FDI in India

FDI stands for Foreign Direct Investment, where it is durable and generally useful whether things go well or badly. Here's the story of FDI in India:

The FDI in retail, it is good for India. It is good for the farmer; it is good for the consumer and it is good for our food security and our overall economy. Especially good for the same farmer who is exploited by almost every political party as is the "aam aadmi". I don't get why BJP is opposing against FDI, the very same BJP in its 2004 manifesto (an election they subsequently lost) made FDI in multi-brand retail a critical task to complete and today, seven years later, it is the same BJP that is crying foul.

-India has become one of the top foreign investment destination and there are good reasons for the same,some of which are:

• India is the 7th largest and 2nd most populous country in the world. It is also the 4th largest economy in the world in terms of PPP.
• The second largest English-speaking scientific, technical and executive manpower in the world;
• The fourth largest economy in the world based on purchasing power parity;
• India has the second largest road network in the world, spanning 3.3 million kilometres.
• The country has a 7500 km long coastline dotted with numerous major and minor ports.
• India's telecommunications network ranks among the top ten countries in the world.
• An abundant supply of raw materials;
• An extensive rail and road network;
• The largest democracy in the world;
• A stable political system based on parliamentary democracy;
• A common law legal system with English as a court language;
• India is emerging as a major market and investment destination;
• The economic reforms initiated in 1991 have made dramatic, far reaching and positive impact on international investment in India;
• The U.S.Dept. of Commerce has identified India as one of the world's top ten "Big Emerging Markets."
• The largest producer of movies in the world;
• A large country with 28 states and 9 Union Territories
• Vibrant & organised capital and stock markets with more than 11000 listed companies;
• A fully developed banking system;
• Most preferred Business Process Outsourcing (BPO) destination. 
   

 Lets discuss the policy of FDI (latest)in India both for Single brand retail and Multi brand retail trading:
1)For Single brand retail:

 


2)For Multi brand retail:

 SWOT Analysis of FDI in Retail:

1) Strength:

• Retail is a $450bn industry in India
• Highest shop density in the world
• High growth rate in retail and wholesale trade
• Presence of big industrial houses with deep pockets.
• FDI can introduce world-level technology and technical know-how and processes to developing countries. Foreign expertise can be an important factor in upgrading the existing technical processes in a host country.  - For example, the civilian nuclear deal between India and the United States would lead to transfer of nuclear energy know-how between the two countries and allow India to upgrade its civilian nuclear facilities.
• FDI improves the quality of a products and processes in a particular sector. 

2) Weakness:

• Lack of trained and educated work force
• Higher prices as compared to local shops
• Inflation may increase slightly
• Domestic firms may suffer if they are relatively uncompetitive  

3) Opportunities:

• High employment generation in the future 
• Will enhance financial conditions of farmers
• Encourage foreign cash inflows
• Result in increasing supply-chain efficiency
• Improve logistics and infrastructures.
• Increase in Disposal income
• Increase in lifecycle changes and status consciousness

4)Threats:

• Eventhough many report says that FDI wont effect small retailers or kirana's but still FDI might effect on small retailers.
• It might help to provide jobs to everyone but doesn't specify what kind of a job.
• Work will be done by Indians and profit will be earned by foreigners
• Started roadside bargains

-FDI in 2010 was $24.2 billion, a significant decrease from both 2008 and 2009.  Foreign direct investment in August 2010 dipped by about 60% to aprox. $34 billion, the lowest in 2010 fiscal, industry department data released showed.  In the first two months of 2010-11 fiscal, FDI inflow into India was at an all-time high of $7.78 billion up 77% from $4.4 billion during the corresponding period in the previous year.
The world’s largest retailer-WalMart has termed India’s decision to allow 51% FDI in multi-brand retail as a “first important step” and said it will study the finer details of the new policy to determine the impact on its ability to do business in India.


Retailing in India is one of the pillars of its economy and accounts for about 15% of its GDP. The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value.

India in 1997 allowed foreign direct investment (FDI) in cash and carry wholesale. Then, it required government approval. The approval requirement was relaxed, and automatic permission was granted in 2006. Between 2000 to 2010, Indian retail attracted about $1.8 billion in foreign direct investment, representing a very small 1.5% of total investment flow into India.

India needs trillions of dollar to build its infrastructure, hospitals, housing and schools for its growing population. Indian economy is small, with limited surplus capital. Indian government is already operating on budget deficits. It is simply not possible for Indian investors or Indian government to fund this expansion, job creation and growth at the rate India needs. Global investment capital through FDI is necessary. Beyond capital, Indian retail industry needs knowledge and global integration. Global retail leaders, some of which are partly owned by people of Indian origin, can bring this knowledge. Global integration can potentially open export markets for Indian farmers and producers. Walmart, for example, expects to source and export some $1 billion worth of goods from India every year, since it came into Indian wholesale retail market. So, FDI is indeed good for India eventhough there are many disadvantages.