INTRODUCTION:

The overall retail market in India is likely to reach Rs47 trillion(us$792.84

billion) by FY 17,presenting a strong potential for foreign retailers planning
to enter in to India .India is the 5thmost favorable destination for
international retailers of the total Indian retailers market,8% is made up by
the organized retail segment.This segment is estimated to grow at the rate
of almost 30% by 2015,hence at the much faster pace than the overall retail
market which is forecast to grow by 16% in the same period.Untill 2011
the Indian central government did not allow Foreign direct
investment(FDI) in multi branded retail. This is prevented foreign groups
from any ownerships in super markets, convenience stores or other
retailers outlets. in late 2012 the government of India introduced FDI
policy which allows foreign retailers to own up to 51% in multi branded
retail and 100% in single branded retail.

It is contributing 14% to 15% to GDP of Indian economy, our government

has also done some reforms to develop Retail Sector in India. It is estimated
to be worth more than US$ 500 billion, the Indian retail industry is
considered as one of the world’s top five retail markets in terms of
economic value. The industry is experiencing exponential growth, with
retail development taking place not just in major cities and metros, but also
in Tier-II and Tier-III cities. The Indian retail market is expected to
touchUS$ 1.3 trillion by 2020 from its existing level of around US$ 500

,
billion according to Mr. KV Thomas, Union Minister for Food and Consumer
Affairs.

The foreign direct investment (FDI) inflows in single-brand retail trading

during the period April 2000– September 2013 stood at US$ 97.29 million,
as per data released by Department of Industrial Policy and Promotion
(DIPP).

As a part of the economic liberalization process set in place by the

Industrial Policy of 1991, the government of India opened up the retail
sector to FDI through a series of steps:-

1
 1995 – World Trade Organization‟s (WTO) General Agreement on
Trade in Services (GATS) which included both wholesale and retail
trade in services came into effect.
 1997 – FDI in cash and carry (wholesale) allowed up to 100% under
the government approval route.
 2006 - FDI in single brand retail was permitted to the extent of 51%;
FDI in cash and carry brought under automatic route.
 2011 – 100% FDI in single-brand retail permitted with government
approval; 51% FDI in multi-brand retail with few conditions.
 2013 - India further eased foreign investment rule in retail on 1st
August 2013 in a renewed attempt to attract global supermarket
chains.

2
OBJECTIVES:
The objectives of this research and
hypothesis are as follows:-

1. To analyze the present trends in retail

industry.
2 To analyze the benefits and concerns
with regard to opening of the retail
sector for FDI.
3. To study the impact of FDI in retailing.

3
METHODOLOGY:
The study is based on published
sources of data collected from various
sources. The data was extracted from
the following sources:
1.Handbook of Statistics on the Indian
economy, RBI, various issues
2.Economic Survey, Government of
India, various issues
3.Department of Industrial Policy and
Promotion (DIPP)
4.Secretariat of Industrial Assistance
(SIA)
Central Statistical Organization (CSO)

4
REVIEW OF LITERATURE
Studies in Indian Context
Study conducted by P. Shankar & Dr.
S. Ramachandran (2013) revealed that
FDI is direct investment into production
or business in a country by a company
in another country,either by buying a
company or by expanding operations Of
an existing business in target country.
FDI is in contrast to portfolio investment
which is a passive investment in the
securities of another country such as
stock and bonds.
Avleen Kaur Kochar (2013) pointed
in the study that over the last few
decades Foreign Direct Investment
(FDI) has been highly as one of the key
instrument of attracting International
Economic Integration in any Economy. It

5
helps in transferring of financial
resources, technology along with
improved management techniques. It
has generated enormous benefits to the
host country’s growth and development.
Most countries, especially the
developing countries, consider FDI as an
important channel for improving
resources for economic development.
Within few past decades, there has been
a dramatic increase in FDI worldwide.
This paper makes an in-depth study to
analyse the scenario of FDI in Indian
economy for the year 2012- 13.The
paper tries to study the trend and
pattern of flow of FDI from 2000-2013.
The data has been collected and
tabulated from the year 2000-2013 to
analyse and find out the degree of
correlation and relationship between
FDI and GDP in manufacturing sector.

