INDEX

1. Introduction To F D I.

 Definition.
 Types.
 Methods.
 Importance and barriers to FDI.
 Overview.
 Advantages & dis-advantages.

2. FDI Reforms In India (2012).

3. FDI In Retail Sector.
4. Reasons For Allowing FDI In Retail Sector
Foreign Direct Investment

Foreign direct investment (FDI) is direct investment into production or business in a country by a
company in another country, either by buying a company in the target country or by expanding
operations of an existing business in that country. Foreign direct investment is in contrast to
portfolio investment which is a passive investment in the securities of another country such as
stocks and bonds.

Definitions

Foreign direct investment can take on many forms and so sometimes the term is used to refer to
different kinds of investment activity. Commonly foreign direct investment includes "mergers
and acquisitions, building new facilities, reinvesting profits earned from overseas operations and
intracompany loans."[1] However, foreign direct investment is often used to refer to just building
new facilities or greenfield investment, creating figures that although both labeled FDI, can't be
side by side compared.

As a part of the national accounts of a country, and in regard to the national income equation
Y=C+I+G+(X-M), I is investment plus foreign investment, FDI refers to the net inflows of
investment(inflow minus outflow) to acquire a lasting management interest (10 percent or more
of voting stock) in an enterprise operating in an economy other than that of the investor.[2] It is
the sum of equity capital, other long-term capital, and short-term capital as shown the balance of
payments. It usually involves participation in management, joint-venture, transfer of technology
and expertise. There are two types of FDI: inward and outward, resulting in a net FDI inflow
(positive or negative) and "stock of foreign direct investment", which is the cumulative number
for a given period. Direct investment excludes investment through purchase of shares.[3] FDI is
one example of international factor movements. foriegn direct investment is nothing but increase
the country's economy .
Types

1. Horizon FDI arises when a firm duplicates its home country-based activities at the same
value chain stage in a host country through FDI.[4]
2. Platform FDI
3. Vertical FDI takes place when a firm through FDI moves upstream or downstream in
different value chains i.e., when firms perform value-adding activities stage by stage in a
vertical fashion in a host country.
4. Horizontal FDI decreases international trade as the product of them is usually aimed at
host country; the two other types generally act as a stimulus for it.

Methods

The foreign direct investor may acquire voting power of an enterprise in an economy through
any of the following methods:

 by incorporating a wholly owned subsidiary or company anywhere

 by acquiring shares in an associated enterprise
 through a merger or an acquisition of an unrelated enterprise
 participating in an equity joint venture with another investor or enterprise

Foreign direct investment incentives may take the following forms:[citation needed]

 low corporate tax and individual income tax rates

 tax holidays
 other types of tax concessions
 preferential tariffs
 special economic zones
 EPZ – Export Processing Zones
 Bonded Warehouses
 Maquiladoras
  investment financial subsidies
 soft loan or loan guarantees
 free land or land subsidies
 relocation & expatriation
 infrastructure subsidies
 R&D support
 derogation from regulations (usually for very large projects)

Importance and barriers to FDI

The rapid growth of world population since 1950 has occurred mostly in developing countries.
This growth has not been matched by similar increases in per-capita income and access to the
basics of modern life, like education, health care, or - for too many - even sanitary water and
waste disposal.

FDI has proven — when skillfully applied — to be one of the fastest means of, with the highest
impact on, development. However, given its many benefits for both investing firms and hosting
countries, and the large jumps in development were best practices followed, eking out advances
with even moderate long-term impacts often has been a struggle. Recently, research and practice
are finding ways to make FDI more assured and beneficial by continually engaging with local
realities, adjusting contracts and reconfiguring policies as blockages and openings emerge.

Overview
First of all, FDI means Foreign Direct Investment which is mainly dealings with monetary
matters and using this way they acquires standalone position in the Indian economy. Their policy
is very simple to remove rivals. In beginning days they sell products at low price so other
competitor shut down in few months. And then companies like Wall-Mart will increase prices
than actual product price.
They are focusing on national and international economic concerns. There are four main working
pillars of FDI. They are financial collaborations, technical collaborations and joint ventures,
capital markets via Euro issues, and private placements or preferential allotments.

There are two types of FDI, one isinward FDI and second is outward FDI. Ongoing news
suggests that largest retailer Wal-Mart has demanded for 51% of international dealings in FDI in
Indian markets which had called nationwide strike. From positive and negative aspects FDI has
its own advantages and disadvantages.

Advantages

 Increase economic growth by dealing with different international products

 1 million (10 lakh) employment will create in three years - UPA Government

 Billion dollars will be invested in Indian market

 Spread import and export business in different countries

 Agriculture related people will get good price of their goods

Disadvantages

 Will affect 50 million merchants in India

 Profit distribution, investment ratios are not fixed

 An economically backward class person suffers from price raise

 Retailer faces loss in business

 Market places are situated too far which increases traveling expenses

 Workers safety and policies are not mentioned clearly

 Inflation may be increased

 Again India become slaves because of FDI in retail sector

2012 FDI reforms

On 14 September 2012, Government of India allowed FDI in aviation up to 49%, in the

broadcast sector up to 74%, in multi-brand retail up to 51% and in single-brand retail up to
100%. The choice of allowing FDI in multi-brand retail up to 51% has been left to each state.

