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PRESENTATION OF ILP
SAM -1ST RE –APPER
PRESENTED BY
NAVEEN KUMAR
CUN110501060

FDI or Foreign Direct Investment

• FDI or Foreign Direct
Investment A company from
one country making a
physical investment into
building a factory in another
country.
• FDI has come to play a major
role in the
internationalization of
business

Foreign Direct Investment

 What is FDI ?
 Foreign direct investment ( FDI ) is direct investment by a
company in production located in another country either by
buying a company in the country or by expanding operations
of an existing business in the country.
 Why FDI ?
 To take advantage of cheaper wages in the country.
 Special investment privileges such as tax exemptions offered
by the country .
 To gain tariff-free access to the markets of the country or the
region.

Entry Options For Foreign Players prior to FDI
Policy
Franchise Agreements
Cash And Carry Wholesale Trading
Licensing Agreements
Manufacturing and Wholly Owned
Subsidiaries.

FDI Policy for Retail Sector
in India
 The government (led by Dr. Manmohan Singh, announced
following prospectivere forms 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.
 3. The retailers 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.

Types of FDI

 Horizontal FDI- arises when a firm duplicates its
home country-based activities at the same value
chain stage in a host country through FDI.
 Platform FDI
 Vertical FDI- takes place when a firm through
FDI moves upstream or downstream in different
value chains .

FDI in India

• India is the second most important FDI destination (after
China) for transnational corporations during 2010–2012.
• Sectors which attracted higher inflows were
services, telecommunication, construction activities and
computer software and hardware.
• Mauritius, Singapore, the US and the UK were among
the leading sources of FDI. FDI in India in 2010 was
$44.8 billion, and in 2011 experienced an increase of
25% to $50.8 billion .

. What does 51% FDI in multi-brand
retail ?
 Minimum investment of $100 million.
 50% of the investment is to be in backend
infrastructure development.
 30% of all raw material has be procured from Indian
small and medium industries.
 Permission to set up malls only in cities with a
minimum population of 10 lakhs.
 Government has the first right to procure material
from the farmers.
 Foreign investor should be the owner of the brand.

FDI
advantage and disadvantage
 Inflow of equipment and
technology.
 Crowding of local
industry.
 Competitive advantage &
innovation.  Conflicts of laws.
 Financial resources for  Loss of control.
expansion.
 Effect on natural
 employment generation.
Environment
environment.
 Contribution to exports growth.  Effect on local culture.
 Improved consumer welfare
through reduced cost , wider
choice and improved quality

Diverse foreign direct investment in indian
retail is greatly cherished by most of the major
and leading including:-

Walmart (USA) Rs 455.80 crore
Tesco (UK) £1bn
 Metro (Germany)about Rs 650 crore
 Carrefour (France)488 crore

FDI in Retail sector:

 FDI in Retail sector FDI in retail sector is not allowed.

 100 % FDI is allowed in cash and carry wholesale and
export trading, both wall mart and Carrefour have already
entered in India in this segment .

 FDI in retail sector will have both positive and negative
effect if allowed. Both organized and unorganized sector
will face adverse competition from global players. Wal-Mart
has a turnover of $256 billion and growing at an average of
12 -13 % annually. Average size of its stores is 85000sq ft
and average turnover is $51 million

Single Brand Retailing
 only single brand products would be sold (i.e., retail of goods
of multi-brand even if produced by the same manufacturer
would not be allowed),
 products should be sold under the same brand
internationally,
 single-brand product retail would only cover products which
are branded during manufacturing.

 any addition to product categories to be sold under ―single-
brand‖ would require fresh approval from the government.

FDI in Multi-Brand Retail
• The government has also not defined the term Multi Brand. FDI in Multi Brand
retail
• implies that a retail store with a foreign investment can sell multiple brands under
• one roof.
• In July 2010, Department of Industrial Policy and Promotion (DIPP), Ministry of
• Commerce circulated a discussion paper [14] on allowing FDI in multi-brand retail.
• The paper doesn‘t suggest any upper limit on FDI in multi-brand retail. If
• implemented, it would open the doors for global retail giants to enter and
establish
• their footprints on the retail landscape of India. Opening up FDI in multi-brand
retail
• will mean that global retailers including Wal-Mart, Carrefour and Tesco can open
• stores offering a range of household items and grocery directly to consumers in
the
• same way as the ubiquitous ‘kirana’ store.

FDI in retail: Positive and Negative impact
• Positive impact

• Job opportunities in areas like marketing, agro-
processing, packaging, transportation, etc. will be created.
• Farmers will get a good price for their crops and their exploitation will stop.
• Infrastructure facilities, refrigeration technology, transportation, etc. will be
renovated.
• Foreign companies will also create a supply-chain in the India market.

• Negative impact
Small retailers and other small ‘ Kirana store owners’ will suffer a large loss.
• Giant retailers and will displace small retailers.
• foreign giants will purchase their goods from the international market and
not from domestic sources.
• Affect will be on consumers ,retailers ,wholesalers ,farmers (producers).

Division of Retail Industry
Organised
 licensed retailers,
 who are registered for sales tax, income tax,
 Unorganised
 traditional formats of low-cost retailing,

Why do we need it:
• We are the second highest producer of fruits and
vegetables in the world but still we are not able to
utilize is properly because of inadequate infrastructure
facilities.
• It will reduce pre-harvest wastage/losses and thus help
control food inflation.
• It will create 1.5 million more jobs in 5 years. Apart
from the huge number of indirect employment.
• It will increase competition which is always beneficial
for the customer.
• It will remove the middleman from the equation. It will
reduce costs which in turn will reduce prices.

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