6
 Subash Sasidharan and Vinish
Kathuria (2011)examine the relation-
ship between FDI and R&D of the
domestic firms in the post-liberalization.
Chew Ging Lee (2009) has pointed
out that GDP per capita has a positive
effect on FDI inflows in the long run.
Krishna Chaitanya Vadlamannatia, Artur
Tamazianb and Lokanandha Reddy
Iralac (2009) analyses about the
determinants of FDI in Asian economies.
The determinants are analyzed under
four heads, viz. economic and policy
factors, socioeconomic factors,
institutional factors and political factors.
The findings in the baseline models
show that poor socioeconomic
conditions and labour-related issues are
the major determinants.
Shiralashetti.A.S and S.S.Huger
(2009) have made a comparison of FDI
inflows during pre and post

7
liberalization period country
wise,sector-wise and region-wise
regime.
Chandana Chakraborty and Peter
Nunnenkamp (2008) said that booming
foreign direct investment in post-reform
India is widely believed to promote
economic growth.
Balasubramanyam V.N Sapsford
David (2007) in their article “Does India
need a lot more FDI” compares the
levels of FDI inflows in India and China,
and found that FDI in India is one tenth
of that of china. The paper also finds
that India may not require increased FDI
because of the structure and
composition of India’s manufacturing,
service sectors and her endowments of
human capital. The requirements of
managerial and organizational skills of
these industries are much lower than
that of labour intensive industries such

8
as those in China. Also, India has a large
pool of well – Trained engineers and
scientists capable of adapting and
restructuring imported know – how to
suit local factor and product market
condition all of these factors promote
effective spillovers of technology and
know- how from foreign firms to locally
own firms. The optimum level of FDI,
which generates substantial spillovers,
enhances learning on the job, and
contributes to the growth of
productivity, is likely to be much lower
in India than in other developing
countries including China. The country
may need much larger volumes of
seeking FDI.

Basu P., Nayak N.C, Vani Archana

(2007) in their paper “Foreign Direct
Investment in India: Emerging Horizon”,
intends to study the qualitative shift in

9
the FDI inflows in India in – depth in the
last fourteen odd years as the bold new
policy on economic front makes the
country progress in both quantity and
the way country attracted FDI. It reveals
that the country is not only cost –
effective but also hot destination for
R&D activities. The study also finds out
that R&D as a significant determining
factor for FDI inflows for most of the
industries in India. The software
industry is showing intensive R&D
activity, which has to be channelized in
the form of export promotion for
penetration in the new markets. The
study also reveals strong negative
influence of corporate tax on FDI
inflows. To sum up, it can be said that
activity, which has to be channelized in
the form of export promotion for
penetration in the new markets. The
study also reveals strong negative

10
influence of corporate tax on FDI
inflows. To sum up, it can be said that
large domestic market, cheap labour,
human capital, are the main
determinants of FDI inflows to India,
however, its stringent labour laws, poor
quality infrastructur,centralize decision
making processes, and a vary limited
numbers of SEZs make India an
unattractive investment location.

11
FDI IN RETAILING IN
INDIA

12
I.DEFINATION:-
FDI
FDI refers to capital inflows from
abroad that is invested in or to enhance
the production capacity of the economy.
It can be a subsidiary, joint venture or
merger or acquisition and includes
Greenfield and Brownfield
projects.OECD has defined FDI as
investment by a foreign investor in at
least 10% or more of the voting stock or
ordinary shares of the investee
company.
RETAIL:
Retail is a French word which means to
“cut it again” and essentially mean a sale
to the consumer for direct consumption.

13
II.DIVISION OF RETAIL SECTOR:-
The retail industry is mainly divided
into:-
1) Organized Retail Sector
2) Unorganized Retail Sector
 Organized retailing comprises the
retailers who are licensed and are
registered for sales tax, income tax
etc. These include the corporate-
backed hyper markets and retail
chains, and also the privately owned
large retail businesses. It covers only
8% of retail business.
 Unorganized retailing constitutes
the traditional low volume retailers
like kirana and betel shops,
convenience stores, hand cart (street
sellers) and pavement vendors etc.
and covers almost 92% of the retail
14
 Business. The growth of unorganized
retail sector is pegged at 6%.

III.GROWTH DRIVERS OF INDIAN

RETAIL SECTOR:-
 Rising Income and increase in
convergence of consumer taste and
preferences.
 Dual family Income
 Knowledge about different
products through different mediums
like Internet, Television etc. Also
knowledge about the latest trend
and fashion.
 47% of the India’s population is
under the age of 30. This category is
driving the consumption story.
 Emergence of new retailing
format.
 Easy availability of Credit
Facilities.