In its supply chain sector, the government of India had already approved 100% FDI for
developing cold chain. This allows non-Indians to now invest with full ownership in India's
burgeoning demand for efficient food supply systems.[ The need to reduce waste in fresh food
and to feed the aspiring demand of India's fast developing population has made the cold supply
chain a very exciting investment proposition.

Foreign investment was introduced by Prime Minister Manmohan Singh when he was finance
minister (1991) by the government of India as FEMA (Foreign Exchange Management Act).
This has been one of the top political problems for Singh's government, even in the current
(2012) election.

FDI can be defined as a cross border investment, where foreign assets are invested into the
organizations of the domestic market excluding the investment in stock. It brings private funds
from overseas into products or services. The domestic company in which foreign currency is
invested is usually being controlled by the investing foreign company. Eg. An American
company taking major stake in a company in India. Their ROI is based on the performance of the
project.

In the past decades, FDI was concerned only with highly industrialized countries. US was the
worlds largest recipient of FDI during 2006 with an investment of 184 million from OECD
(Organization for Economic Co-operation and Development) countries. France, Greece, Iceland,
Poland, Slovak Republic, Switzerland and Turkey also have a positive record in FDI
investments. Now, during the course of time, FDI has become a vital part in every country more
particularly with the developing countries. This is because of the following reasons:

Availability of cheap labor.

Uninterrupted availability of raw material.

Less production cost compared with other developed countries.

Quick and easy market penetration.

FDI in the Retail sector:

Retailing is one of the worlds largest private industry. Liberalizations in FDI have caused a
massive restructuring in retail industry. The benefit of FDI in retail industry superimposes its
cost factors. Opening the retail industry to FDI will bring forth benefits in terms of advance
employment, organized retail stores, availability of quality products at a better and cheaper price.
It enables a countrys product or service to enter into the global market.

 Cheaper production facilities:

FDI will ensure better operations in production cycle and distribution. Due to economies of
operation, production facilities will be available at a cheaper rate thereby resulting in availability
of variety products to the ultimate consumers at a reasonable and lesser price.

 Availability of new technology:

FDI enables transfer of skills and technology from overseas and develops the infrastructure of
the domestic country. Greater managerial talent inflow from other countries is made possible.
Domestic consumers will benefit getting great variety and quality products at all price points.

 Long term cash liquidity:

FDI will provide necessary capital for setting up organized retail chain stores. It is a long term
investment because unlike equity capital, the physical capital invested in the domestic company
is not easily liquidated.
More than two decades after the first wave of reforms were introduced in the year1991; the
country’s socio-economic health has by no means become better. In the midst of these galloping
problems, the announcement by the UPA government about FDI in multi brand retail comes not
as a relief but as a matter to be given a serious thought. The debate so far is threefold: (a) one
section which is drooling over the reforms and projecting huge surge of investment in
infrastructure and thereby increment in the employment levels. (b) The second group is the one
which is sceptical about the opening of markets for foreign retail giants like Walmart,Carrefour,
Kmart etc. not because they fear that it would affect the overall development of the economy.
Rather, this group fears competition from the big foreign companies which have deep pockets to
procure products from the world market. Thus, it would affect their profits by a huge margin. (c)
The third group comprises of the unorganized retail sector which fears its elimination from the
market in the long run.

Various claims made by UPA seem to fall flat on any reason if we take into consideration the
outcomes of previous reforms. Employment in formal sector has not increased by any count
since 1991, informalization of labour in the formal sector is a clear indication of this fact.
Productivity in agriculture, where almost 54 per cent of the population is dependent has declined.
It is no longer a profitable venture as the input costs have gone up in the post green revolution
phase. Rise in the phenomena of rural to urban migration, rural non-farm employment, farmer
suicides, show what precarious condition agriculture has landed into. Gradual shift of the
economy from agriculture to industry, as expected in the prospects of reforms, has proven to be a
fallacy. Instead, the existing industries have become more capital intensive leading to the
displacement of labour on a mass scale. Trade liberalisation has given the global players a free
hand to rein the economy. As a consequence rate of inflation is rising unchecked as the price of
crude oil is fluctuating globally. These examples showcase that reforms and liberal policies have
not led to the overall development of the economy.

In the light of the above observations, announcement of FDI in multi brand retail does not give
much hope. The Indian retail sector is not only very vast but also varied in its composition. The
huge population of the country, the rise of the middle class and its purchasing power and a huge
market for foreign investment in India are factors that have invoked the interest of the foreign
investors. But, it becomes imperative to see what this FDI would entail for the retail sector when
it is analyzed by keeping the informal economy at the centre of the debate.

