Foreign Direct Investment in Multi-Brand Retailing in India

-B.V.Raghunandan, SVS College, Bantwal

Post-Graduate Department of Commerce,

Government College, BarkurOctober 12, 2012

Classes of Foreign Investment

• Foreign Institutional Investment• Foreign Direct Investment

Retailing: Brand Modes

• Single Brand : Also known as vertical brands

- Single Line Format - Multiple Locations - Limited Investment• Multi-Brand : Many brands

including private brands - Limited Locations - Huge Investment

Recent Government Move• 51% FDI in Multiple Brand

Retailing• 100% FDI in Single Brand

Retailing• 30% Outsourcing Locally from

MSME units• Brands need not be Owned by

the Parent, but by any of the Subsidiaries

• In cities with a population of not less than 10 lakh

The Widespread Opposition

• Political Parties are Dominated by Mandis

• Fear of the Middlemen being Removed

• Economic Issues are Adopted when Political Ideologies Whither Away

• Kiranawala is only an eye wash argument

Impact on Local Kiranawalla• Near the Location of

the Customers• Flexibility on the Basis

of Requirements of Customers

• No need to Scale up the Model

• Low Employee and Establishment Costs

• Customer Services• Limited Suitability for

Large Retail Format

Need for FDI • Encouraging Contract Forming• Better Processing of

Agricultural Produce• Networking with Local Retailers• Commercial Warehousing in

Rural Areas• Better Dissemination of Market

Information• Healthier Agricultural Practices• Better Seeds and Organic

Farming• Better Agricultural Research• Avoiding Wastages

Earlier Examples

• ITC’s E’Choupal• Pepsi’s Contract Farming in Punjab• EID Parry’s Farmers-Connect• AMUL’s Success• Nestle’s Dairy Development• Private Dairies

Interest of FDI• Large Markets• Stable Income Levels in

India• Sourcing of Agricultural

Produce• Festivals and Special

Occasions (Multi-etnic and Multi-religious)

• Cash Based Transactions• Diversified Consumption

Problems for the FDI

• Limited Working Hours• Working Hours Unsuitable for Indian Customers• Expensive Real Estate• High Salary to the Employees• High Establishment Expenses• Unsuitable for Many Lines of Products• Indian Corporate Retailers paint a sad Story• Younger Demography

Focus• Development of Infrastructure in Rural Areas• Better Price for the Farmers• Effective Utilisation of Grains in the Godowns of Central and State

Warehousing Corporation• Better Processing Facilities• Increasing the Storage Facilities• Better Farming Practices• Better Farmer Education using Modern Technology

THANK YOU