15
IV.PRESENT FDI POLICY FOR RETAIL
SECTOR IN INDIA:-
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
sect oral policy/ sect oral 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.
1. India will allow FDI of up to 51% in
multi-brand sector.

16
2.Single brand retailers such as Apple
and Ikea, can own 100% of their Indian
stores, up from previous cap of 51%.
3. FDI up to 100% for cash and carry
wholesale trading and export trading
allowed under the automatic route.
4.The retailers (both single and multi-
brand) will have to source at least 30%
of their goods from small and medium
sized Indian suppliers.
5.. All retail stores can open up their
operations in population having
over1million.Out of approximately 7935
towns and cities in India, 55 suffice such
criteria.
6..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

17
losses and provide remunerative prices
to farmers.

V.FOREIGN DIRECT INVESTMENT

IN INDIA’S SINGLE AND MULTIBRAND
RETAIL:-
(a) FDI in “single-brand” retail
Up to 100 percent FDI is permissible in
single-brand retail conditions stipulate
that:
(i) Only single-brand products are sold
(ii) Products are sold under the same
brand internationally
(iii) Single-brand products include only
those identified during manufacturing
(iv) Any additional product categories to
be sold under single-brand retail must
first receive additional government
approval

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FDI in single-brand retail implies that a
retail store with foreign investment can
only sell one brand.
 Single Brand Retail: 100% FDI
in Single Brand Retail.
1.Archies
2. Cantabil
3.VIP Ind
4. Titan
5. IFB Industries

(b) FDI in “multi-brand” retail-

FDI in multi-brand retail generally
refers to selling multiple brands under
one roof. Currently, this sector is limited
to a maximum of 49 percent foreign
equity participation.

In July 2010, the Department of

Industrial Policy and
Promotion (DIPP) and the Ministry of
Commerce circulated a discussion paper

19
on allowing FDI in multibrand retail.
The Committee of Secretaries, led by
Cabinet Secretary Ajit Seth,
recommended opening the retail sector
for FDI with a 51 percent cap on FDI,
minimum investment of US$100 million
and a mandatory 50 percent capital
reinvestment into backend operations.
Notably, the paper does not put forward
any upper limit on FDI in multi-brand
retail.
The long-awaited scheme has been sent
to the Cabinet for approval, but no
decision has yet been made. There
appears to be a broad consensus within
the Committee of Secretaries that a 51
percent cap on FDI in multibrand retail
is acceptable. Meanwhile the
Department of Consumer Affairs has
supported the case for a 49 percent cap
and the Small and Medium Enterprises
Ministry has said the government

20
should limit FDI in multi-brand retail to
18 percent. In terms of location, the
proposed scheme allows investment in
towns with populations of at least 10
lakh (1 million), while retailers with
large space requirements may also be
allowed to open shop within a 10
kilometer radius of such cities.
 Multi Brand Retail Stores: 51% in
Multi brand retail
1. Pantaloon Retail
2.Vishal Retail
3. Shoppers Stop
4. Koutons
5. Trent.

21
VI.SWOT ANALYSIS OF FOREIGN
DIRECT INVESTMENT IN INDIAN
RETAIL SECTOR:-
SWOT analysis is one of the primary
step in strategic management. It
contains an analysis of
strengths,weaknesses, opportunities
and threats. The strength and
weaknesses of the FDI shows the
present state:-
(a)Strengths of FDI Policy-

(i) Fast growing economy.

(ii) Young and dynamic manpower. . A
large young working population with
median age of 25 years, nuclear families
22
in urban areas, along with increasing
working women population and
emerging opportunities in the service
sector are going to be the key growth
drivers of the organized retail sector in
India
(iii) Highest shop density in the world.
Customers will have access to greater
variety of international quality branded
goods.
(iv) Employment opportunities both
direct and indirect have been increased.
Farmers get better prices for their
products through improvement of value
added food chain.
(v) Increase in disposal income and
customer aspirations are important
factors; increase too in expenditure for
luxury items.
(vi) FDI has also contributed to large
scale investments in the real estate
sector.

23
(vii)Large domestic market with an
increasing middle class and potential
customers with purchasing power.
(viii) The consumer get a better product
at cheaper price, so consumers get value
for their money.
(ix) High growth rate in retail &
wholesale trade.
(x) Presence of big industry houses
which can absorb losses.