When only 4 percent of the retail trade in India comes under the organized retail it becomes
essential to evaluate or assess the viability of FDI taking into consideration not this 4 percent but
the 96 percent which belongs to the unorganized retail sector. The unorganized retail sector is not
a homogeneous category, it comprises of peddlers, street vendors, kiosks, push-cart vendors,
weekly traders. It is not unknown that the majority of those engaged in retailing at the lower end
of the economy depend on the small and medium enterprises for their supplies. It has been
reiterated time and again, by many economists, how and under what conditions the unorganized
sector has risen to such heights in India and other developing countries via the route of the neo-
liberal regime. Indian retail market is quite diverse in terms of scale, culture and structure. Some
reasons for this diversity can be attributed to the divide that exists between rural and urban India.
Traditional forms of marketing (neighbourhood markets, mandis, and periodic/weekly markets)
coexist with modern day markets (supermarkets, hypermarkets, Single brand outlets etc.).
Decline of the rural economy coupled with lack of employment in the manufacturing sector
(organized sector) created a vast pool of surplus labour in the country in the post reform period.
This multitude of labour started migrating to urban centres in search of employment and many of
them landed up with self employment in the service sector of which retailing forms a huge part.
Annihilation of small scale and self employed lower middle class will lead to large scale poverty
and destitution because the unorganised sector is absorbing the shocks of migration and rural
distress. It manages by catering to middle classes in the metropolis. If this market is gone, they
will all be unemployed.

On the one hand the government is trying to convince that FDI would not harm the local trading
practices and on the other hand various traders associations, vendors are fearing its exit from the
retail market in the long run when various multi brand retail giants with their deep pockets and
marketing skills would create direct contacts with farmers and producers of essential
commodities. Whether it’s a small vendor selling fruits on his bicycle or a trader who has a kiosk
in a neighbourhood where he sells grocery or a weekly market trader who sells garments, all
three of them depend on a vegetable mandi, grain mandi and wholesale market for garments
respectively. With the entry of the multi-brand retail giants in the market two possibilities
emerge (a) these retail giants are expected to procure 30 percent of goods from medium scale
enterprises (but it is not necessary that these enterprises should be from the host country) thus, in
case it decides to capture the domestic market it would create direct contact with small and
medium enterprises and get commodities at the lowest possible cost and take benefit of the
economies of scale. In case this happens, then the retail giants would slowly gain hands and
monopolize the market and dictate the prices of essential commodities in the domestic market.
This would slowly displace small vendors who don’t have enough working capital to compete
with retail giants. These vendors who till now were able to purchase goods from the wholesale
market by proving their credit worthiness would no longer be able to give cash and carry goods
to the retail market.

(b) Since multi brand retail stores have the liberty to buy products from anywhere in the world
and they have enough resources to conduct market research, it would explore the world market
and invest wherever they would be able to maximize their profits through final sale. In this
scenario, small vendors and traders would continue to have access to the products which are
produced by the small scale industries but at the same time these enterprises would face severe
competition from cheap commodities imported from elsewhere. In the long run it is speculated
that the prices of their commodities would fall in the markets and sooner or later these domestic
small enterprises would be forced to quit. For example, T. Vellayan, president of the Tamil Nadu
Federation of Trader’s Associations gives the example of how the import of palm oil and
soyabean oil for edible purposes proved ineffectual to the oil manufacturing units. Vellore,
Tiruvannamalai, Cuddalore and Villupuram districts had several stone oil presses. But these
traditional oil mills closed down. In Pudukottai district, oil mill premises have been converted
into marriage halls ( Frontline, Dec.2011).

Another justification given by the government for allowing FDI is that it would stabilize the
inflationary trends that the Indian economy is witnessing for the past two years. This logic seems
to be a wishful thinking because rising inflation cannot be controlled by the multi brand retail
giants instead the prices of food grains, fruits and vegetables and essential commodities would
only increase once these retail outfits will make a market for their products in India. Price of
diesel and petrol has been exponentially hiked up; this is going to affect the cost of production
both in agriculture and manufacturing. Farmers are not going to benefit in any way as they would
continue to be exploited by the multi brand retail giants in the long run. If in this context we see
the large unorganized retail sector, we can observe how small vendors of fruits and vegetables
are able contain the inflationary pressure by offering lower prices.

One round of a weekly market in the neighbourhood of Delhi or elsewhere would show that the
margins between the prices at which weekly traders sell their products and the price at which any
supermarket sells the same thing varies by more than 20 to 30 percent. Multi brand retail giants
would not only affect the price of food grains at the national level but it might also result in the
disappearance of Agricultural Produce Marketing Committees which keep a certain minimum
check on the price of the foodgrains coming to the grain markets. Thus, corporate capital would
get a free reign in the indigenous markets of India and the process of primitive accumulation
would set in as predicted by C.P. Chandrashekhar, Prabhat Patnaik et. al. This would have direct
impact on that section of the unorganized retail sector which is employed in the lowest level of
the market hierarchy who do not have ready cash to invest and whose livelihood is dependent on
the recycling of debt for a day, a week, a month or a year because the prices are going to rise in
the long run and so will the interests on the borrowed sum.

The adverse impact of the FDI would befall the unorganized retail sector with great intensity if
the State makes more stringent rules of zoning and regulation. I have been researching the local
weekly markets of Delhi for the past three years. These markets are very prominent feature in all
parts of Delhi and NCR. There are around twelve hundred weekly markets of which only one
fourth are recognized by the Municipal Corporation of Delhi (consequence of zoning).
Approximately 2.5 million people are employed through these markets. This figure would just
double if we take in to account additional employment that is created around these markets.
Various own account and household enterprises are producing commodities on a daily basis for
such low end markets. Local weekly markets provide a very easy channel of distribution of
commodities produced not only in local small scale industries but also in the neighbouring
States. For instance, rubber chappals and shoes made in Agra, sarees made in Surat, hosiery
made in Coimbatore, woollens made in Ludhiana are all sold at affordable prices here in these
very markets. FDI in multi brand retail would either displace various wholesale markets or the
size of such markets would shrink. Today the local markets run on capital which has a fluid or
floating nature. But with the coming of multi brand retail stores this floating capital would freeze
and small retailers and vendors will be evicted from the market.

