ACKNOWLEDEMENT

It is indeed a great pleasure and privilege for us to present OVERVIEW OF INDIAS ORGANISED RETAIL SECTOR

I take immense pleasure in thanking our Institution Sinhgad Institute of Management for giving us an opportunity to do this project.

I would also like to thank my Project Guide Mr. Nilesh Gokhale for all her suggestions and guidance which helped me during my project. I also extend our thanks to all those who directly or indirectly involved in our project completion.

At last we would like to thanks once again to our faculty whose sincere support has enable us at each and every step and his experience always give us the right direction to achieve our goal.

DECLARATION

I, the undersigned, hereby declare that the project report entitled Study of Organized Retail Industry in India writen and submitted by me to the AICTE, in the partial fulfilment of the requirement for the award of degree of Post Graduate Diploma In Management (Marketing) under the guidance of Prof. Nilesh Gokhale is my original work and the conclusion drawn therein are based on the material collected by myself.

The matter embodied in this project report has not been submitted to any other University or Institution for the award of degree.

Place: Pune

Submitted by: Surya Shukla

Date:

Executive Summary

Retailing is emerging as a sunrise industry in India and its presently the largest employer after agriculture. Retailing in India is one of the business enterprises of its economy and accounts for 14 to 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. India is one of the fastest owner manned small shops account for more than 90%. In 2010, larger format convenience stores and supermarkets accounted for about 4% of the industry, and these were present only in large urban centres. The sunrise of the organised retailers in India creates a major turn in the retail industry. Top major organised retail players are increasing their market share day by day. Their main focus is based on FMCG and consumer durables. With modernization, Indian culture is aping the western dressing sense and lifestyle and these techniques is promoting by the Retailers and by this they are generating a remarkable revenue from the Indian consumers. , Indian Retail market is estimated to be worth US$ 511 billion, and is poised to grow to US$ 833 billion by 2013. The organised retail that currently accounts for less than 5 per cent of the total retail market is expected to register a compound annual growth rate (CAGR) of 40 per cent and swell to US$ 107 billion by 2013. Until 2011, Indian central government denied Foreign Direct Investment (FDI) in multi-brand retail, forbidden foreign groups for any ownership in supermarkets, convenience stores or any retail outlets. Even single-brand retail was limited to 51% ownership and a bureaucratic process.

INDEX

CHAPTER NO.
1

TOPIC
INTRODUCTION TO RETAIL INDUSTRY IN INDIA SCOPE AND OBJECTIVES OF THE STUDY

PAGE NO.
6-9

11

RETAILING IN INDIA

13-19

SIZE AND GROWTH

21-25

MAJOR PLAYERS IN THE MARKET

27

GOVERNMENT POLICIES

29-38

GLOBAL PLAYERS PORTERS FIVE FORCE MODEL & SWOT ANALYSIS ARTICLES ON ORGANISED RETAIL SECTOR REGADING FDI CONCLUSION OF THE STUDY

40-43

45-49

51-53

10

55

CHAPTER-I INTRODUCTION

1.1)

INTRODUCTION OF RETAIL MAKET:

n India the vast middle class and its almost untapped retail industry are the key attractive forces for global retail giants wanting to enter into newer markets, which in turn will help the

India Retail Industry to grow faster. Indian retail is expected to grow 25 per cent annually. Modern retail in India could be worth US$ 175-200 billion by 2016. Food Retail Industry in India dominates the shopping basket. The Mobile phone Retail Industry in India is already a US$ 16.7 billion business, growing at over 20 percent per year. The future of Mobile phone Retail Industry looks promising with the growing of the market, with the government policies becoming more and more favourable and the emerging technologies facilitates operations.

The word retail means to sell or be sold directly to individuals. Retail is Indias largest industry, and arguably the one with the most impact on the population. It is the countrys largest source of employment after agriculture, has the deepest penetration to rural India, and generates more than 10 percent of Indias GDP. However, retailing in India has so far, been mostly in the hand of small unorganized entrepreneurs. It is also Indias least evolved industries.

The industry suffers from lack of management talent, poor access to capital, unfavourable regulation and denial of access to best practices. The Indian retail industry is only now beginning to evolve in line with the transformation that has swept other large economies. Fifty years of restricting the consumer goods industry, a national mindset which favoured denial over indulgence, and a fractured supply chain for agricultural products have all contributed to prevent the development of modern tenants based on scale advancements and consumer preferences.

India has some 12 million retail outlets, but many of these act merely as subsistence providers for their owners and survive on a cost structure where labour and land is assumed to be free and taxes nil. Compare this with the global retail industry, which is one of the worlds largest organized employers, is at the cutting edge of technology, and leverages scale and scope to offer value-added services to its customers.

However, only recently has there been an awakening in this sector, with more organized retailers starting to make an impact. The liberalization of the consumer goods industry, initiated in the mid80s and accelerated through the 90s has begun to impact the structure and conduct of the retail industry. Backed by changing consumer trends and metrics, liberalization in mindsets driven by media, new opportunities and increasing wealth, retailing in India, presents a vast opportunity for a variety of businesses real estate, store design & operations, visual merchandising logistics and communications, B2C service providers, and FMCG companies who can add to their offers by partnering this revolution.

Retailing in India is one of the business enterprises of its economy and accounts for 14 to 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. India is one of the fastest owner manned small shops account for more than 90%. In 2010, larger format convenience stores and supermarkets accounted for about 4% of the industry, and these were present only in large urban centres.

Until 2011, Indian central government denied Foreign Direct Investment (FDI) in multi-brand retail, forbidden foreign groups for any ownership in supermarkets, convenience stores or aany retail outlets. Even single-brand retail was limited to 51% ownership and a bureaucratic process.

The Indian retail industry is generally divided into organised and unorganised retailing: Organized retailing Organized retailing refers to trading activities undertaken by licensed retailers, those who have registered for sales tax, income tax, etc. These includes corporatebacked hypermarkets and retail chains, and also privately-owned large retail businesses. Hence, organized retail which now constitutes a small four per cent of total retail sector is growing at a much faster pace of 45-50% per annum and quadruples its share in total retail trade to 16% by 2011-12. Unorganized retailing- Unorganized retailing refers to the traditional forms of low-cost retailing, for example, local kirana shops, owner-operated general stores, paan/beedi shops, convenience stores, hand cart and street vendors, etc. The unorganized retail sector is growing at about 10% per annum with sales rising from US$ 309 billion in 2006-07 to US$ 496 billion in 2011-12.
7

Global Retail Industry

Retail, with total sales of $ 6.6 trillion, is the worlds largest private industry ahead of financial industries $ 5.1 trillion. It is also home to a number of the worlds largest enterprises. Over 50 of the Fortune 500 companies, and around 25 of the Asian top 500 companies, are retailers. The industry accounts for over 8 percent of the GDP in western economies.