(b) Weaknesses of FDI Policy-

(i) Low capital investment in retail

sector.
(ii) Will mainly cater to high-end
consumers placed in metros and will not
deliver mass consumption goods for
customers in villages and small towns.
(iii) Retail chain are yet to settled down
with proper merchandise mix for the
mall outlets.

24
(iv) Small size outlets are also one of the
weaknesses in the Indian retailing, 96%
of the outlets are lesser than 500 sq. ft.
(v) Lack of trained & educated force.
(vi) Lack of competition.
(vii)More prices as compared to
specialized shops.
(viii) The volume of sales in Indian
retailing is also very low.

(c) Opportunities of FDI Policy-

(i) Global retail giant take India as key

market.
It's rated fifth most attractive retail
market. The organized retail sector is
expected to grow stronger than GDP
growth in the next five years driven by
changing lifestyle, increase in income
and favourable demographic outline.
Food and apparel retailing are key
drivers of growth.

25
(ii) FDI can become one of the largest
industries in terms of numbers of
employees and establishments.
(iii) Rural retailing is still unexploited
Indian market. It will enhance the
financial condition
of farmers.
(iv) Improve the competition.
(v) Result in increasing retailer’s
efficiency.
(vi) Foreign capital inflows.
(vii)Big market along with better
technology and branding with latest
managerial skills.
(viii) Quality improvement with cost
reduction.
(ix) Increasing the export capacity.

(d) Threats of FDI Policy-

(i) Threat to the survival of small

retailers like ‘pan tapri’, ‘local kirana’.

26
(ii) Jobs in the manufacturing sector will
be lost.
(iii) Started roadside bargains.
(iv) Work will be done by Indians and
profits will to foreigners (v) One of the
.

greatest barriers to the growth of

modern retail formats are the supply
chain management issues. For
perishables, the system is complex.
Government regulations, lack of
adequate infrastructure and inadequate
investment are the bottlenecks for retail
companies.
(vi) Difficult to target all segments of
society.
(vii)Emerge of hyper and super markets
trying to provide customer with value,
variety ad volume.
(viii) Heavy initial investment is
required to break even with other
companies and compete with them.

27
(ix)Labour rules and regulation are also
not followed in the organized retails.
(x) Lack of uniform tax system for
organized retailing is also one of the
obstacles.
(xi) Problem of car parking in urban
areas is serious concern.
(xii)Sector is unable to employ retail
staff on contract basis.
(xiii) The unorganized sector has
dominance over the organized sector
because of low investment needs.

28
VII. Entry Options for Foreign Players
Prior to FDI Policy (2006) :-
Although prior to Jan 24, 2006, FDI was
not authorized in retailing, most general
players had been operating in the
country. Some of entrance routes used
by them have been discussed in sum as
below:-
(a) Franchise Agreements:- It is an
easiest track to come in the Indian
market. In franchising and
commission agents‟ services, FDI
(unless otherwise prohibited) is
allowed with the approval of the
Reserve Bank of India (RBI) under
the Foreign Exchange Management
Act. This is a most usual mode for
entrance of quick food bondage
opposite a world. Apart from quick
food bondage identical to Pizza
Hut, players such as Lacoste,

29
 Mango, Nike as good as Marks as
good as Spencer, have entered
Indian marketplace by this route.

(b) Cash And Carry Wholesale

Trading:-

100% FDI is allowed in wholesale

trading which involves building of a
large distribution infrastructure to
assist local manufacturers. The
wholesaler deals only with smaller
retailers and not Consumers. Metro AG
of Germany was the first significant
global player to enter India through this
route.

(c) Strategic Licensing Agreements:-

Some foreign brands give exclusive

licences and distribution rights to Indian
companies. Through these rights, Indian

30
companies can either sell it through
their own stores, or enter into shop-in-
shop arrangements or distribute the
brands to franchisees. Mango, the
Spanish apparel brand has entered India
through this route with an agreement
with Piramyd, Mumbai, SPAR entered
into a similar agreement with
Radhakrishna Foodlands Pvt. Ltd.

(d) Manufacturing and Wholly Owned

Subsidiaries:-

The foreign brands such as Nike,

Reebok, Adidas, etc. that have wholly-
owned subsidiaries in manufacturing
are treated as Indian companies and are,
therefore, allowed to do retail. These
companies have been authorised to sell
products to Indian consumers by
franchising, internal distributors,
existent Indian retailers, own outlets,

31
etc. For instance, Nike entered through
an exclusive licensing agreement with
Sierra Enterprises but now has a wholly
owned subsidiary, Nike India Private
Limited .

