PRESTIGE INSTITUTE OF MANAGEMENT AND

RESEARCH

ASSIGNMENT

Name Shreya Pawde

Program MBA FT – H 1 st Semester

Section “H”

Subject “FDI in Retail Sector Boon or Bane”

Scholar No. 1121213719

Prof. Deepti Sharma Shreya Pawde

Submitted to Submitted By

“FDI in Retail Sector: - Boon or Bane”

The Foreign Direct Investment (FDI) means “cross border investment made by a
resident in one economy or in an enterprise in another economy, with the aim of
earning profits in the targeted country.
FDI in retail industry means that foreign companies in certain categories
can sell products through their own retail shop in the country.
Foreign direct investment (FDI) in India was introduced in the 1991 under the
Foreign Exchange Management Act (FEMA) implemented by the then finance
minister, Dr. Manmohan Singh. It commenced with the baseline of 1 billion
dollars in 1990.

The Government of India was initially very apprehensive of the introduction of

the Foreign Direct Investment in the Retail Sector in India. The unorganized
retail sector as has been mentioned earlier occupies 98% of the retail sector and
the rest 2% is contributed by the organized sector. Hence one reason why the
government feared the surge of the Foreign Direct Investments in India was the
displacement of labour. The unorganized retail sector contributes about 14% to
the GDP and absorbs about 7% of our labour force. Hence the issue of
displacement of labour consequent to FDI is of primal importance. At present,
foreign direct investment (FDI) in pure retailing is not permitted under Indian
law. Government of India has allowed FDI in retail of specific brand of
products. As India is one of the developing countries, so FDI must be promoted
but must be kept under control as it can affect the economy of the country.
Indian retail industry has emerged as one of the most dynamic and
fast-paced industries due to the entry of several new players. It accounts for over
10% of the country’s gross domestic product (GDP) and around eight% of the
employment. India is the world’s fifth-largest global destination in the retail
space.
India is the world’s fifth-largest global destination in the retail space and ranked
63 in World Bank’s Doing Business 2020.
India is the world’s fifth-largest global destination in the retail space. In FDI
Confidence Index, India ranked 16 (after US, Canada, Germany, United
Kingdom, China, Japan, France, Australia, Switzerland, and Italy).

Major Key Players:

1.      Pantaloons Retail Ltd, a Future group venture: Over 12 mn sq. ft. of retail
space spread over 1,000 stores, across 71 cities in India.
2.      Shoppers Stop Ltd: Over 1.82 mn sq. ft. of retail space spread over 35
stores, in 15 cities.
3.      Spencer’s Retail, RPG Enterprises: Retail footage of over 1.1 mn sq. ft.
with approx 250 stores, across 66 cities.
4.      Lifestyle Retail, Landmark group venture: Has approximately 15 lifestyle
stores and 8 Home centres.

Other major domestic players in India are

● Bharti Retail, Tata Trent, Globus, Aditya Birla ‘More’, and Reliance
retail. Some of the major foreign players who have entered the segment in
India are– 
●          Carrefour which opened its first cash-and-carry store in India in
New Delhi. 
●          Germany-based Metro Cash & Carry which opened six wholesale
centres in the country. 
●          Walmart in a JV with Bharti Retail, owner of Easy Day store—plans
to invest about US$ 2.5 billion over the next five years to add about 10
million sq ft of retail space in the country.
●          British retailer Tesco Plc (TSCO) in 2008 signed an agreement with
Trent Ltd. (TRENT), the retail arm of India’s Tata Group, to set up
cash-and-carry stores. 
●          Marks & Spencers have a JV with Reliance retail.
FDI in “Single – Brand” Retail

According to e-commerce FDI rules, $100%, FDI is allowed in Single Brand

Product Retail (Online Presence Allowed) under automatic route. FDI is
permissible in single – brand retail conditions stipulate that:
∙ Only single – brand products are sold.
∙ Products are sold under the same brand internationally
∙ Single –brand products include only those identified during manufacturing
∙ Any additional product categories to be sold under single- brand retail
must first receive additional government Approval.
FDI in a single –brand retail implies that a retail store with foreign investment
can only sell one brand.

FDI in Multi –Brand

51% Foreign Direct Investment in E-Commerce in India is allowed in

Multi-Brand Product Retail (Online Presence Not Allowed) under government
route.