By 2010, the list of Indias top 10 retailers will have at least 5 Indian corporate. Retail Marketing will go through a tremendous change in India this millennium. It will change Indias cities, its people, and its households. The Indian consumer is reportedly the largest spender in Singapore and London. It is, therefore, strange that there have, so far, been few efforts to present the product in the right kind of environment in India. Indeed, the right shopping experience does induce Indian consumers to spend more.

Few factors that driving the growth are: Mall Mania: The developing mall culture in India Emergence of region-specific formats Emergence of discount formats Entry of international players

1.2) Organized Retailing in India: The Sunrise Sector

Organized retail appeared in India in 1999 with the launch of the first malls, the launch of Ansals Plaza in Delhi and Crossroads in Mumbai. They were hailed as the spark that led to the explosion of organized retail in the country and transformed the retail landscape. It is the next sunrise industry after IT and is gaining momentum with many global retail giants showing interest to enter India. Even the owners of traditional Kirana stores have taken initiatives to organize and implement technologies in their stores. However, there is an apparent fear in the minds of millions of small retailers and hawkers that organized retail would endanger their livelihood.

CHAPTER II SCOPE AND OBJECTIVES

10

2.1) OBJECTIVES OF THE STUDY

The main objective of my study is to measure "To find out the organized retailing in India". For the purpose of measuring it I also have to decide some other objectives of my study which are as follows: 1. To find out the Major players in Retail Sector. 2. To find out the government policies for Retailers. 3. To know the present status of the retailers in India. 4. To study the growth of retail sector in India. 5. To study about the major and emerging formats of retailing in India. 6. To study about the challenges and opportunities faced by retail sector in India.

2.2) SCOPE OF THE STUDY

The scope of my study restricts itself to analyze the organised retailers profitability drivers on the basis of Garments, Gifts, Cards and Music Department where as in the recent trend its seen that the key players in this Industry are more emphasizing on the Garments, Personal Grooming, Home furnishings, Life style and Footwear Departments in their Stores.

11

CHAPTER-III RETAILING IN INDIA

12

3.1) Todays Retail in India

omprised of organized and traditional retail formats, Indian Retail market is estimated to be worth US$ 511 billion, and is poised to grow to US$ 833 billion by 2013. The organised retail

that currently accounts for less than 5 per cent of the total retail market is expected to register a compound annual growth rate (CAGR) of 40 per cent and swell to US$ 107 billion by 2013.

A report by global consultancy firm, AT Kearney said "The consumer spending in India has increased by an impressive 75 per cent in the last four years and will quadruple in the next 20 years." Moreover, India recently topped the Nielsen Global Consumer Confidence study, conducted by Nielsen, a market research company. The biannual report revealed that Indians are "the most optimistic lot globally who think that their country will be out of the economic recession in the next twelve months."

However the size of Organised Retail in India will exceed US$22bn mark from current level of about US$4bn with its space requirement touching over 220mn sq. ft., by 2010, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM). In a Paper brought out by ASSOCHAM on `Retail Scenario in India and Its Related Issues, it has been stated that approx. 40mn sq. ft. is currently generating a business of about US$4bn in organized retail.

Indias vast middle-class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets and India provides for the ideal locations. Since, Delhi and its suburbs have so far seen the growth of 100 bigger and smaller malls; roughly 600 new malls are coming up in other metropolis and large townships in which less than 35% of retail business is going to be transacted.

13

It is seen that over 1000 malls are in the pipelines for smaller townships in which the retail sector is projected to grow at over 60% because of ample availability of land and increased purchasing power of the folks living in those areas because of increased economic activities. Naturally, the large players will prefer to go there and put up their shops by sourcing their supplies from the places convenient to them.

Some of the key areas in which retail boom will prevail in towns beyond metros and even large cities will include food items, FMCG products, grocery, sportswear, outerwear, tailored clothing, eyewear, watches, footwear and accessories and the like. The retail business that will pre-dominantly stay with malls put up in metros and large cities will include apparel, pharmaceuticals, luxury goods and consumer durables.

Changes should be brought about in Agricultural Produce Marketing Committee (APMC) Act (a key contributor to the large number of intermediaries) such as the introduction of contract farming and allowing direct procurement from farmers by retail owners so that a direct chain is established between the user and farmers for their equal benefits. It also highlights, pointing out that even in the case of non-agricultural products such as apparel, FMCG and general merchandise, the situation is far from ideal.

The key cause for inefficiency is the poor integration between the retailer and supplier. None of the retailers, in view of ASSOCHAM has so far an automated system for information exchange with their suppliers. In developed countries, retailers practice Vendor Management Inventory (VMI) systems, where the supplier has access to the point of sales data of the retailer and plans automatic replenishments responding to the stocks available at the retailer.

14

3.2) Key Points of Indian Organised Retail Industry

1. Potential to be the third largest economy in terms of GDP in next few years.

2. It ranks high amongst the top 10 FDI destinations of the world.

3. Fastest growing tourist market in Asia. 4. World Bank states, India to be worlds second largest economy after China by the year 2050.

5. Stable and investor friendly Central Government at the helm of affairs.

6. Introduction of Value Added Tax or VAT and tax reforms.

7. High degree of professionalism and corporate ethics.

8. Excellent Investment opportunities in Indian retail sector and in allied sectors; sure and high returns on investments.

9. Bullish stock markets. 10. Hordes of foreign investors are thronging in to invest in Indian retail markets. 11. Highly educated English speaking young workforce. 12. Vibrant and multi cultured cities. 13. Huge opportunity exists, especially in semi-rural and rural areas. 14. Till date the second largest employer after agriculture sector, for the huge semi-skilled Indian population. 15. Offers highest shop density in the whole world. 16. Having almost 1,20,000 shops, across the length and breadth of the country.