It is argued by the government that FDI in retail would create employment opportunities. But
employment for whom is the crucial question? It would create employment for those who are
educated and have professional experience. Taking cue from my observation in the weekly
markets of Delhi I would argue that majority of those now employed in these markets have
minimal education and have no professional degrees apart from their marketing knowledge. Now
if FDI in multi brand retail comes, it is not in any way going to benefit these traders if they lose
their sole means of survival.

I have observed in the course of my research that through weekly markets of Delhi hundreds of
people have employed themselves who were displaced for one reason or the other. At the same
time it has created a distinct market for lower middle class who would not go to a super market
or a mall for shopping. Where will this section of population shop for daily needs with the entry
of multi brand retail outlets in case it leads to the displacement of weekly markets?

Instead of providing infrastructural facilities the State already keeps street vending, peddling and
weekly markets at the helm by keeping them in that buffer zone where it is difficult to
‘recognize’ their real viabilility for the economy at large. Often these are characterized as
unlawful, black, or hidden activity.

It is my contention that in order to make way for the private capital the State might evict street
vendors, cancel their licenses, or remove tehbazaari rights for weekly markets in the times to
come. Just as in Delhi, Mumbai, Bangalore and other metropolitan cities, the State, has from
time to time uprooted slums and relocated them to the periphery of the city, to make way for the
investment by private corporate builders in order to make the city slum free. Similar decisions if
taken for the unorganized retail sector would gravely increase inequality and poverty.
Though the government has put on hold its decision to allow FDI in retail sector in India and
entry of foreign retailers like Walmart, Tesco in the country's $450 billion retail sector, the
debate over whether government should allow it or not continues.

The greatest issue of debate over allowing 51 per cent FDI in multi-brand retail in India and
100 per cent FDI in single brand retail is like a double edged sword. While liberalisation of
the Indian economy further to allow the foreign players like Walmart, Carrefour, etc to
operate as retailers may go in favour of the SMEs, customers and farmers, competitive for the
Indian retail big-wigs like Big Bazaar, Reliance and Aditya Birla, it may be suicidal to the
local kirana shops.

The Small and Medium Enterprises (SMEs) who provide products to the multi-brand retailers
at their brands warn that allowing FDI in retail sector in India may be fruitful to the SMEs as
they will have increased number of retailers to provide to and the Indian retailers will pull up
their socks and improve quality and make the prices more competitive. But the Chinese
dragon somehow needs to be controlled from entering the Indian markets through these
foreign retailers because if that happens then the entire Indian manufacturing sector and the
economy will go for a toss.

"If cheap Chinese goods start getting imported in India through foreign retailers then it may
not be good. If government has some kind of regulation for preventing Chinese goods
entering the Indian markets then such liberalization will be good for the Indian economy. But
if Chinese goods flood the Indian markets then they will take over the entire Indian market.
China has a completely different model of production, which makes them produce goods at
the minimum cost which is the reason Chinese goods have taken over the world," Managing
Director (MD) of Delhi-based Trisis Corp Sunil Jain said which supplies home and personal
care products to Bharti Walmart, Reliance Retail, Future Group, Aditya Birla Retail, Dabur,
Wipro etc.

"Chinese goods are not being stopped. Chinese electrical goods are flooding the Indian
markets, but organized sector in retail is being stopped," MD of Nainital-based processed
food firm Delicia Foods India Pvt Ltd Deepak Puri said, which supplies ketchups, jams,
canned fruits, etc to Bharati Walmart in Amritsar, Cash and Carry Carrefour (French co) in
Delhi and Jaipur and Metro Cash and Carry (German co) in Bangalore, Kolkata, etc. Cash and
Carry stores can only sell to other retailers or businesses.

Currenlty multi-brand retailers are definitely benefitting the SMEs in a big way. SMEs
manufacture and supply to the big multi-brand retailers. "We started the company in 2004.
We supply ketchups, jams and canned fruits to Bharati Walmart since last 3 years and to Cash
and Carry Carrefour and Metro Cash and Carry since last 1 year," Puri said.

Delicia Foods has grown over the years with the help of these multi-brand retailers. "In the
1st year we had a turnover of Rs 25 lakh. Next year it was Rs 50 lakh and then when we
started supplying to the multi-brand retailers our turnover rose to Rs 75 lakh. Currently our
turnover is above Rs 2 crores. The multi-brand retailers have definitely benefited the SMEs,"
Puri said sighting advantages of FDI in india.

So the SMEs are definitely in favor of FDI in retail in India provided the Chinese goods have
a controlled entry into the Indian markets. "FDI in retail sector should have been allowed. It is
misfortune that it is not allowed. It leads to growth of business of manufacturers and suppliers
both," Puri said.

Major procurement of the food items, FMCG, personal care products in the big retail stores
happen from small and medium enterprises. "As an individual entrepreneur I support foreign
FDI in retail in India. I have been with Bharati Walmart for 2 years now. They are
instrumental in our success and deal very professionally. They make SMEs more organized
even train us for better techniques to increase the production. SMEs stand to gain more
business from foreign multi-brand retailers," Jain said.