32
VIII.PRESENT STATUS OF INDIAN
RETAIL INDUSTRY :-
Retailing is one of the important pillar
among the different pillars of Indian
economy and it accounts for 14 to 15
percent of its GDP. The Indian retail
market is estimated to be US$ 500
billion and one of the top five retail
markets in the world by economic value.
India is one of the fastest growing retail
markets in the world, with 1.2 billion
people.
As of 2013, India's retailing industry
was essentially owner manned small
shops. In 2010, larger format
convenience stores and supermarkets
accounted for about 4 percent of the
industry, and these were present only in
large urban centers. India's retail and
logistics industry employs about 40
million Indians (3.3% of Indian
population).

33
Until 2011, Indian central government
denied foreign direct investment (FDI)
in multi-brand retail, forbidding foreign
groups from any ownership in
supermarkets, convenience stores or
any retail outlets. Even single-brand
retail was limited to 51% ownership
and a bureaucratic process.
In November 2011, India's central
government announced retail reforms
for both multi-brand stores and single-
brand stores. These market reforms
paved the way for retail innovation and
competition with multi-brand retailers
such as Walmart, Carrefour and Tesco,
as well single brand majors such as
IKEA, Nike, and Apple. The
announcement sparked intense
activism, both in opposition and in
support of the reforms. In December
2011, under pressure from the
opposition, Indian government placed

34
the retail reforms on hold till it reaches
a consensus. In January 2012, India
approved reforms for single-brand
stores welcoming anyone in the world
to innovate in Indian retail market with
100% ownership, but imposed the
requirement that the single brand
retailer source 30 percent of its goods
from India. Indian government
continues the hold on retail reforms for
multi-brand stores.
In June 2012, IKEA announced it had
applied for permission to invest $1.9
billion in India and set up 25 retail
stores. An analyst from Fitch Group
stated that the 30 percent requirement
was likely to significantly delay if not
prevent most single brand majors from
Europe, USA and Japan from opening
stores and creating associated jobs in
India.

35
On 14 September 2012, the government
of India announced the opening of FDI in
multi-brand retail, subject to approvals
by individual states. This decision was
welcomed by economists and the
markets, but caused protests and an
upheaval in India's central government's
political coalition structure. On 20
September 2012, the Government of
India formally notified the FDI reforms
for single and multi brand retail, thereby
making it effective under Indian law.
On 7 December 2012, the Federal
Government of India allowed 51% FDI
in multi-brand retail in India. The
government managed to get the
approval of multi-brand retail in the
parliament despite heavy uproar from
the opposition (the NDA and leftist
parties). Some states will allow foreign
supermarkets like Walmart, Tesco and
Carrefour to open while other.

36
IX.KEY DEVELOPMENTS AND
INVESTMENTS :-
 Reliance Retail plans to enter the
e-commerce segment in six to eight
months, a move that will pitch it
against established players such as
Amazon, for a share of India's fast
growing online retail market. The
company currently operates over
1,500 stores, including
hypermarkets, digital stores,
jewellery outlets and apparel stores,
in 136 cities nationwide. For the
quarter ended September 2013, the
company's sales jumped 31 per cent
from a year ago to Rs 3,456 crore
(US$ 557.76 million).
 Swedish furniture retailer IKEA
had proposed setting up 10
furnishing and home ware stores as
well as allied infrastructure in India,
over the next 10 years. The company
37
 also plans to open 15 more stores. It
has already identified Haryana,
Andhra Pradesh, Maharashtra and
Karnataka as possible states to set up
its stores.
 Myntra has entered into an
exclusive partnership with UK-based
apparel manufacturer, Raised on
Denim. The UK brand will
manufacture its premium youth
apparel range, Stanley Kane, locally
and sell it on Myntra, aiming to reach
the fashion-conscious clientele who
are increasingly shopping online.
 Shoemaker Johnston & Murphy,
which is known for having made
shoes for several US Presidents,
plans to open 15 stores across Indian
metros in the next four–five years,
and leverage the wholesale channel.
It is expecting business of Rs 50

38
 crore (US$ 8.06 million) in the initial
three–four years.
 Tesco Plc, the UK’s largest
supermarket company, plans to be
the first foreign multi-brand chain to
enter the Indian market. Extending
its back-end and wholesale support
franchise agreement with the Tata
Group's Trent, Tesco will invest US$
110 million in the Indian market for
front-end multi-brand retail stores.
 Apollo Tyres Ltd has opened its
first branded outlet in Sri Lanka
strengthening its presence in the
island country. The outlet deals in
both passenger and commercial
vehicle tyres..