15

3.3) CHALLENGES TO RETAIL DEVELOPMENT IN INDIA

Organized retail in India is little over a decade old. It is largely an urban phenomenon and the pace of growth is still slow. Some of the reasons for this slow growth are: -

THE KIRANAS CONTINUE - The very first challenge facing the organized retail industry in

India is competition from the unorganized sector. Traditionally retailing has established in India for centuries. It is a low cost structure, mostly owner operated, has negligible real estate and labour costs and little or no taxes to pay. Consumer familiarity that runs from generation to generation is one big advantage for the traditional retailing sector.

On the other hand, organized sector have big expenses to meet and yet have to keep prices low enough to compete with the traditional sector.

RETAIL NOT BEING RECOGNIZED AS AN INDUSTRY IN INDIA Lack of recognition

as an industry hampers the availability of finance to the existing and new players. This affects growth and expansion plans.

THE HIGH COSTS OF REAL ESTATE Real estate prices in some cities in India are amongst

the highest in the world. The lease or rent of property is one of the major areas of expenditure; a high lease rental reduces the profitability of a project.

HIGH STAMP DUTIES In addition to the high cost of real estate the sector also faces very high stamp duties on transfer of property, which varies from state to state (12.5% in Gujarat and 8% in Delhi). The problem is compounded by problems of clear titles to ownership, while at the same time land use conversion is time consuming and complex as is the legal process for settling of property disputes.
16

 LACK OF ADEQUATE INFRASTRUCTURE - Poor roads and the lack of a cold chain infrastructure hampers the development of food and grocery retail in India. The existing supermarkets and foods retailers have to invest a substantial amount of money and time in building a cold chain network.

MULTIPLE AND COMPLEX TAXATION SYSTEM The sales tax rates vary from state to state, while organized players have to face a multiple point control and system there is considerable sales tax evasion by small stores. In many locations, retailers have to face a multi point control with the introduction of value Added Tax (VAT) in 2005, certain anomalies in the existing sales tax system causing disruption in the supply chain are likely to get corrected over a period of time.

There is price war between different retail organizations. Each and every one is saying to provide goods at low cost and offers various promotional schemes. In such a case it is difficult to keep ones customers with oneself.

17

3.4) OPPORTUNITIES
Retail marketing gets various opportunities to grow up in the Indian market. Not only retailing but Manufacturers as well as suppliers, and buyers have various opportunities, some of which are mentioned below WHAT IS IN STORE- Organized retail provides brands much needed visibility and platform for customer interaction. It also helps in launching of new product or product variant and in market penetration. It has wider product range and more frequent, speedier deliveries.

URBANIZATION Increased urbanization has shifted consumers to one place and thus a single retail can catch more customers.

NUCLEAR FAMILY- As the time passed away joint families came in a new form i.e. nuclear family. Again the income level of these nuclear families increases because both members started earning. This results into increased power of purchase and lack of time. Now they want everything under one roof. This brought the concept of organized retailing.

PLASTIC REVOLUTION Increased use of credit cards is in favour of retail marketing. It creates requirement even when it is not necessary.

JO DIKHTA HAI WOH BIKTA HAI Organized retail stores put stress on proper infrastructure like well maintained building, air conditioning, trained employees, electronic machine, parking facilities and proper display of goods category wise. Here customers feel comfort, joy and entertainment. Purchasing becomes joy for him. Self-selection saves time and gives more opportunities and satisfaction. Fix cost removes the threat of misleading. They avail various discounts and promotional schemes presented by the manufacturers. They also get product of different varieties and of proper quality.

18

 EMPLOYMENT - Retail marketing is one of the largest employments generating industry. It provides employment to skilled, semi-skilled as well as to unskilled persons. Thus it helps in the socio- economic development of the society.

PRICE WAR Increase in the no of retail outlets increases competition among these retailers. To attract customers they give various promotional schemes as various discounts, buy one get one free, another product with any particular product, festival special, etc.

CONTRACT FARMING The retail marketers directly purchase from farmers and reducing middlemen, thus provide proper cost to farmers and also set proper price for consumers. They also make contract with farmers to get proper amount of crops and vegetables.

REDUCES SUPPLY CHAIN MANAGEMENT - The big players of retail marketing and the manufacturing companies directly come in contact thus reducing many intermediary chains. Manufacturers also give many promotional schemes for their product that is beneficial for consumers.

CONCLUSION There is very huge potential for the growth of organized Retailing in India. By following some of the strategies it can rise tremendously and can reach each and every nock and corner. Open communication should be established between functional departments. A balance should be maintained between brand building and promotion. Non-marketing factors like gas prices, weather etc. should be avoided and new schemes should always be launched. The Retail Industry in India has come forth as one of the most dynamic and fast paced industries with several players entering the market. But all of them have not yet tasted success because of the heavy initial investments that are required to break even with other companies and compete with them. The India Retail Industry is gradually inching its way towards becoming the next boom industry.
19

CHAPTER IV SIZE AND GROWTH

20

4.1) SIZE AND GROWTH OF ORGANISED RETAIL INDUSTRY IN INDIA

New Delhi: Contrary to the general perception that organised retail has the potential to capture dominant market share by wiping out kirana stores and generate huge profits, a closer look at the balance sheets of Indias seven listed retailers in the last five years suggests a long haul. While these firms posted cumulative losses or somewhat modest profits in the last five years, one indicator is common: Their debts have galloped as the firms have ratcheted up scale. As a result, the debt-equity ratio of these companies has become quite steep.

For instance, the countrys largest department store operator Shoppers Stop posted an overall loss of R4 crore in the last five years, while its debt soared to R390 crore. Similarly, Vishal Retail posted cumulative losses of R550 crore, while it borrowed R64 crore during the period. The number is even starker for the countrys largest listed retailer Pantaloon Retail: It reported a cumulative profit of R173 crore in five years, borrowing a whopping R7, 848 crore from the market during the same period. Pantaloons profits between 2007 and 2011 were dragged down as the company posted R68 crore losses in 2008 and 2009.