Along with the SMEs the agricultural sector also stands to gain from FDI in retail sector in
India. "Agriculturists are gaining from the Indian retailers. Even foreign retail chains will be
organizing the farmers on their entry into India. It will be a win-win situation for the farmers
as the middle men will be wiped out. FDI in retail in India should help the farmers," Jain said.

Though the small retailers' (kirana shops'), which are the unorganized sector of retail, fate is a
little dicey in case of FDI in retail, which is seen as major disadvantages of FDI in india.
"Kirana shops are a question mark. They can be affected. Either they will have to start
procuring from large cash and carry stores at competitive prices or there will be some
reshuffling. Inefficient people will be wiped out in which kirana shops may become a
casualty," Jain said. "Small retailers (kirana shops) do not give any bill nor do they show their
incomes. It is the unorganized sector out of which government is not getting any revenues,"
Puri said.

Thus the small kirana shops which form the unorganized retail sector are up and against FDI
in retail in India. "If big foreign retailers open stores nearby our shops, we will be closed
down because no-one will buy from us," says Khetlal, a local kirana shop owner in Pune.

As far as Indian multi-brand retailers go, mergers and acquisitions will take place if retail
sector is liberalized. "Mergers and acquisitions will take place if FDI in retail is liberalized.
Some of them may get taken over by foreign retail or vice versa. Indian retailers are very
competent and reforms have always helped India," Jain said.

One thing is sure, if FDI in the retail sector in India is allowed it will be the survival of the
fittest. Better quality will sustain when competition rises amongst Big Bazaar, Carrefour, etc.
"Whoever is sustaining it means they are providing better quality. Walmart is not East India
Company," Puri said. This is an obvious advantages of FDI in india.

Currently approximately 33 million people or 7.3% of India's workforce is said to belong to

the unorganized retail sector, including the kirana stores. Only 5% of the retail sector is said
to be organized.

Though entry of foreign entrants in the retail sector throgh FDI in retail sector in India may
organize our retail sector, the main challenge before the government will be to control or
dissuade the entry of Chinese goods in the Indian markets. Keeping in mind the benefits to the
SMEs, consumers and farmers or keeping the existence of the kirana shops in mind, each may
argue about advantages of FDI in india or disadvantages of FDI in india, but one thing that
comes out very clearly is that we need to be beware of the Chinese dragon.
The government today assured global retail giants Wal-Mart and Tesco that it will hand hold
them for their entry into the just opened multi-brand retailing in the country.

The assurance was given by Commerce and Industry Minister Anand Sharma to the heads of the
two retail giants in separate meetings on the sidelines of the annual World Economic Forum
conference.

While CEO Walmart International Doug McMillon said the company is studying the conditions
before making the final announcement, Tesco Chairman Richard Braodbent sought clarifications
on some of the conditions that India has imposed while allowing foreign players to open stores in
the multi-brand retail sector during their meeting.

McMillon "conveyed that Walmart is excited about India and they are studying the conditions
before making the final announcement," said a statement issued by the Commerce and Industry
Ministry.

Mr Sharma has asked both the officials to send written request for clarification to the ministry,
and assured them of providing all necessary clarity on the policy.

"India's policy on FDI in multi-brand retail has finality and they need not be unduly concerned
about any policy reversal," the statement said, quoting Mr Sharma.

Wal-Mart is already present in India in cash and carry, or wholesale, segment through a 50:50
joint venture with Bharti Enterprises.

"Mr Sharma assured that all the foreign investors will be provided hand holding," it added.

The government has imposed certain conditions like foreign retailers planning to enter the multi-
brand segment would have to invest a minimum of $100 million with 50 per cent of it in the
back-end infrastructure.
The firms will also have to source 30 per cent of their products from MSMEs.
Reasons For Allowing FDI In Retail Sector

The 30% mandatory sourcing condition has been incorporated to encourage local value addition
and manufacturing.

Foreign Direct Investment (FDI) complements and supplements domestic investment. Domestic
companies are benefited through FDI, by way of enhanced access to supplementary capital and
state-of-the-art technologies; exposure to global managerial practices and opportunities of
integration into global markets.

Government had instituted a study, on the subject of “Impact of Organized Retailing on the
Unorganized Sector”, through the Indian Council for Research on International Economic
Relations (ICRIER), which was submitted to Government in 2008. The ICRIER study indicated
significant benefits for various stakeholders, such as consumers, farmers and manufacturers,
arising from the growth of organized retail.

Based upon the study, as well as the experience of other countries, it is the Government’s
assessment that implementation of the policy permitting FDI, up to 51%, in multi-brand retail
trading, is likely to facilitate greater FDI inflows into front and back-end infrastructure;
technologies and efficiencies to unlock the potential of the agricultural value chain; additional and
quality employment; and global best practices. This, in turn, is expected to benefit consumers and
farmers in the long run, in terms of quality and price.

The 30% mandatory sourcing condition has been incorporated to encourage local value addition
and manufacturing. The increased level of activity, in the front-end, as well as in the back-end,
resulting from greater FDI inflows, is expected to create additional employment opportunities for
rural and urban youth. It is, further, expected to encourage existing traders and retail outlets to
upgrade and become more efficient, thereby providing better services to consumers and better
remuneration to the producers from whom they source their products.