39
X.IMPACT OF FDI IN VARIOUS
STAKEHOLDER:-

1. Impact on Traditional Mom and

Pop Stores- Traditional retailing
has been established in India for
many centuries, and is
characterized by small, family-
owned operations. Because of this,
such businesses are usually very
low-margin, are owner-operated,
and have mostly negligible real
estate and labour costs. Such small
shops develop strong networks
with local neighbourhoods. The
informal system of credit adds to
their attractiveness. Moreover, low
labour costs also allow shops to
employ delivery boys, such that
consumers may order their grocery
list directly on the phone. These
advantages are significant, though

40
hard to quantify. In contrast,
players in the organized sector
have to cover big fixed costs, and
yet have to keep prices low enough
to be able to compete with the
traditional sector. Getting
customers to switch their
purchasing away from small
neighbourhood shops and towards
large-scale retailers may be a major
challenge. The experience of large
Indian retailers such as Big Bazaar
shows that it is indeed possible.
The oppositions, on the other hand,
believe that local kirana shops will
not be affected. The kirana stores
operate in a different environment
catering to a certain set of
customers and they will continue to
find new ways to retain them.
1. Case Study of China: FDI in
retailing was permitted in China

41
for the first time in 1992. Foreign
retailers were initially permitted
to trade only in six Provinces and
Special Economic Zones. Foreign
ownership was initially restricted
to 49%. Foreign ownership
restrictions have progressively
been lifted and, and following
China„s accession to WTO,
effective December, 2004, there
are no equity restrictions.
Employment in the retail and
wholesale trade increased from
about 4% of the total labour force
in 1992 to about 7% in 2001. The
numbers of traditional retailers
were also increased by around
30% between 1996 and 2001. In
2006, the total retail sale in China
amounted to USD 785 billion, of
which the share of organized
retail amounted to 20%. Some of

42
 the changes which have occurred
in China, following the
liberalization of its retail sector,
include: (i) Over 600
hypermarkets were opened
between 1996 and 2001 (ii) The
number of small outlets
(equivalent to “kiranas‟)
increased from 1.9 million to over
2.5 million. (iii) Employment in
the retail and wholesale sectors
increased from 28 million people
to 54 million people from 1992 to
2000. Thus the above discussion
and case of China suggest that it is
too early to predict the erosion of
mom and pop stores in India with
opening of multi-brand retail
sector in India to foreign
investors.
2. Impact on Farmers- It is being
claimed by the advocates of FDI in

43
retail that the elimination of
intermediaries and direct
procurement by the MNCs would
secure better prices for the
farmers. The fact is that the giant
retailers would have far greater
buyer power vis-à-vis the farmers
compared to the existing
intermediaries. The entry of giant
MNCs into agricultural
procurement would make the
problems worse for the farmers. As
against the „mandis‟ that operate
today, where several traders have
to compete with each other in
order to buy the farmers‟ produce,
there will be a single buyer in the
case of the order to buy the
farmers‟ produce, there will be a
single buyer in the case of the
MNCs. This will make the farmers
dependent on the MNCs and

44
vulnerable to exploitation. On the
contrary, the advocates of FDI
believe that FDI in retail in the
agriculture will help in improving
supply chain, infrastructure and
ensure economic security for
farmers through the elimination of
middlemen in the country.
Case Study:
1.Case 1- PepsiCo India-
Helping Farmers Improve Yield
and Income- Today PepsiCo
India„s potato farming programme
reaches out to more than 12,000
farmer families across six states.
We provide farmers with superior
seeds, timely agricultural inputs
and supply of agricultural
implements free of charge. They
have an assured buy-back
mechanism at a prefixed rate with
market price fluctuations. Through

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our tie-up with State Bank of India,
we help farmers get credit at a
lower rate of interest. They have
arranged weather insurance for
farmers through our tie-up with
ICICI Lombard.
2.Case 2- Bharti Walmart
initiative through Direct Farm
Project- Corporate Social
Responsibility (CSR) initiatives in
Bharti Walmart are aimed at
empowerment of the community
thereby fostering inclusive growth.
 They focused on enhancing
opportunities in the areas of
education, skills training and
generating local employment,
women empowerment and
community development