21

By March 2009, Shoppers Stop had a debt-equity ratio of 1.15:1 and Pantaloon 1.3:1, while Vishal Retail was treading in dangerous territory with 2.65 debts for every equity. The company had to be rescued through a corporate debt restructuring with R630 crore debt and was finally acquired earlier this year by an alliance of US-based private equity TPG Capital and Chennai-based Shriram Group. Because these companies had small equity bases to start with, the massive retail expansion came through heavy debt. For, example, Chennai-based Subhiksha Trading Services expanded to 1,600 stores on its small equity base of R32 crore while its debt amounted to R750 crore. Eventually, the financial mismatch led to its bust in early 2009 as the discount retailer was unable to raise working capital from banks or the market. The wrenching economic slowdown which started in late 2008 dealt crippling blows to domestic organised retailers as sales shrank and inventory piled up, leading to soaring debt. While Shoppers Stop was able to bring its debt to equity level at more comfortable levels since, Pantaloon's worsened as its debt-equity ratio breached 1.31: 1, a level seen in the slowdown era. This is a sign and symbol of the retailers getting carried away by the India growth story and the rise of the middle class, said Jagannadham Thunuguntla, head of SMC Global. Thunuguntla added that retailers have run up huge debts because the country's back-end is not developed and huge investments go into developing it. His views were echoed by a retail analyst who said Indian retailers have suffered as they don't possess the vital supply chain for their networks, ultimately creating inventory problems for them. Our supply chain is not efficient and holding up of inventory is cost and the cost ultimately affects profitability, said an analyst. Mitesh Shah, a retail analyst at brokerage Sharekhan says operating margins and same-store-sales have been dropping for retailers in India over the last five years. For example, Pantaloon enjoyed about 15% same-store-sales five years ago which has now come down to about 6.5%. similarly, the company's operating profits has dropped considerably from 15% four-five years ago to about 8.5% at present. Inventory costs have been going up and sales pace could not keep pace, says Shah. Meanwhile, analysts say the decision allowing foreign companies to hold 51% will help companies like Pantaloon reduce debt as they might be able to offload stakes.
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4.2) Formats in Indian Organized Retail Sector

1. Supermarkets: A supermarket, also called a grocery store is a self-service store offering a wide variety of food and household merchandise, organized into departments. It is larger in size and has a wider selection than a traditional grocery store and it is smaller than a hypermarket or superstore.

2. Hypermarkets: A hypermarket is a superstore which combines a supermarket and a department store. The result is a very large retail facility which carries an enormous range of products under one roof, including full lines of groceries and general merchandise. In theory, hypermarkets allow customers to satisfy all their routine weekly shopping needs in one trip. Example; wall mart

23

3. Department Stores: A department store is a retail establishment which specializes in satisfying a wide range of the consumer's personal and residential durable goods product needs; and at the same time offering the consumer a choice multiple merchandise lines, at variable price points, in all product categories. Department stores usually sell products including apparel, furniture, appliances, electronics, and additionally select other lines of products such as paint, hardware, toiletries, cosmetics, photographic equipment, jewellery, toys, and sporting goods. Certain department stores are further classified as discount department stores. Discount department stores commonly have central customer checkout areas, generally in the front area of the store. Department stores are usually part of a retail chain of many stores situated around a country or several countries. Carry several product lines -typically clothing, home furnishings and household goods, with each line operated as a separate department managed by specialist buyers or merchandises. Eg. Macy's,Sears

24

4. Shopping malls: A shopping mall or shopping centre is a building or set of buildings which contain retail units, with interconnecting walkways enabling visitors to easily walk from unit to unit.

4. Specialty Chains: A Specialty Chains is numbers stores which are specialized in a specific range of merchandise and related items. Most stores have an extensive width and depth of stock in the item that they specify in and provide high levels of service and expertise. They differ from department stores and supermarkets which carry a wide range of merchandise.

25

26

CHAPTER-V MAJOR PLAYERS IN ORGANISED RETAIL INDUSTRY

27

TOP MAJOR RETAIL PLAYERS

Retailer

Existing formats

Brand Names

No.of Stores 13 450 12 400 225

Total Space

Retail

(000 sq ft) 1,948 5000 1200 6000 230

Department store Pantaloon Retail Hypermarket Indian Ltd Seamless Malls Hyper markets RPG Retail Music Stores books Stores Department stores Shoppers Ltd. Stop Books & Music Stores Home furnishing Landmark Group Department Stores (Based in Dubai) Department Stores Trent India Ltd Hypermarkets Books & Music Stores Vishal Group Hyper markets

Pantaloon Big Bazaar Central Spencers Music world Books and Beyonds Shoppers Stop Crosswords Home Stop

20 33 N/A

1000 N/A N/A

Lifestyle

370

West side Star India Bazaar Land Mark Vishal Mega Mart

19 1 4 183

350 N/A N/A 13,45

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CHAPTER VI GOVERNMENT POLICIES

29

6.1) BACKGROUND India has liberalized its single brand retail industry to permit 100% foreign investment, with regulatory issues and legal structures pertinent to establish operations in this new dynamic market. Indias retail industry is estimated to be worth approximately US$411.28 billion and is still growing, expected to reach US$804.06 billion in 2015. As part of the economic liberalization process set in place by the Industrial Policy of 1991, the Industrial government has opened the retail sector to FDI slowly through a series of steps:

1995 World Trade Organizations general agreement on trade in services, which include both wholesale and retailing services, came into effect 1997 FDI in cash and carry (wholesale) with 100% rights allowed under the government approval route 2006 FDI in cash and carry (wholesale) brought under the automatic route Up-to 51% investment in a single-brand retail outlet permitted 2011 100% FDI in single-brand retail permitted

The Indian government removed the 51% cap on FDI into single-brand retail outlets in December 2011, and opened the market fully to foreign investors by permitting 100% foreign investment in this area. It has also made some, albeit limited, progress in allowing multi-brand retailing, which has so far been prohibited in India. At present, this is displacing traditional Indian mom-and-pop stores is a hot political issue in India, and the progress and keen eyes as concerns further possible liberalization in the multi-brand sector.

a) FDI in single-brand retail while the specific meaning of single-brand retail has not been clearly defined in any Indian government circular or notification, single-brand retail generally refers to the selling of goods under a single brand name. Up to 100% FDI is permissible in single-brand retail, subject to the Foreign Investment Promotion Board (FIPB) sanctions and conditions mentioned that are:

30

Only single-brand products are sold (i.e, sale of multi-brand goods are not allowed, even if produced by the same manufacturer) 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 initial government approval.

