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International Indexed & Refereed Research Journal, ISSN 0974-2832, (Print), E- ISSN- 2320-5474, Aug-Oct, 2013 ( Combind ) VOL –V * ISSUE – 55-57
Research Paper - Commerce
Aug- Oct , 2013
Introduction-
Foreign direct investment refers to the
total of equity capital, reinvestment of earning, long
term and short term capital. After being signatory to
WorldTrade'sOrganizationgeneralagreementonTrade
in Services,which include wholesale and retailing ser-
vices, India had to open up the retail trade sectors to
foreign investment.
In organized retail business size is very small but its
scope is extraordinary. Bythe year 2013, it is expected
that retail industry in India is expected to go up to
us$833 billion. It is moreover believed that to reach
us$1.3 trillion by the year 2018 at a CAGR of 10%.
RetailSector-
In 2004, The High court of Delhi defined
the term 'retail' as a sale for final consumption in con-
trast to a sale for further sale or processing (i.e. whole-
sale), a sale to the ultimate consumers. Thus, retailing
can be said to be interface between the producer and
the consumer. Retailing excludes the direct interface
betweenthe manufacturerand theconsumer. Consum-
ers may be government or other bulk customer. A re-
tailer earns a margin of profit by selling goods to indi-
vidual consumer
Reforms-
In November 2011, Central Government of
India announced a lot of retail reforms for both multi
brand retailers such as Carrefour, Tesco and Wal-Mart
and as well as single brand major such asApple, Nike
etc. A lot of intense activism sparked both in opposi-
tion and in support of reforms. In December 2011, In-
dianGovernmentplacedtheretailreformsonholdunder
pressure from the opposition till it reaches a consen-
sus. In January 2012, Indian Government approved
reformforasinglebrandstore,whichanyonecancome
FDI in Retail Sector
* Ms. Deepika
* Asst. Prof.incommerce,GMN(PG)College, AmbalaCantt.
The goal of this research paper is to examine the changes in market scene in retail sector, an overview of the Indian retail
sector, reforms, entry option for foreign prior to FDI policy. It examines the growing awareness in all social classes of people
in India and show how the urban and semi- urban retail markets are growing. Government has approved on September
20, 2012, 51% FDI in multibrand and 100 %( revised) in single brand retail sector by government route. It is explained
by Prime Minister of India to the nation that the necessity and obligation under WTO agreement to allow FDI in retail
sector. India is the profit oriented and attractive market for the investment in developed countries since last two decades.
For entering the market of developing countries, FDI is an easy path.
A B S T R A C T
Keywords- FDI, FDI inflow, reforms, challenges
inIndianmarkettoinnovateinIndianretailmarketwith
100% ownership. But it imposed some regulation that
single brand retailer source 30% of its goods from
India. In multi brand retail store, Indian Government
can continue the hold on retail reforms. Due to this
announcement IKEA announced in January that it is
putting on hold its plan to open stores in India because
of the 30% requirement.
EntryOptionsForForeignPlayersPriorToFdiPolicy-
1. Cash and Carry wholesale trading
In cash and carry trading, 100% FDI is allowed. It
involves building of a large distribution infrastructure
to assist local manufacturers. In this the wholesaler
deals only with small retailers not with customers.
Example-MetroAGGermanywasthefirstglobalplayer
who enters through this way.
2. Strategic LicensingAgreement-
With the help of these rights, Indian compa-
nies can use it either by sell it through own stores or
they may enter into shops arrangements or they may
distributes the brand to Franchisee.
3 Franchise Agreement-
It is one of the easiest ways to come in the
Indian market. In franchising and commission agents'
services, FDI is allowed after taking the approval of
Reserve Bankof India (RBI) under the FEMA . This is
one ofthemost usual modes for entranceofquick food
bondageoppositeaworld.SomeofexamplesarePizza
Hut, Mango etc.
4. Manufacturing and wholly owned subsidiaries-
Somefamous foreign brands likeReebok,Adidas,
Nike, Peter England, and Mentor etc that havewholly-
ownedsubsidiariesinthemanufacturingareallowedto
do retail with Indian company. These companies can
sell theirproducts to Indian consumers byfranchising,

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International Indexed & Refereed Research Journal, ISSN 0974-2832, (Print), E- ISSN- 2320-5474, Aug-Oct, 2013 ( Combind ) VOL –V * ISSUE – 55-57
own outlet, existent Indian retailers etc.