There is no procedure to shortlist companies. Foreign investors desirous of investing in retail

trade (multi brand or single brand) in India are required to submit their applications in the
Department of Industrial Policy & Promotion, where their applications are examined to determine
whether the proposed investment satisfies the notified guidelines, before being considered by the
Foreign Investment Promotion Board, in the Ministry of Finance, for Government approval.

As per some news items published on 17.11.2012, Wal-Mart, USA, is stated to be inquiring into
allegations of potential violations, under the Foreign Corrupt Practices Act of USA, in certain
countries where the company is operating.

India has stringent anti-corruption laws. Any corrupt practices are liable to be dealt appropriately
under applicable laws.

This information was given by the Minister of State for Commerce & Industry Dr. S.
Jagathrakshakan in written reply to a question in Rajya Sabha today

Whenever the issue of foreign direct investment (FDI) in multi-brand retail is discussed, the
name of Walmart will invariably come into the forefront. Once again when two-day debate on
FDI under Rule 184 resumed in Lok Sabha on Wednesday, Dec 5, Opposition parties accused
Congress-led UPA of being partial towards Walmart. Opposing FDI, CPI leader Gurudas
Dasgupta said that Prime Minister Manmohan Singh was ready to sacrifice government for
Walmart. NCP's Praful Patel defended FDI in retail. He said it will not affect the small
businessman. "The small retailer should be protected," he added. Even the name Coca Cola, the
soft drink belonging to PepsiCo group, was referred during the debate. "We had sent back Coca
Cola. But it was allowed back in; the company acquired Parle's Thums Up and tried to replace it
with Coke. But Thums Up is still more popular in India than Coca Cola," said Patel. Slamming
Manmohan Singh over the issue of allowing FDI in multi-brand retail, BJP leader LK Advani
earlier said the red carpet was being rolled out for Wal-Mart when it faced protests even in the
US and New York City "shut Walmart out". In an earlier blog, Advani referred to the reported
unrest brewing against US' largest retailer Walmart in various American cities at a time when the
government here was "rolling out the red carpet" for it. In 2007, Walmart announced an
agreement with Bharti Enterprises to establish a joint venture, Bharti Walmart Private Limited,
for wholesale cash-and-carry and back-end supply chain management operations in India. "A
typical wholesale cash-and carry facility stands between 50,000 and 100,000 square feet and
sells a wide range of fruits and vegetables, groceries and staples, stationery, footwear, clothing,
consumer durables and other general merchandise items. Our first Best Price Modern Wholesale
opened in 2009," states the website of Walmart.
Wal-Mart In India
In 2007, Walmart announced an agreement with Bharti Enterprises to establish a joint venture,
Bharti Walmart Private Limited, for wholesale cash-and-carry and back-end supply chain
management operations in India. A typical wholesale cash-and carry facility stands between
50,000 and 100,000 square feet and sells a wide range of fruits and vegetables, groceries and
staples, stationery, footwear, clothing, consumer durables and other general merchandise items.
Our first Best Price Modern Wholesale opened in 2009.

The president and CEO of Walmart India is Raj Jain. See photos and learn more about BestPrice
Modern Wholesale.

Best Price Modern Wholesale Store

Best Price Modern Wholesale stores are a one-stop-shop that offers best prices with unmatched
convenience, choice, quality and hygiene. The stores meets day-to-day needs of business
members namely restaurant owners, hoteliers, caterers, fruit and vegetable resellers, kiranas,
other retail stores, offices and institutions. Around 5,000 items, including food and non-food
items, are available at competitive wholesale prices by lowering cost of operations. Over 90% of
these items are being sourced locally, which in turn reduces the costs and eventually, the prices.

A typical cash-and-carry store stands between 50,000 and 100,000 square feet and sells a wide
range of fresh, frozen and chilled foods, fruits and vegetables, dry groceries, personal and home
care, hotel and restaurant supplies, clothing, office supplies and other general merchandise items.
Leadership

Raj Jain

Raj is President, Walmart India and Managing Director & CEO, Bharti Walmart Pvt. Ltd.

Raj joined Walmart in Shanghai, China as President of Emerging Markets for Walmart
International in 2006. He spearheaded Walmart’s entry into India and relocated back to India in
2007 to head the JV with Bharti. Prior to joining Walmart, Raj was Regional Head, Marketing &
Supply Chain for the Asia Pacific at Whirlpool Corporation in Shanghai. During his 10 years at
Whirlpool he also served as Managing Director & CEO of Whirlpool of India Ltd.

Raj started his career at Unilever as a Management Trainee. His successful and distinctive career
spanning over 16 years in Unilever in India and U.K. included several key managerial positions
in Sales, Marketing and Supply Chain etc. Raj is a serving Board Member of American Chamber
of Commerce & Industry (AMCHAM).

