Foreign Direct Investment.

Intoduction FDI is investment in a foreign country through the acquisition of a local company or the establishment of a new site.. To put in simple words, FDI refers to capital inflows from abroad that is invested in or to enhance the production capacity of the economy. 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 in this regard had issued a notification which contains the Foreign Exchange Management 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 foreign investors are free to invest in India, except few sectors/activities, where prior approval from the RBI or Foreign Investment Promotion Board would be required. What is Multi-Brand Retailing? Single brand retail means selling products under one brand, which are also sold internationally. Examples are Rebook, Adidas, Nike, Gucci, Lotto. Levis etc. Multi-branding is the process of selling or marketing of two or more widely similar, competing and sometimes substitute products by the same firm under different brands. Multi-brand retail has the different formats like supermarket, hypermarket, and the shopping malls etc. Conditions to be fulfilled by foreign countries to enter Indian markets There are some basic requirements which must be fulfilled by the foreign companies to enter Indian retail market which are as follows : 1) Amount of investment If any foreign company wants to enter into the Indian market the very first condition which it has to satisfy is that such foreign company must invest at least 100 million dollars or more into the Indian market. No foreign company whose investment is less than 100 million dollars will be allowed to enter Indian retail sector. 2) Places of opening stores Another condition which these foreign companies have to satisfy is that they can't open their stores at any place in India where they want rather such companies can open their stores only in those cities the population of which is 1 million or more. 3) Other conditions Apart from this there are certain other conditions which must be satisfied by these foreign companies to enter Indian markets like at least 50 % of their investment should be in back-end infrastructure like warehouses etc. & they have to take permission to the concerned state government where they want to establish their chains.

FDI Policy with Regard to Retailing in India Prospected Changes in FDI Policy for Retail Sector in India The government (led by Dr.Manmohan Singh), announced following prospective reforms in Indian Retail Sector 1. India will allow FDI of up to 51% in multi-brand sector. 2. Single brand retailers such as Apple and Ikea, can own 100% of their Indian stores, up from previous cap of 51%. 3. The retailers (both single and multi-brand) will have to source at least 30% of their goods from small and medium sized Indian suppliers. 4. All retail stores can open up their operations in population having over 1million.Out of approximately 7935 towns and cities in India, 55 suffice such 5. Multi-brand retailers must bring minimum investment of US$ 100 million. Half of this must be invested in back-end infrastructure facilities such as cold chains, refrigeration, transportation, packaging etc. to reduce post-harvest losses and provide remunerative prices to farmers. 6. The opening of retail competition (policy) will be within parameters of state laws and regulations.

Merits 1.Plenty Opportunities: There is a huge opportunity for FDI in multi-brand retail. At the present moment, Indian manufacturers are exporting different and various types of products to innumerable retailers worldwide. There are a significant number of people in the population which feels that there is a considerable difference in the quality of the products sold to foreign people and the same products sold in the local market. In view of the availability of disposable incomes for Indians, there is an increased thinking to pay for quality and ease and access to a one-stop buying which will have a wide range of different products. If the economy is opened, then the prices can also be changed and the monopoly of specific Indian manufacturers will be challenged. In the eventual analysis, the Indian consumers will get benefit in the form of possible lower prices due to free, enhanced and, possibly, tough competition in the retail sector.

2.Benefits for the Indian farmers: It can be assumed that, with the establishment of multi-brand retail, the essential commodity industry like food and packaging industry will also get benefits and boost also. India is on of the largest producers of fruits and vegetables; it has not enough integrated cold-chain infrastructure. Non-availability of adequate storage facilities is a cause for heavy losses to the farmers, as well in terms of wastage in quality and quantity of fruits and vegetables in particular. With adoption of liberal, there could be a complete overhaul of the currently fragmented supply chain infrastructure. Extensive backward integration by MNC retailers, coupled with their technical and operational expertise, can hopefully remedy such structural flaws. Also, farmers can get benefit with the farm-to-fork the chain of food supply, from the farm where it is produced to the consumer ventures with retailers which helps (i) to reduce number of intermediaries ; (ii) give fair prices to farmers, and (iii) provide stability and economies of scale which will benefit, in the ultimate analysis, both the farmers and consumers. 3.Advanced technology and transportation: Advanced technology for processing, grading, handling and packaging of goods and further technical improvements in areas like electronic weighing, billing, barcode scanning etc. could be a direct result of MNCs opening retail shops in India,. Further, transportation facilities can get an incentive, in the form of increased number of refrigerated vans and precooling chambers which can help to reduce wastage of goods and financial losses. 4.Boost to the real-estate business: Organized retail sector is closely dependant on real estate as any retailer will require large spaces for setting up retail stores. Without real estate it is not possible to grow the retail business. Real estate business in India has gone through a revamp due to the demand of highend retail malls and people's changing perception towards an enjoyable shopping experience. Thus real estate can get a further benefit in India and receive more investment with the starting of FDI in multi-brand retail. 5. Indian government is already operating on budget deficits. It is simply not possible for Indian investors or Indian government to fund this expansion, job creation and growth at the rate India needs. Global investment capital through FDI is necessary. Beyond capital, Indian retail industry needs knowledge and global integration. Global retail leaders, some of which are partly owned by people of Indian origin, can bring this knowledge. With 51% FDI limit in multi-brand retailers, nearly half of any profits will remain in India. Any profits will be subject to taxes, and such taxes will reduce Indian government budget deficit.

6. Intermediaries and mandi system will be evicted, hence directly benefiting the farmers and producers: the prices of commodities will automatically be checked. For example, according to Business Standard, Walmart has introduced Direct Farm Project at Haider Nagar in Punjab, where 110 farmers have been connected with Bharti Walmart for sourcing fresh vegetables directly.

Demerits 1.People those who oppose to the FDI in multi-brand retail, feel that FDI will pose some threats before the unorganized retail sector and will adversely impact the small retailers, farmers and consumers and will give boost to monopolies of large multinational retailers, which may adversely affect the pricing and supply of the goods. They also claim that the unorganized retail sector in India is one of the major employment generators and granting permission to FDI in this sector can hurt financially the unorganized retailers, which would lead to losing the livelihood. 2.Global retail corporations will lay the impact of their pricing on retails and they will try to create monopoly, oligopoly in the markets. This may results in essentials commodities, including food products, supply and pricing being controlled by MNCs and organized retailers. Indian retailers have argued that since lending rates are much higher in India, Indian retailers, especially small retailers, are at a disadvantageous position compared to foreign retailers who have access to International funds at lower interest rates. High cost of borrowing forces the domestic players to charge higher prices for the products 3 This movement will lead to huge number of job losses. World-wide experience has shown that organized retail stores and supermarkets had displaced small and unorganized retailers. Unorganized and small retail sector has been crushed out up to some extents in developed countries like the America and in countries of Europe. Independent stores will close, leading to massive job losses. Walmart employs very few people in the United States. If allowed to expand in India as much as Walmart has expanded in the United States, few thousand jobs may be created but millions will be lost. 4. Jobs opportunities in the Indian manufacturing sector will be lost by Indians, because the multinational and organized retailers will purchase goods across the globe and not from local manufacturers. This is the experience of many countries that have permitted FDI in retail sector. 5 Segmented markets will give many options to consumers to purchase the products any where. The non-segmented markets may face the conditions like lack consumer. Permitting foreign retail players will result in displacing and disturbing the existing markets.

6. It would lead to asymmetrical growth in cities, causing discontent and social tension elsewhere. Hence, both the consumers and the suppliers would lose, while the profit margins of such retail chains would go up.