FDI in single-brand retail implies that a retail store with foreign investment can only sell one brand. For example, if Adidas were to obtain permission to retail its flagship brand in India, those retail outlets could only sell the products under the Adidas brand. For Adidas to sell products under the Reebok brand, which it owns, separate government permission is required and (if permission granted) Reebok products must then be sold in separate retail outlets.

b) FDI in multi-brand retail The government of India has not clearly defined the term multi-brand retail, FDI in multi-brand retail generally refers to selling multiple brands under one roof. Currently, this sector is limited to a maximum of 49% foreign equity participation. On July 2010, the Department of Industrial Policy and Promotion (DIPP) and the Ministry of Commerce circulated a discussion paper on allowing FDI in multi-brand retail. The Committee of Secretaries, led by Cabinet Secretary, recommended opening the retail sector for FDI with a 51% cap on FDI, minimum investment of US$100 million and a mandatory 50% capital reinvestment into backend operations. Notably, the paper does not put forward any upper limit on FDI in multi-brand retail.

The long-awaited scheme has been sent to the Cabinet for approval, but no decision has yet been made. There appears to be a broad consensus within the Committee of Secretaries that a 51% cap on FDI in multi-brand retail is acceptable. Meanwhile the Department of Consumer Affairs has supported the case for a 49% cap and the Small and Medium Enterprises Ministry has said the government should limit FDI in multi-brand retail to 18%.

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c) Government safety values on FDI There is concern about the competition presented to domestic competitors and the monopolization of the domestic market by large international retail giants. The Indian government feels that the FDI in multi-brand retailing must be dealt cautiously, given the large potential scale and social impact. As such, the Government is considering the safety valves for standardizing FDI in this sector.

For example: A stipulated percentage of FDI in the sector could be required to be spent on building back-end infrastructure, logistics or agro-processing units in order to ensure that the foreign investors make a genuine contribution to the development of infrastructure and logistics. At least 50% of the jobs in the retail outlet could be reserved for rural youth and a certain amount of farm produce could be procured from poor farmers. A minimum percentage of manufacturing products could be required to be sourced from the SME sector in India. To ensure that the public distribution system and the Indian food security system, is not weakened, the government may reserve the right to procure a certain amount of food grains. To protect the interest of small retailers, an exclusive regulatory framework is made to ensure that the retailing giants do not resort to predatory pricing or acquire monopolistic tendencies.

6.2) Benefits of FDI in multi-brand retail

Soaring inflation is one of the driving motives behind this move towards multi-brand retail. Allowing international retailers such as Wal-Mart and Carrefour, which have already set up wholesale operations in the country, to set up multi-brand retail will assist in keeping food and commodity prices under control. Moreover, industry experts feel allowing FDI will cut waste, as Big players will build backend infrastructure.FDI in multi-brand retail would also help narrow the current account deficit. Additional benefits include moving away from an industry focus on intermediaries and job creation. Moving away from intermediary-only Job creation No threats to kiranas (mom-and-pop stores)

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6.3) Need to Regulate Organized Retail

Large format retailing is controlled and regulated across the world. The experiences of Western European as well as South East Asian countries are particularly relevant in this regard. However, an appropriate regulatory framework for the organized retail sector in India has to be framed keeping in mind the Indian specificities. India has the highest shop density in the world with 11 shops per 1000 persons, much higher than the European or Asian countries. The potential social costs of the growth and consolidation of organized retail, in terms of displacement of unorganized retailers and loss of livelihoods is enormous. Regulation in India therefore needs to be more stringent and restrictive. There are broadly three ways in which the adverse impact of the rapid and unbridled expansion of organized retail can be felt:

1. Around 95% of the 12 million shops in India have a floor area of less than 500 square feet. The impact of the growing market share for organized retailers is being manifested in the falling sales for the unorganized retailers in several places. The NSSO surveys already indicate a significant decline of more than 12.5 lakhs in the number of self-employed retailers in urban India (by current weekly status) between 1999-2000 and 2004-05. Further acceleration in the growth of organized retail would eventually result in making business unviable for a large number of unorganized retailers, particularly in the event of a slowdown in consumption growth and retail sales. In the backdrop of huge unemployment and underemployment persisting in India, small-scale retailing still provides livelihood security to around 20 million urban workers and 12 million rural workers. Their displacement would further worsen the unemployment scenario.

2. Giant organized retailers use their monopoly buying power to squeeze small producers of agricultural as well as manufactured products. The experience of the farmers of developing countries with the giant food retailers has been particularly bad. The farmers become dependent upon the inputs, credit and technology supplied by the food retailers and end up being at their mercy in terms of prices for their produce and quality standards. Contract farming, which is the preferred mode of operations as far as the agribusiness corporations and food retailers are concerned, has led to agrarian distress in many places. Moreover, uncontrolled diversification in agriculture away from foodgrains can imperil food security. In

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the backdrop of the crisis being already faced in Indian agriculture, the entry of large retailers with monopolistic control can aggravate the situation. 3. The proliferation of large format retail outlets reshapes the urban landscape in myriad ways. Land use patterns change drastically, often in violation of city plans. Given the unplanned and chaotic path of urban development witnessed in India over the past decade and a half, and the pathetic state of urban infrastructure, the proliferation of large format retailers will only accelerate the undesirable trends of predatory real estate development and unsustainable pressures on urban infrastructure and the environment. Rather than enhancing choices for the consumers, especially the lower income groups, proliferation of large format retail stores would kill competition, lead to closure of neighbourhood markets and make consumers solely dependent upon the organized retailers. This would also increase the propensity to use private vehicles for shopping thus leading to more pollution.

Regulation of the organized retail sector has to address all these areas of concern mentioned above. Organized retail cannot be allowed to grow in a way, which displaces existing unorganized retailers, jeopardizing livelihoods in the absence of other employment opportunities. The interests of the small producers, especially farmers, also have to be protected by preventing the emergence of local monopolies/monopolise. It has to be ensured that competition is not stifled and potentially monopolistic practices in credit, input and output markets are not encouraged by the entry of large corporate retailers. Moreover, undue pressure on urban infrastructure and the environment arising out of the proliferation of large format retailers has to be prevented.

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6.4) Framework for a National Policy on Regulating Organized Retail

Small retailers need protection and policy support in order to compete with organized retail. The Ministry of Housing and Urban Poverty Alleviation has formulated a National Policy for Urban Street Vendors. The policy proposes several positive steps to provide security to street vendors considering it as an initiative towards urban poverty alleviation. However, what is required is a more comprehensive policy, which addresses the needs of small retailers, especially in terms of access to institutional credit and know how to upgrade their businesses.