Raj holds an Engineering Degree from Delhi University and an Executive MBA degree from the
Kellogg School of Business. He is married and has two children. He is a keen Golfer and an avid
traveler.
Corporate Office

Corporate Office
Bharti Walmart Private Ltd.
4th Floor, Orchid Center,
Golf Course Road, Sector 53
Gurgaon 122002. (Haryana) India
Supplier Contact
Phone No: +91-124-456-8599
Email Us On: supplier.india@wal-mart.com
Member Contact
Email Us On: member.feedback@bharti.wal-mart.com

Overview

Best Price Modern Wholesale is a Business-to-Business, cash and carry wholesale format which
has the mission of enabling small businesses to prosper. More than 5000 items, across product
categories like Fresh (Fruits, Vegetables, Poultry, Mutton, Fish), Dairy (Milk and Milk
Products), Consumer Packaged Goods (Food and Non Food), General Merchandise and
Household Electronics and Appliances are offered under one roof, at low, transparent prices to
business members. The focus is to meet the unique needs of every member segment like kirana
shop owners, general merchandise resellers, hotels, restaurants, caterers, offices and institutions
by offering relevant items at very competitive prices, ensuring consistent availability and
member convenience.
Product Range

Best Price Modern Wholesale Store offers over 5,000 items under one roof across multiple
categories like

 Snacks and Hot Beverages

 Beverages
 Packaged Foods
 Confectionery
 Commodities
 Dry Fruits
 Spices
 Household items
 Restaurant Supplies
 Linen
 Hair and Personal Care
 Detergents and Cleaning Aids
 Luggage
 Apparel and Footwear
 Office Supplies and Stationery
 Electronics and House Hold appliances

The range of fresh foods at Best Price makes it the best place to buy vegetables, fruits, milk and
milk products, chicken, mutton and fish.

The sourcing for produce and fresh is done through local & regional sourcing teams. Special
pack sizes have been developed across categories for customers from HoReCa segment (Hotel,
Restaurant, Caterer) and Offices & Institutions.
Quality & Hygiene

Food Safety and Quality Standards at Best Price Modern Wholesale Stores
Best Price stores provide safe and affordable food, so people can live better. This is achieved
through the 4Cs followed at Best Price:
 Care –We care for our community by selling only safe food.
 Customer Service – We serve our members through a team of food handlers trained in food
safety best practices.
 Courage – We always do the right thing for our members. Food safety is non negotiable.
 Continuous Improvement – We have a dedicated food safety team which continuously works
towards monitoring and improving the food safety standards.
High Five – Five Best Practices followed at Best Price Modern Wholesale Stores
 Be Clean, Be Healthy: Personal hygiene of very high standards is followed by the food
handlers through frequent hand wash, use of hand gloves, hair nets & other protective gear to
preserve the wholesomeness of fresh food. This ensures that only healthy associates handle
the fresh food.
 Keep it Cold, Keep it Hot: All perishable food items are preserved to ensure high quality of
food. A superior cold holding infrastructure at Best Price Modern Wholesale stores preserves
quality of fresh and frozen product assortment.
 Don’t Cross Contaminate: Vegetarian products, Dairy, Meat & Fish departments are
physically separated from each other. Best Price respects the science of food safety and
quality and the religious sentiments of our members.
 Wash, Rinse & Sanitize: Modern and international best practices for sanitation and hygiene
are followed at Best Price Modern Wholesale stores. All food equipments are sanitized every
four hours. A combination of science and care ensures providing an excellent shopping
experience to the Members.
 Cook it & Chill it: Products are cooked and chilled using scientific principles for offering
safe and high quality food to the members.
Business Solutions & Services

Best Price Modern Wholesale Stores offer a host of services to members for their convenience
which include credit, payment and delivery solutions.

A dedicated Sales & Business Development team provides end-to-end solutions for key members
by communicating prices, booking orders and ensuring timely delivery of merchandise.
Credit solution for members through Private Label credit card with Kotak Mahindra bank

 No Joining Fee
 No Annual / Renewal fee
 Two Free Add - On Cards
 Fourteen Days Interest Free Period
Third Party Delivery Solution
 To facilitate delivery at members’ doorstep
 Delivery at very competitive rates to both city and upcountry locations
 The solution has been designed to allow members to book part load as well as full load
 Transparent rates and timelines for delivery - displayed prominently at the store
Remote Booking Office
 A special solution designed for upcountry members in select cities.
 Members get most current information on prices and a complete range of available products
at the parent store.
 Members can pay, book orders and receive merchandize through the official 3rd party
delivery solution.
Mera Kirana

Best Price's mission is to enable businesses to prosper...every single member. Kirana stores is a
key member segment served by Best Price and "Mera Kirana” is an innovative program which
has been developed to help the kirana stores grow their business and compete better against
modern retail.

Today's informed consumers expect better variety and value added services even from their
neighborhood stores and more often than not, kirana owners struggle to control costs and keep
pace with their customers.

There are two aspects to the Mera Kirana program:

Seminars at Best Price stores
Regular seminars are organized to address specific needs of kirana stores. These specific needs
have been identified after extensive feedback from our members and range from effective use of
displays, inventory optimization to customer retention. The sessions are interactive and are
interwoven with each other as a complete program.

‘Mera Kirana’ model shop set up at Best Price stores

Mera Kirana model shops have been set up within each Best Price Modern Wholesale store
which helps in practical demonstration of best practices to kirana owners - efficient lay out,
correct stocking of products and maximizing paid displays.
Hundreds of kirana store owners have been touched by this initiative and have appreciated the
practical knowledge imparted to them through this program.
Benefits to Kirana Shop Owners

Kirana store owners, who are members of Best Price Modern Wholesale stores, derive ‘special’
benefits in numerous ways:

A) There are an estimated 12 million kirana stores in India of which as much as 90% are not
directly serviced by India’s FMCG majors. Best Price stores offer them access to quality
products at the lowest prices they need and when they need them.

