The document discusses India's current policy on foreign direct investment in retail, which only allows up to 51% FDI in single-brand retail. It notes international retailers are expanding in India within this policy. It also outlines different options used by foreign companies to enter the Indian retail market like cash-and-carry wholesale, franchising, joint ventures, and manufacturing. However, the government faces a dilemma in fully liberalizing FDI in multi-brand retail due to concerns about impacts on small retailers and employment.
2. Current FDI Policy
India’s current policy does not allow FDI in
retail trade except for “Single Brand Retail”
3. Current FDI Policy
India’s current policy does not allow FDI in
retail trade except for “Single Brand Retail”
FDI up to 51% is allowed in Single Brand
Retail with prior government approval
4. Current FDI Policy
India’s current policy does not allow FDI in
retail trade except for “Single Brand Retail”
FDI up to 51% is allowed in Single Brand
Retail with prior government approval
100% FDI is allowed in wholesale cash-and-
carry format
5. Current FDI Policy
India’s current policy does not allow FDI in
retail trade except for “Single Brand Retail”
FDI up to 51% is allowed in Single Brand
Retail with prior government approval
100% FDI is allowed in wholesale cash-and-
carry format
Franchisee arrangements are allowed in retail
format
6. Current FDI Policy
Particulars FDI % Route Conditions
Retail Trading (except single Nil
brand)
Single Brand product 51% FIPB* Products to be sold of a single brand only
retailing Products should be sold under the same brand
internationally
Single brand product retailing to cover only products
which are branded during manufacturing
Wholesale / cash and carry 100% Automatic
trading
Trading for exports 100% Automatic
Trading of items sourced 100% FIPB Subject to the condition that the test marketing approval
from small scale sector will be for a period of two years and investment in setting
up manufacturing facilities commences simultaneously
with test marketing
Test marketing of such 100% FIPB
items for which a company
has approval for
manufacture *FIPB: Foreign Investment Promotion Board
7. Current FDI Policy
International retailers are fast expanding their
business in India to tap the immense consumer
base
8. Current FDI Policy
International retailers are fast expanding their
business in India to tap the immense consumer
base
Reebok has set up its largest store in the world in
Hyderabad
9. Current FDI Policy
International retailers are fast expanding their
business in India to tap the immense consumer
base
Reebok has set up its largest store in the world in
Hyderabad
Tommy Hilfiger and Levis have over 20,000
square feet of retail space and stand-alone stores
across major metros
10. Current FDI Policy
International retailers are fast expanding their
business in India to tap the immense consumer
base
Reebok has set up its largest store in the world in
Hyderabad
Tommy Hilfiger and Levis have over 20,000
square feet of retail space and stand-alone stores
across major metros
Fast-food giants Pizza Hut, McDonalds, Subway
etc. are expanding at a fast pace with their
expansion into the Tier II and Tier III cities
11. Retail Entry Options
Strategic License Cash & Carry
Distribution
Agreements Wholesale Retailing
• Foreign company • 100 % FDI allowed in • An international
enter into a licensing wholesale trading company can set up a
agreement with a which involves distribution office in
domestic retailer or building a large India and supply
partnering with Indian distribution network products to the local
promoter owned retailers. Franchise
companies outlets can also be set
up in this route
Franchisee Route Manufacturing Joint Venture
• The entry route which • A company can setup • International firms
includes the master manufacturing units in can enter into
franchisee route is India along with agreements with
widely used, with a standalone retailing domestic players and
number of outlets set-up base in India.
international brands Share of MNCs is
to set up presence in restricted to 49% in
India this route
12. Retail Entry Options
Strategic License Cash & Carry
Distribution
Agreements Wholesale Retailing
• Foreign company • 100 % FDI allowed in • An international
enter into a licensing wholesale trading company can set up a
agreement with a which involves distribution office in
domestic retailer or building a large India and supply
partnering with Indian distribution network products to the local
promoter owned retailers. Franchise
companies outlets can also be set
up in this route
Franchisee Route Manufacturing Joint Venture
• The entry route which • A company can setup • International firms
includes the master manufacturing units in can enter into
franchisee route is India along with agreements with
widely used, with a standalone retailing domestic players and
number of outlets set-up base in India.
international brands Share of MNCs is
to set up presence in restricted to 49% in
India this route
13. Retail Entry Options
Strategic License Cash & Carry
Distribution
Agreements Wholesale Retailing
• Foreign company • 100 % FDI allowed in • An international
enter into a licensing wholesale trading company can set up a
agreement with a which involves distribution office in
domestic retailer or building a large India and supply
partnering with Indian distribution network products to the local
promoter owned retailers. Franchise
companies outlets can also be set
up in this route
Franchisee Route Manufacturing Joint Venture
• The entry route which • A company can setup • International firms
includes the master manufacturing units in can enter into
franchisee route is India along with agreements with
widely used, with a standalone retailing domestic players and
number of outlets set-up base in India.
international brands Share of MNCs is
to set up presence in restricted to 49% in
India this route
14. Retail Entry Options
Strategic License Cash & Carry
Distribution
Agreements Wholesale Retailing
• Foreign company • 100 % FDI allowed in • An international
enter into a licensing wholesale trading company can set up a
agreement with a which involves distribution office in
domestic retailer or building a large India and supply
partnering with Indian distribution network products to the local
promoter owned retailers. Franchise
companies outlets can also be set
up in this route
Franchisee Route Manufacturing Joint Venture
• The entry route which • A company can setup • International firms
includes the master manufacturing units in can enter into
franchisee route is India along with agreements with
widely used, with a standalone retailing domestic players and
number of outlets set-up base in India.