 In conjunction with the farmers‟

development program in
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 Punjab, community-building
activities have been
implemented in village, Haider
Nagar.
 Due to lack of sanitation
facilities, households tend to use
the farm fields, thereby affecting
yields and impacting the
produce that is being supplied
to stores. In order to improve
the yields and the community„s
way of life, we are working on
the issues of Sanitation and
Biogas, Education, Awareness
Building and Health and
Hygiene.
2. Impact on Consumers- With
liberalization, economic growth
and changes in Indian consumers‟
demographic and economic profile
and their shopping behaviour, the
retail sector is undergoing changes.
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At present, foreign retailers
operate in India through both store
and non-store formats. In terms of
the shopping behaviour of Indian
consumers across different retail
outlets, traditional different retail
outlets, traditional outlets are
preferred as consumers can
bargain while modern outlets are
preferred because they link
entertainment with shopping.
Those who purchase at modern
outlets have reported better
product quality, lower prices, one-
stop shopping, choice of more
brands and products, better
shopping experiences with family
and fresh stocks as some of the
reasons for their choice of outlet.
On the other hand, proximity to
residence, goodwill, credit
availability, possibility of

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bargaining, choice of loose items,
convenient timings, home delivery,
etc., are some of the benefits of
traditional outlets (Joseph and
Soundararajan 2009). Authors of
ICRIER Policy series paper (August,
2011) and various other surveys
have pointed out that most
consumers are willing to
experiment to different brands and
so they are in favour of allowing
FDI in retail. Apart from providing
Indian consumers more choices in
the form of reputed, good quality
brands, liberalizing multi-brand
retailing in India is likely to
facilitate much greater inflows of
investments. This, in turn, will lead
to the development of more
efficient and lower cost supply
chains, resulting in better quality as
well as lower-priced products for

49
Indian consumers. This will
increase consumer spending, which
in turn, will drive growth in all
sectors of the economy in a
virtuous cycle.
1.Case Study: Consumers of
Indian Telecommunication and
Automobile Retail Sector have
benefited a lot from liberalizing
FDI. In the telecommunication
sector, it has led to more access,
better quality, better services and
lower prices for consumers. The
entry of foreign players in the
automobile sector has made the
domestic industry globally
competitive and even middle and
low-income consumers in India
can now afford to own cars.
Global experiences show that FDI
in retail can sometimes negatively
impact consumers if corporate

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 retailers adopt anti-competitive
practices such as predatory
pricing. In India, the Competition
Act 2002 has provisions to check
abuse of dominant position by
major players, including
predatory pricing.
4. Impact on Existing Indian
Organized Retail Firms- The existing
Indian organized retail firms (such as
Spencer's, Food world Supermarkets
Ltd, Nilgiri's and ShopRite) support
retail reforms and consider
international competition as a blessing
in disguise. They expect a flurry of joint
ventures with global majors for
expansion capital and opportunity to
gain expertise in supply chain
management.
Case Study:
Case 1: Spencer's Retail with 200
stores in India, and with retail of fresh

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vegetables and fruits accounting for
55% of its business claims retail reform
to be a win-win situation, as they
already procure the farm products
directly from the growers without the
involvement of middlemen or traders.
Spencer„s claims that there is scope for
it to expand its footprint in terms of
store location as well as procuring farm
products.
Case 2: Foodworld, which operates
over 60 stores, plans to ramp up its
presence to more than 200 locations. It
has already tied up with Hong Kong-
based Dairy Farm International. With
the relaxation in international
investments in Indian retail, India„s
Foodworld expects its global
relationship will only get stronger.
Though it is too early to assess the true
impact of allowing FDI in single-brand
and multi-brand retailing in India, but

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still the Govt. argues strongly in favour
on the ground that it will provide huge
gainful employment in agro-processing,
marketing and logistics, help farmers‟
secure remunerative prices by
eliminating exploitative middlemen,
ensure supply chain efficiencies, bring
investment in back-end infrastructure
and also create a multiplier effect for
employment, technology up gradation
and income generation by sourcing of a
minimum of 30% from Indian micro and
small industry. The opposition,
however, argues that there will be a
large-scale job loss according to
international experience and global
retail giants will resort to predatory
pricing to create monopoly/oligopoly.
So, opening up of FDI in multi-brand
retail in India could potentially be a
mixed blessing for domestic players.

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