A regulatory framework for organized retail should also be framed. Since the operations of organized retailers impact upon various sectors of the economy, policy guidelines should be framed involving all the relevant Departments, namely Commerce, Agriculture and Urban Development. Moreover, since regulation of the large format retailers would mainly be in the domain of the states and local bodies, State Governments have to be consulted and involved in the process of framing policy guidelines. A Central legislation or a Model legislation, which can be enacted by the State Governments, may also be considered for this purpose.

In addition, the UPA Government should also abandon the moves to permit FDI in retail trade through the back door, as in the case of the joint venture between Wal-Mart and Bharti whereby the former proposes to operate in the cash-and-carry segment while the latter in the front-end. It is more than obvious that this proposed joint venture is nothing but a subterfuge, to circumvent the existing policy regime, which does not allow FDI in retail. The entry of giant MNCs like the Wal-Mart, TESCO, Carrefour etc, besides accelerating manifolds the already rapid growth of organized retail, would also sabotage any attempt by the Government to regulate the sector in order to protect the interests of the small retailers and farmers. The UPA Government should take a categorical position on this issue. Not allowing MNCs to operate in the retail sector should be the starting point of the national policy on retail.

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6.5) A Licensing System for Organized Retail

The issues, which need to be addressed in the regulatory framework for organized retail, have already been discussed above. Some suggestions are made below which seek to address those issues: 1. A system of licensing should be introduced for organized retail. Any retail outlet with floor area over an appropriate minimum floor area should require prior license from local authorities (city corporations or municipalities). Corporate entities should not be allowed to operate retail outlets below the specified minimum floor area 2. The authority to grant licenses should be the urban local bodies. A dedicated committee/board/department should be set up by the urban local bodies, with representation from street vendors and small retailer associations, which should be empowered to grant licenses to organized retailers. 3. The system should be devised in a manner so that there is transparency in the process of granting licenses in order to prevent corrupt practices. A process of open bids for granting licenses may be considered. 4. Considering the multiplicity of formats of organized retail, there should be separate sets of regulations for each format, based on floor area. Slabs should be set for the different retail formats, like discount stores, supermarkets, hypermarkets, shopping malls etc based on floor area. 5. Licenses for each format should be given on the basis of a population criterion, i.e. not more than X number of large format retail stores of Y format per Z population. The criteria may vary between states and cities depending upon the nature of the retail sector and needs of consumers. However, a commonality should exist in terms of assessing the employment impact by the local authorities in a scientific as well as democratic manner, before granting license for a large format retail outlet. 6. There should be appropriate caps both on the total number of large format retail outlets that are being granted licenses in particular areas as well as on the maximum floor area for a retail outlet. 7. Retail outlets above a certain floor area should not be allowed to operate within existing commercial zones/areas. In case a license is granted for a large format retailer within an existing commercial area, it should only be on the basis of an agreement to share a substantial proportion of its floor area with small retailers at concessional rent. The allotment of space to small retailers in such cases should be done by the license issuing authority.

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8. Giant retail outlets like hypermarkets, which attract large numbers of customers should have adequate parking space and should ideally be located outside city limits. Environmental Impact assessment should also be mandatory for giant retail outlets whose floor area exceeds a specified limit. 9. Penal provisions, including withdrawal of licenses, should be laid down for violation of the terms and conditions of licenses by organized retailers.

6.6) Governments Role in Preventing Private Monopolies

1. A single large format retailer should not be allowed to capture a large market share. For this it is important to restrict the number of retail outlets that a single private entity can open in a city, state as well as region. Under no circumstances should a national level monopoly be allowed to develop in the retail sector. 2. There should be guidelines to prevent predatory pricing and below-cost sales by organized retailers. A mechanism should be set up where complaints against predatory pricing can be registered by small retailers. The Competition Commission in India is not suitably equipped to handle such issues. A dedicated mechanism is required for this purpose. 3. In order to prevent the development of big private monopolies in retail trade, it is also important for the Government to ensure its presence in the market. Several Government marketing agencies exist, both at the Central as well as State levels. With a few exceptions, these agencies have been experiencing decay, owing to various factors. These marketing agencies should be revived and encouraged to grow and compete with private large format retailers. 4. Consolidation of several Government marketing agencies in order to create a few big public sector retail chains should be seriously considered, which can also invest in developing modern supply chain infrastructure. Panchayati Raj Institutions (PRIs) should be involved in the administration of cold storages and procurement centres. 5. Encouragement should be provided to the existing retail chains in the cooperative sector. New retail cooperatives should also be promoted. Partnerships between existing Government marketing agencies and cooperatives can also be considered, especially in food retail where synergies exist.

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6. The State Governments or urban local bodies should levy a cess on the VAT on all goods sold by large format retail outlets (including those in the public sector) in order to create a level playing field between the organized and unorganized retailers. Revenues generated from the cess can be used to create a dedicated fund to provide infrastructure support, financial assistance or cheap credit for unorganized retailers to improve and upgrade their operations. 7. Tax incentives should not be provided, either by the Central or State Governments, for the setting up of procurement/distribution centres or rural business hubs by private players. Neither should tax breaks be provided to private players for contract farming. Safeguarding Farmers Interests 1. Handing over farmland to food retailers for contract farming should not be permitted. Rules for contract farming should ensure that there is no possibility of farmers being alienated from their land, even if there is a failure in meeting contract commitments. 2. Contract farming should be regulated and monitored by the Government to protect the interests of farmers. Farmers should be encouraged to form groups or cooperatives in order to enter into contracts collectively with corporates rather than entering into individual contracts. 3. The processes of credit provision linked to input supplies and subsequent purchase of the crop, all by one private player, need to be regulated carefully by State authorities and PRIs. Supply of inputs like seeds need to be monitored by the Government. It is also important to ensure that monoculture is avoided. 4. It should be ensured that the farmers are not denied the opportunity of selling their produce over and above the quantity specified in the contract to other agencies at a price higher than what is specified in the contract. Farmers also need to be protected from arbitrary refusal by the contracting parties to buy their produce on grounds of poor quality. The Government should reserve the right to intervene in such contracts in situations when they are found to be operating to the detriment of farmers interests. 5. Large procurement centres created by corporate retailers should compulsorily have separate space for Government agencies. The scope of activities of the Government agencies would depend on the scale of operations. They may range from a single information centre for Government services to various Government agencies supplying inputs, providing extension services, disbursing credit and undertaking procurement. Several State Governments have amended their APMC Acts in accordance with the Model APMC Act framed by the Central Government. That model Act itself needs to be changed incorporating the suggestions made above. State Governments should also be persuaded to do the same.
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6. It has to be ensured that a single corporate retailer does not monopolize procurement operations in a district or area. It is therefore absolutely critical that both public procurement agencies and cooperatives are given support, incentives and freedom to compete with the corporate retailers. This would require special initiatives from the State Governments to reinvigorate the Government agencies. The Central Government should also provide adequate funds required for the purpose. 7. Private procurement of food grains by large players who can manipulate the market should be discouraged. The experience of the last two years shows how the free hand given to corporate players has led to shortfalls in public procurement necessitating wheat imports. There is an urgent need to strengthen and expand the public procurement machinery into more areas and provide it with the required flexibility to ensure adequate procurement at remunerative prices. Private procurement of food grains, wherever it takes place, should be closely monitored by the PRIs and the Government. 8. Food retailers or other agribusiness companies should not be allowed to corner and hoard foodgrains stocks under any circumstances. To prevent cornering of stocks by private players with the associated potential for speculation, there should be rules for public disclosure of stock holding levels. Public agencies should be empowered to purchase food grains from the private holders at pre-specified prices if their stocks exceed a specified level.