Development Scenario

● In November 2021, Department for Promotion of Industry and Internal

Trade announced that it is working on a regulatory compliance portal to
minimize burdensome compliance processes between industries and the
government.
 ● In October 2021, retailers in India increased by 14% compared with last
year
● In September 2021, New Delhi-based e-commerce enablement startup
GoKwik raised US$ 5.5 million through Matrix Partners India. Dukaan,
another startup that helps businesses digitize operations, received a US$
11 million investment led by 640 Oxford Ventures.
● India’s retail sector attracted US$ 6.2 billion from various private equity
and venture capital funds in 2020.
● In October 2021, Reliance announced plan to launch 7-Eleven Inc.’s
convenience stores in India.
● In October 2021, Realme launched 100 new exclusive stores across India
to expand and strengthen its footprint in the country.
● In October 2021, Reliance Retail introduced Freshpik, a new experiential
gourmet food store in India, to expand its grocery segment in the
ultra-premium category.
● In October 2021, Plum, the direct-to-consumer beauty & personal care
brand, announced plan to launch >50 offline stores across India (by 2023)
to expand its customer base.
● In July 2021, Dyson announced to increase its retail presence to 12 stores.
● Tanishq, Shoppers Stop and Bestseller India (sells fashion brands Vero
Moda, ONLY and Jack & Jones) plan to add 10-35 stores in FY22.
● In 2021, Lenskart received US$ 315 million funding from Falcon Edge
Capital, Temasek Holdings, and KKR. The company plans to use the
proceeds to expand its retail footprint in Southern India.
● Flipkart hired 23,000 individuals in India between March and May 2021
in various capacities across its supply chain, including delivery
executives, to strengthen the supply chain.

Advantages and Disadvantages:

Advantages of FDI in retail sector in India:
∙ Capital infusion,
∙ Boost Healthy Competition and check inflation,
∙ Improvement in Supply Chain,
∙ Improvement in Customer Satisfaction,
∙ Improved Technology and Logistics,
∙ Benefits for the Farmers,
∙ Creation of More and Better Employment Opportunities

Disadvantages of FDI in Retail Sector

∙ Domination of Organized Retailors,
∙ Create Unemployment,
∙ Loss of Self Competitive Strength,
∙ Indirectly Leads to Increase in Real Estate Cost,
∙ Distortion of Culture,
∙ Increase Poverty.

Market Size during Pandemic

According to the Retailers Association of India (RAI), the retail industry
achieved 93% of pre-COVID sales in February 2021; consumer durables and
quick service restaurants (QSR) increased by 15% and 18% respectively.
After an unprecedented decline of 19% in the January-March 2020 quarter, the
FMCG industry displayed signs of recovery in the July-September 2020 quarter
with a y-o-y growth of 1.6%. The growth witnessed in the fast-moving
consumer goods (FMCG) sector was also a reflection of positivity recorded in
the overall macroeconomic scenario amid opening of the economy and easing of
lockdown restrictions.
E-Retail has been a boon during the pandemic and according to a report by Bain
& Company in association with Flipkart.  During the festival period in 2020,
Amazon, Flipkart and various vertical players sold goods worth US$ 9 billion
despite the pandemic onslaught.

Road Ahead
E-commerce is expanding steadily in the country. Customers have the
ever-increasing choice of products at the lowest rates. E-commerce is probably
creating the biggest revolution in retail industry, and this trend is likely to
continue in the years to come. Retailers should leverage digital retail channels
(E-commerce), which would enable them to spend less money on real estate
while reaching out to more customers in tier II and tier III cities.
Online retail market in India is projected to reach US$ 350 billion by 2030 from
an estimated US$ 55 billion in 2021, due to rising online shoppers in the
country. In 2020, the most common payment methods online were digital
wallets (40%), followed by credit cards (15%) and debit cards (15%). Online
penetration of retail is expected to reach 10.7% by 2024 versus 4.7% in 2019.
Nevertheless, long-term outlook for the industry looks positive, supported by
rising income, favorable demographics, entry of foreign players, and increasing
urbanization.

Conclusion
It can be said that the advantages of allowing unrestrained FDI in the retail
sector evidently outweigh the disadvantages attached to it and the same can be
deduced from the examples of successful experiments in countries like Thailand
and China where too the issue of allowing FDI in the retail sector was first met
with incessant protests, but later turned out to be one of the most promising
political and economic decisions of their governments and led not only to the
commendable rise in the level of employment but also led to the enormous
development of their country's GDP.
And also, nobody can force a consumer to visit a mega shopping complex or a
small retailer/sabji mandi. Consumers will shop in accordance with their utmost
convenience, where ever they get the lowest price, max variety, and a good
consumer experience.

WEBLIOGRAPHY

https://www.ibef.org/industry/retail-india.aspx

https://lawcirca.com/understanding-foreign-direct-investment-fdi-in-retail-sector
-in-india/

https://www.slideshare.net/Skyron93/fdi-in-retail-sector-in-india-ppt