Forexample-Nikeenteredthroughanexclusiveagree-
mentwithSierraenterprisesbutnowhaswhollyowned
subsidiaries, Nike India Private.
FDIInSingleBrandRetailing-
There no clear cut definition of single brand
in any of its circulars and any notifications. In single
brand retail, the limit of FDI is 51%, but now as per
recentdevelopmentanddeclarationofthegovernment
ofIndia,thislimitisextendedupto100%ownershipby
foreign retailers and investors. Therefore a lot of op-
portunity is generously offered to all foreign compa-
nies, retailers and investors of the world for entering
into Indian market. The foreign direct investment is
hopedtoreachthelevelofUS$2.5-3billioninnextfive
yearsinbothmultibrandand singlebrand.Theforeign
single brand retailer will have to procure at least 30%
of their products and goods from the local or domestic
industries and companies to do business in India.
FDI In MultiBrandRetailing-
The government of India also does not
define multibrand retailing in anycircular nor its noti-
fication.Multibrandretailingimpliesthataretailstore
withaforeigninvestmentcansellmultiplebrandsunder
oneroof.InJuly2010,Departmentofindustrialpolicy
andpromotion(DIPP),adiscussionpaperiscirculated
amongministryofcommercewhichallowsFDIinmulti
brand retail. But this paper does not suggest any kind
ofupperlimitonFDIinmultibrandretail.Itwouldopen
the doors for global retail giants to enter and establish
their footprints on the retail landscape of India, if it is
fullyimplemented.Ifthereisopeningupofmultibrand
retailing, it would mean that global retailers including
Carrefour,Wal-MartandTescocanopenastores.These
storesworkinasamemanneras'kirana'storesoffering
a range of household item and grocery directly to con-
sumers.
as per an estimate by mellow and expert economist.
India contributes almost 15% in national GDP. Today
India is regarded as one of the top five largest retail
market in the whole world as India is estimated to be
worth US $450 billion. The retail market of India can
reachthelevelofaround$650 billionbytheyear2015,
as per an estimate by mellow and expert economist
.India contribute almost 15% in national GDP.
ChallengesofRetailingInIndia-
1. Threat of product obsolescence low margin and
dissimilarity in consumer groups.
2. Mainly status of the retailer industry will depend
on external factors like government government
regulation and policies.
3. Slowly emerging from recession face a lot of diffi
culties from bank.
4. Difficultiesinattractingcustomersfromtraditional
kirana stores.
5. Strict restriction on retail sector by government.
6. Entry of large global retailers such as Wal- Mart
would kill local shops and millions of jobs.
7. Retailerwouldexercisemonopolisticpowertoraise
and reduce the price received by the supplier.
8. It will cause dissatisfaction and social tense else
where.
9. Profitmarginofsuchretailchainwouldgoupwhile
both consumer and supplied would get loss.
10. FDI in retailing can also upset the import balance
RemovalOfLimitation-
i) Development of infrastructure should take place.
ii) RemovalofIntermediaries monopoly
iii) Properpublicdistributionsystemshouldbemade.
iv) Giving chance to micro, small and medium enter
prises.
Conclusion-
There are a lot of innovation comes out in
Indianmarketwhichstrengthenmarketposition.There
willbeinitialandadvantageousdisplacementofmiddle
man which is involved in the supply chain of farm
produce, but theyare likelyto be absorbed by increase
in the food processing sector induced by organized
retailing. Due a lot of efforts made by government,
there are adverse effects on smallretailers and traders.
Farmers are able to earn more with the help of direct
marketing window. Due to global competition, con-
sumers are able to get better quality, cash memos and
assured weights products. There will rise in govern-
mentrevenuedue to largebusinessand recorded sales.
1 www.rbi.org.in 2 www.ask.com 3 www.economywatch.com
4 Research paper of K.R. Kaushik, research scholar, modinagar, SRM University
5 Research paper of Rupali gupta , Christ University, Bangalore
6 Press Note 4 of 2006 issued by DIPP 7 Consolidated FDI policy issued in October 2010 8 Revised FDI policy issued in
2011 and 2012 vide press note 1of 2011
R E F E R E N C E
Today India is regarded as one of the top five largest
retailmarketinthewholeworld asIndiaisestimated to
beworthUS$450billion.TheretailmarketofIndiacan
reachthelevelofaround$650 billionbytheyear2015,