Conclusion: These proposals are being made in a backdrop where private players are entering both in retail trade and agriculture in a big way. There is an urgent need to frame new rules in order to regulate the operations of corporate in these sectors, which employ the bulk of the Indian population. The UPA Government should consider the proposals seriously and take immediate initiatives to frame a national policy in this regard.

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CHAPTER VII MAJOR GLOBAL PLAYERS

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MAJOR GLOBAL PLAYERS

7.1 Wal-Mart
Wal-Mart Stores, Inc., branded as Wal-Mart since 2008 and Wal-Mart before then, is an American multinational retailer corporation that runs chains of large discount department stores and warehouse stores. The company is the worlds third largest public corporation, according to the Fortune Global 500 list in 2012. It is also the biggest private employer in the world with over two million employees, and is the largest retailer in the world. Wal-mart remains a family-owned business, as the company is controlled by the Walton family who own a 48% stake in wal-mart. Wal-marts investments outside North America have had mixed results: its operations in the United Kingdom, South America and China are highly successful, whereas ventures in Germany and South Korea were unsuccessful.

Sensing huge opportunities, Wal-Mart entered the Korea but adopted different strategies. WalMart attempted to penetrate the Korean market by building stores in distant areas where land prices were low, replicating the US strategy of smaller-city store build-up. It had only 16 stores in all of Korea with just one in the Seoul metropolitan area and could not achieve economies of scale. The company expected the Korean consumers to drive to its stores for price shopping as American consumers do. However, this location strategy did not match well with the Korean consumers lifestyle and shopping habits. They prefer to buy smaller units on a mode frequent basis and to have accessibility to a store within walking distance. As a result, Wal-Mart faced serious challenges in implementing its core competence in South-Korea. Moreover, it could not enjoy its buyer power in the local vendor market and had no control over its Korean supply chain and procurement. Eventually, it packed its bag in 2006. WAL-MART IN INDIA : Bharti Wal-Mart Pvt. Ltd is a joint-venture between Bharti Enterprises, one of the Indias leading business group with interest in telecom, agri business, insurance and retail, and Walmart, the worlds leading retailer, renowned for its efficiency and expertise in logistics, supply chain management and sourcing. The joint venture is establishing wholesale cash-and-carry stores and back-end supply chain management operations in line with the government of India
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guidelines. Under the agreement, Bharti and Wal-Mart hold 50:50 stakes in Bharti Wal-Mart Pvt. ltd. The first wholesale cash-carry facility named Best Price Modern Wholesale opened in Amritsar in may 2009 and subsequently in Zirakpur (near Chandigarh), Jalandar, Kota, Bhopal, Ludhiana, Raipur, Indore, Vijaywada, Meerut, Agra, Lucknow, Jammu, Guntur, Aurangabad, Bhatinda and Amravati. Bharti Wal-Mart strives to improve the quality of life for the employees, customer and communities through various interventions and the Direct Farm Program is one of them.

Benefits to Farmer: 1. 7-10% higher price to farmers than what they get from Mandi. 2. 3-4% incentives for the quality of the produced farmers deliver to Bharti Wal-Mart based on customer requirement. 3. Expert advice on better crop planning and management 4. Efficient crop calendar management aimed at catching early and late seasons for better prices 5. Opportunity to maximize and improve income by offering better quality.

Benefits to Stores and Customers: Fresh produce. Next local source Consistent quality Safer food Value for money Lower cost compared to open market buys

7.2 Carrefour
It is an International hyper market chain head quartered in Boulogne Billancourt, France, in Greater Paris. It is one of the hyper market chains in the world (with 1395 hyper markets in the end of 2009, the second largest retail group in the world in terms of revenue and third largest in profit after Wal-Mart and Tesco).Carrefour operates mainly in Europe, Argentina, Brazil, China, Columbia, Dominican Republic, United Arab Emirates and Saudi Arabia, but also has shops in North Africa and other parts of Asia, with most stores being of smaller size than hyper markets
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or even super markets. Carrefour meansCrossroads in French. Previously the company Head Office was in Levallois-Perret, also in Greater Paris.

Carrefour in India:
The Carrefour Group announces the opening of its first Cash&Carry store in India in New Delhi under the name Carrefour Wholesale Cash&Carry. With a sales area of 5200 m2,this store is located at the East of New Delhi in the Shahadra neighbourhood will offer more than 10,000 SKUs in food and nonfood to professional businesses, institutions, restaurants and local retailers. This opening is in line with the groups strategy to be present in major emerging markets that offer significant expansion and medium and long growth opportunities.

7.3 Tesco
It is a British Multinational Grocery and General Merchandise Retailer Head Quatered in Cheshunt, United Kingdom. It is the third largest Retailer in the World measured by revenues (after Wal-Mart and Carrefour) and the second largest Retailer measured by profits (after Wal Mart) .It has stores in fourteen Countries across Asia, Europe and North America and is the Grocery market leader in U.K(where it has a market share of around 30%) ,Malaysia , the Republic of Ireland and Thailand.

