreign Direct Investment (FDI), by large international retailers like Wal-Mart, on the fate of small retailers. Interestingly, both these questions have been on the table of policy makers in India for more than 15 years and the Government has so far only allowed some FDI in 'single-brand' retailing and 'wholesale trading' of retail goods. While the incumbent Congress party led Government has voiced many reasons to organize retail and allow FDI in multi-brand retailing, public opinion in response to a discussion paper released by the Department of Industrial Policy and Promotion (DIPP) - Ministry of Commerce & Industry - has been negative. In my quest to decipher whether India should organize and allow FDI in multi-brand retail, I have analyzed all the opinions received by the DIPP. I posit that the data is skewed and not sufficient to form the basis of a policy decision. I have also conducted an extensive literature review on the impact of Wal-Mart on small retailers to understand the potential impact it can have on India. Despite the concerns, I conclude that this change can be managed to India's advantage and that opening of the retail sector to FDI is an imperative, not an option.
This Survey-Based Study Analyses The Current Retail Scenario In India, Investigates The Growth Across Different Segments Of Retailing And Evaluates The Likely Impact Of Allowing Fdi (Foreign Direct Investment) On Various State Holders In Different Retail Segments.
In 2012, the Indian Government threw open the gates to foreign investment in multi-brand retail in a bid to tap the combined mammoth potential of the retail and agriculture sector.This reform was roundly attacked by opponents saying that it would threaten the existence of unorganised retail or the traditional mom and pop stores. There were also speculations that the reform would lead to exploitation of farmers by foreign retail chains since they would pressurise them to sell their produce at cut-throat prices. All this would put a financial strain on the economy. To unravel this dilemma, we studied the impact of recent economic reforms on FDIin multi-brand retail particularly onthe unorganised retail outlets and also onthe farmers and economy. Primary research amongst consumers revealed that the advent of FDI based multibrand stores would not have an adverse effect on sales ofthe mom and pop stores. We also carried out extensive secondary research to studythe pros and cons of FDI in multi-brand retailin other countriesas well as the relative strengths and weaknesses of foreign retail chains via-a-vis unorganised retail.Findings showed that the weaknesses (and threats) of foreign retailers outnumber the inherent strengths (and opportunities) of mom & pop stores. Moreover there are enough global success stories wherein foreign retail giants have co-existed with the local retail entities and have even taken initiatives to benefit them.The paper thus supports FDI in multi-brand retail in India with arguments from point of view of various stakeholders.
The current debate on allowing foreign direct investment (FDI) in India's retail trade primarily focuses on two issues - employment and consumer welfare. The supporters of the move have developed consumer centric arguments while the opponents are more concerned with its adverse impact on employment. In the process, some key areas of concern remain untouched Here, we have identified the following few which deserve due attention of policy makers. These are: (I) Unique characteristics of Indian retail sector. (II) Identification of major beneficiaries of FDI - the push and pull factors (III) Possible impact on marginal producers and work force- the experiences of other countries. (IV) Impact on existing labor laws. (V) Safeguard options available with the government to protect the interest of small producers and suppliers. This paper attempted addressing the above issues on the basis of secondary information gathered from diversified sources. We concluded that unlike in other sectors, FDI in retail will have a much wider impact on the economy. Organized global retail chains will break the traditional symbiotic relationship that exists between small producers and small retailers. In the new retailing format, due to unequal terms of trade in a monopsony like situation, small producers and suppliers are likely to suffer most.
In September 2012, the Government of India announced several economic policy reform measures that included a move to allow 51 per cent foreign direct investment (FDI) in multi-brand retail. In the same announcement, it relaxed norms for foreign direct investment in the aviation sector, allowing international airlines to invest in domestic peers and cleared a slew of other reform-oriented measures 0́3 an increase of FDI in some broadcasting services.