Fdi in Retail
FDI in retail sector in India Apoorv Verma(HRM 2012-14,XLRI) Ritika Singh(HRM 2012-14, XLRI) Introduction-Meaning of Foreign Direct Investment
Foreign direct investment as defined by Organization of Economic Cooperation and Development (OECD) is a category of cross-border investment made with a strategic long-term intent. The OECD defines a transfer of 10% or more of the voting power (shares in company) as the definition of foreign direct investment. There is a significant degree of influence by the direct investor in the management of the direct investment enterprise. The objectives of direct investment are different from those of portfolio investment whereby investors do not generally expect to influence the management of the enterprise. This is why investment made by Foreign Institutional Investors (FIIs) is called Hot Money.
Defining the Retail Sector
In 2004, The High Court of Delhi defined the term ‘retail’ as a sale for final consumption in contrast to a sale for further sale or processing (i.e. wholesale).i.e. sale to the ultimate consumer. Now let us have a glimpse of the Indian retail sector. Indian retail sector is approximately $ 450 billion in size with 96% in the unorganized sector and 4% in organized sector. The organized sector is under two formats namely Single brand retail i.e. The Adidas, Reebok, Pantaloons store we visit and Multi brand retail which houses many brands under the same roof like for example the Big Bazaar, The Shoppers Stop or the next door kirana store. Then other than the retail there is a Wholesale segment which does not directly sell to ordinary customers like me and you. An example of this type of store is the Bharti Wall Mart which acts as retailer to other stores and not directly to retail consumers
Evolution of foreign investment in the Retail Sector of India
India is a signatory to World Trade Organization‘s General Agreement on Trade in Services. This agreement also includes wholesale and retailing services. So
Foreign direct investment as defined by Organization of Economic Cooperation and Development (OECD) is a category of cross-border investment made with a strategic long-term intent. The OECD defines a transfer of 10% or more of the voting power (shares in company) as the definition of foreign direct investment. There is a significant degree of influence by the direct investor in the management of the direct investment enterprise. The objectives of direct investment are different from those of portfolio investment whereby investors do not generally expect to influence the management of the enterprise. This is why investment made by Foreign Institutional Investors (FIIs) is called Hot Money.
Defining the Retail Sector
In 2004, The High Court of Delhi defined the term ‘retail’ as a sale for final consumption in contrast to a sale for further sale or processing (i.e. wholesale).i.e. sale to the ultimate consumer. Now let us have a glimpse of the Indian retail sector. Indian retail sector is approximately $ 450 billion in size with 96% in the unorganized sector and 4% in organized sector. The organized sector is under two formats namely Single brand retail i.e. The Adidas, Reebok, Pantaloons store we visit and Multi brand retail which houses many brands under the same roof like for example the Big Bazaar, The Shoppers Stop or the next door kirana store. Then other than the retail there is a Wholesale segment which does not directly sell to ordinary customers like me and you. An example of this type of store is the Bharti Wall Mart which acts as retailer to other stores and not directly to retail consumers
Evolution of foreign investment in the Retail Sector of India
India is a signatory to World Trade Organization‘s General Agreement on Trade in Services. This agreement also includes wholesale and retailing services. So
References: 1. http://articles.economictimes.indiatimes.com/2012-10-08/news/34323106_1_globalretailers-fdi-total-retail-business 2. http://economictimes.indiatimes.com/fullcoverage/fdi-in-retail 3. FDI in Indian Retail Sector: Analysis of Competition in Agri-Food Sector- Internship Project Report by Rupali Gupta and Payal Malik 4. http://www.oecd.org/investment/investmentpolicy/2090148.pdf 5. http://www.indianexpress.com/news/tough-riders-for-fdi-in-multibrand-retail/1003507/2 6. http://www.legalindia.in/foreign-direct-investment-in-indian-retail-sector-%E2%80%93-ananalysis 7. http://www.kpmg.com/IN/en/Documents/India-Retail-FDI-changes.pdf 8.http://zenithresearch.org.in/images/stories/pdf/2012/JUNE/ZIJMR/9_ZIJMR_VOL2_ISSUE6_JU NE2012.pdf