B) Assortment, service and store layout of Best Price stores are customized to their specific
needs to help them get the benefit of high quality products at best prices to enhance their
business profitability.

C) Best Price stores help kirana stores manage their inventory better by enabling them to
purchase in quantities they need and at the time they require. They can hence take advantage of
Best Price store by using it as their own godown, thus freeing up their capital for business rather
than lock it up in inventory.

D) Best Price stores have also created an innovative kirana model “My Kirana” that is tailored
for kirana stores to provide them training and insights into areas such as assortment planning,
hygiene, in-store displays, inventory management, value added services etc.

E) In addition, different education programs for members with customized modules like taxation,
food preparation, food safety and category workshops have also been introduced for different
target segments.
Overview

As a globally responsible company, we strive to improve the quality of life for our employees,
customers and communities through various interventions and the Direct Farm Program is one of
them. Through this program we aim to enable the development of a robust supply chain, link
farming communities directly to our consumers, introduce farming best practices and improve
the overall quality of life of the farming communities we engage with.

Bharti Walmart is investing in establishing an efficient back-end supply chain management

operation to help make it efficient, thereby maximizing value for farmers and retailers as well as
consumers. The supply chain operation supports farmers who have limited infrastructure and
distribution strength and helps in minimizing the wastage of fresh fruits and vegetables. An
efficient supply chain can play an important role in transforming farmers into successful
entrepreneurs.

The Direct Farm program began 30 months back with 65 farmers in Malerkotla near Ludhiana in
Punjab and has expanded to include over 7,000 farmers across Punjab, UP, Delhi NCR, Haryana,
Maharashtra, Himachal Pradesh and Karnataka. The farmers who joined this program are small
and marginal farmers. These farmers currently supply 12-16 locally grown vegetables which
accounts for about 20% of our stores’ requirement. The objective is to build and implement a
sustainable and differentiated crop production model, which will deliver clear economic benefits
to the farmers.
Highlights:
Step 1:
Understood current practices and identified critical gaps in the cultivation and post-harvest
process after which interventions were made in the following areas:
 Soil testing for nutrient levels to capture deficiencies
 Map agri input applications (fertilizers, irrigation, agrochemicals, seed varieties)
 Form self-help group and appoint a lead farmer to coordinate farm level activities
 Appoint well-qualified field agronomists
 Set up a model nursery that provides healthy seedlings to our member farmers
 Create demonstration farms in partnership with Bayer Crop Science, Nunhems Seeds
Company and some local agencies
 Work along with local NGO on a comprehensive sanitation program to help improve hygiene
standards and overall quality of life of the farmers

Result: These interventions result in better crop productions and farmers are convinced of the
potential of this partnership.
Step 2:
 Bharti Walmart field agronomists work closely with the farmers to develop a planting
calendar
 Once the produce is ready we begin direct sourcing
 For farm sourcing, a special system is designed to suit the requirements of small and
marginal farmers
 This system enables transparent weighing with digital balances and immediate cash payment
 The pricing strategy has been designed to remove intermediaries and give the farmers more
visibility on the market rates
 Bharti Walmart monitors prices constantly so that we are able to ensure marginally higher
income for the farmers in our program
 Farmers who deliver on quality get an additional bonus for their produce

Result: Farmers are able to make an informed choice on pricing while selling their produce.
The Co-op Center Initiative:
As our business grows and our scale improves we are moving towards a more robust system for
consolidation, handling, packaging and delivery of produce to the stores
Role of the Co-op Center:
 Create a modern fruit and vegetable pack house including cold storage
 Aggregate and consolidate produce from farmers and other vendors
 Pay farmers within 24 hours, pay APMC tax and adhere to other legal compliance
 Grading, sorting and packaging according to company specifications
 Inventory management, batch making and Distribution Centre/Store servicing in line with
company requirement
Benefit to farmers:
 7-10% higher price to farmers than what they get from Mandi
 3-4% incentive for the quality of the produce farmers deliver to Bharti Walmart based on
customer requirement
 Expert advice on better crop planning and management
 Efficient crop calendar management aimed at catching early and late seasons for better prices
 Opportunity to maximize and improve income by offering better quality
Benefit to stores & customers:
 Fresh produce
 Local source
 Consistent quality
 Safer food
 Value for money
 Lower cost compared to open market buys

Benefits to farmers

 7-10% higher price to farmers than what they get from Mandi
 3-4% incentive for the quality of the produce farmers deliver to Bharti Walmart based on
customer requirement
 Expert advice on better crop planning and management
 Efficient crop calendar management aimed at catching early and late seasons for better prices
 Opportunity to maximize and improve income by offering better quality
Bibliography

1) http://www.wikipedia.com
2) http://www.bharti-walmart.in
3) http://www.thehindu.com/opinion/op-ed/fdi-in-retail-what-it-
entails/article4372020.ece
4) http://www.indiainfoline.com/Markets/News/Reasons-for-allowing-FDI-in-
retail-Sector/5563712462