international brands Share of MNCs is
to set up presence in restricted to 49% in
India this route
16. Retail Hurdles
US$ 590 bn
US$ 322 bn
2006-07 2011-2012
Retail Trade Estimated to Grow 13% annually
Share of organised retail growing very fast
17. Retail Hurdles
US$ 590 bn
US$ 322 bn
2006-07 2011-2012
Retail Trade Estimated to Grow 13% annually
Share of organised retail growing very fast
An attractive destination for global retailers
18. Retail Hurdles
US$ 590 bn
US$ 322 bn
2006-07 2011-2012
Retail Trade Estimated to Grow 13% annually
Share of organised retail growing very fast
An attractive destination for global retailers
Democratic country with high growth rate
19. Retail Hurdles
US$ 590 bn
US$ 322 bn
2006-07 2011-2012
Retail Trade Estimated to Grow 13% annually
Share of organised retail growing very fast
An attractive destination for global retailers
Democratic country with high growth rate
Youth population with growing disposable income
20. Retail Hurdles
US$ 590 bn
US$ 322 bn
2006-07 2011-2012
Retail Trade Estimated to Grow 13% annually
Share of organised retail growing very fast
An attractive destination for global retailers
Democratic country with high growth rate
Youth population with growing disposable income
Existing investment cap an entry hurdle
22. Retail Reforms: Dilemma
Second coming of UPA government was seen as a
positive sign
The Congress party, reasonably stronger, after
the elections, to dictate its agenda can push
further the retail reforms agenda it had
persuaded
23. Retail Reforms: Dilemma
Second coming of UPA government was seen as a
positive sign
The Congress party, reasonably stronger, after
the elections, to dictate its agenda can push
further the retail reforms agenda it had
persuaded
Government’s recent views presents a different
picture
24. Retail Reforms: Dilemma
Second coming of UPA government was seen as a
positive sign
The Congress party, reasonably stronger, after
the elections, to dictate its agenda can push
further the retail reforms agenda it had
persuaded
Government’s recent views presents a different
picture
“The government will continue to deliberate on the proposals for opening of
sectors like multi brand retail. These sectors require wider consultation
within the Cabinet.”
Anand Sharma, Union Commerce Minister
25. Retail Reforms: Dilemma
June ‘09 - A parliamentary panel asks government to
ban foreign firms and big domestic corporates from
retailing groceries, fruits and vegetables, and stop
issuing licences for wholesale operations*
* http://www.livemint.com/2009/06/08185249/Parliamentary-panel-recommends.html
26. Retail Reforms: Dilemma
June ‘09 - A parliamentary panel asks government to
ban foreign firms and big domestic corporates from
retailing groceries, fruits and vegetables, and stop
issuing licences for wholesale operations*
July ’09 - The Economic Survey 2009-10 released by
the Ministry of Finance generated some hopes by
proposing opening up of FDI in multi-format retail,
starting with food retailing.
* http://www.livemint.com/2009/06/08185249/Parliamentary-panel-recommends.html
** http://www.thehindu.com/2009/07/03/stories/2009070358300100.htm
27. Retail Reforms: Dilemma
July ‘09 - On a written reply to the Lok Sabha (the
lower house of parliament) on July 13, 2009 the
Minister of State for Commerce announced that
the government has no proposal to change the
current policy on retail trade *
"Government also fully recognises the need to ensure that small retailers are
not adversely affected by the growing organised retail and that there is no
adverse effect on employment.”
Jyotiraditya Scindia, the Minister of State for Commerce and Industry
* http://www.livemint.com/2009/07/13161538/No-plans-to-change-retail-FDI.html
28. Retail Reforms: Dilemma
December ‘09 - government has released a draft
document aimed at simplifying overseas
investments in India called “FDI Regulatory
Framework. The new policy framework clarifies that
while FDI is not allowed in retail, FII is permitted ” *
"This document keeps retail out of the prohibited sector list of foreign
investment while retaining it in the prohibited sector list of FDI.”
* http://www.livemint.com/2009/12/24230435/India-to-review-FDI-rules-ever.html
29. What scares policymakers?
Retail business is the second largest employer
after agriculture
* http://finance.yahoo.com/news/Is-WalMart-Killing-Your-inc-1332006942.html?x=0&.v=56
30. What scares policymakers?
Retail business is the second largest employer
after agriculture
The government does not want to antagonise
the labour-intensive sector
* http://finance.yahoo.com/news/Is-WalMart-Killing-Your-inc-1332006942.html?x=0&.v=56
31. What scares policymakers?
Retail business is the second largest employer
after agriculture
The government does not want to antagonise
the labour-intensive sector
Numerous studies indicated, entry of a retailing
gians like Wal-Mart does significantly impact
sales at other local establishments*
* http://finance.yahoo.com/news/Is-WalMart-Killing-Your-inc-1332006942.html?x=0&.v=56
32. What scares policymakers?
Retail business is the second largest employer
after agriculture
The government does not want to antagonise
the labour-intensive sector
Numerous studies indicated, entry of a retailing
gians like Wal-Mart does significantly impact
sales at other local establishments*
The government seeks to safeguard small
retailers from adverse impact of growing
organised retail
* http://finance.yahoo.com/news/Is-WalMart-Killing-Your-inc-1332006942.html?x=0&.v=56