Tesco in India:
Tesco has a limited presence in India with a service centre in Banglore, and outsourcing. In 2008 Tesco announced their intention to invest an initial ($115m) to open wholesale cash-and-carry business based in Mumbai with the assistance of Tata group. The Global service operations of Tesco HSC are involved in creating and executing strategic initiatives for Tesco Retail Stores Worldwide. These Strategic initiatives cover the IT, Business, Financial, Commercial and Property aspects, among others, of Tesco operations. The operations cover all internal and external platforms that drive Tescos Business making it one of Worlds most preferred Retail Stores. Tesco is first major International Retailer to have a fully owned support centre in India .We are dedicated to make the Tesco experience better for over 60 million customers Worldwide ,simpler for over 500,000employees and achieve cost-efficiencies.

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7.4 IKEA
IKEA is a privately held, International Home Products Company that designs and sells ready-toassemble furniture such as beds, chairs, desks, appliances and home accessories. The Company is the Worlds largest Furniture Retailer , Founded in Sweden in 1943 by 17-year-old Ingvar Kamprad, the first IKEA Store was opened in Almhult , Smaland in 1953,while the first stores outside Sweden were opened in Norway (1963) and Denmark (1969).The Stores spread to other parts of Europe in the 1970s,with the first store outside Scandinavia opening in Switzerland (1973),followed by Germany(1974).Things were going so well for the Company ,that in 1973,the Companys German Executives accidently opened a store in Konstanz when they had meant to open one in Koblenz. Later that decade, stores opened in other parts of the World, including Japan(1974) , Australia and Hong Kong(1975) , Canada(1976) and Singapore (1978).IKEA further expanded in the 1980s,opening stores in France and

Spain(1981),Belgium(1984),The United States(1985),The United Kingdom(1987),Italy(1989) among other areas .The company expanded into more countries in the 1990s and 2000s.Germany ,with 44 stores, is IKEAs biggest market , followed by United States with 37.At the end of 2009 financial year ,the IKEA Group had 267 stores in 25 countries.

Swedish furniture home accessories IKEA is planning to enter India with a Euros 1.5 billion (around Rs10,500 crores) investment in a single-brand retail venture. In the first phase it plans to set up 24 stores within investment of Euros 600 millions (around 2400 crores) in opening 25 stores. The company has already sought government permission to set up a 100 Indian venture and has also promised to increase its sourcing from the country. In these stores companies are permitted to stock goods from one brand only. The entry also comes with the stipulation that at least 30% of the products have to be sourced from Indian micro, small and medium enterprises-a major area of concern for IKEA until recently.

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CHAPTER VIII PORTERS FIVE FORCE MODEL

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8.1 PORTERS FIVE FORCE MODEL

Rivalry among existing competito rs (HIGH) Threats of substitutes (HIGH) Threats of new entrants Industry Competitive ness (HIGH)

Bargaining power of buyers (MODERATE)

Bargaining power of suppliers (LOW)

1. Threat of New Entrants: One trend that started over a decade before has been a decreasing
number of independent retailers. While the barriers to start up a new store are not impossible to overcome, the ability to establish favourable supply contracts, leases and be competitive is becoming virtually impossible. There vertical structure and centralized buying gives chain stores a competitive advantage over independent retailers. 95% of the market is made up of small, uncomputerised family run stores. Now there are finally signs that the Indian Government dropping its traditional protectionist stance and opening up its Retail market to greater overseas investment. It has already allowed 51% ownership in single-brand goods leading to entry of McDonalds, Marks & Spencer, Body Shop and Ikea and with proposal of raising the ownership to 100% will attract more foreign retailers. Also with allowing investment by Foreign retailers in multi-brand retailing in a phased manner will lead to more inflow of foreign investors in Indian retail sector. On the whole threat from new entrants in retail industry is high.
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2. POWERS OF SUPPLIERS: Historically retailers have tried to exploit relationships with

supplier. A great Example was in the 1970s, when Sears sought to dominate the household Appliance market. Sears set very high standards for quality; suppliers that did not meet these standards were dropped from the Sears line. This could also be seen in case of Walmart that places strict control on its suppliers. A contract with a big retailer like Walmart can make or break a small supplier. In retail industry suppliers tend to have very little power.

3. POWERS OF BUYERS: Individually, consumers have very little bargaining power with retail
stores. It is very difficult to bargain with the clerk at Big Bazaar for better price on grapes. But as a whole if customers demand high-quality products at bargain prices, it helps keep retailers honest. Taking this from Porters side of the coin we can say customers have comparatively high bargaining power in unorganized sector than in organized sector. As the customer will demand products from organized units he will be more focused towards quality aspect.

4. AVAILABILITY OF SUBSTITUTES: The tendency in retail is not to specialize in one good or

service, but to deal in wide range of products and services. This means what one store offers is likely to be same as that offered by another store. Thus threat from Substitutes is high.

5. COMPETITIVE RIVALRIES: Retailers always face stiff competition and must fight with each
other for market share and also with unorganized sector. More recently, they have tried to reduce cut throat pricing competition by offering frequent flier points, memberships and other special services to try and gain the customers loyalty. Thus retailers give each other stiff but healthy competition which is evident from their aggressive marketing strategies and segment policies.

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8.2 SWOT ANALYSIS OF ORGANISED RETAIL SECTOR

1. Strengths:

Major contribution to GDP: The retail sector in India is hovering around 33-35% of GDP as compared to around 20% in USA. High Growth Rate: the retail sector in India enjoys an extremely high growth rate of approximately 46%. High Potential: since the organised portion of retail sector is only 2-3%, thereby creating lot of potential for future players. High Employment Generator: the retail sector employs 7% of work force in India, which is right now limited to unorganised sector only. Once the reforms get implemented this percentage is likely to increase substantially.

2. Weaknesses (limitation):
Lack of Competitors: AT Kearneys study on global retailing trends found that India is least competitive as well as least saturated markets of the world. Highly Unorganised: The unorganised portion of retail sector is only 97% as compared to US, which is only 20%. Low Productivity: Mckinsey study claims retail productivity in India is very low as compared to its international peers. Shortage of Talented Professionals: The retail trade business in India is not considered as reputed profession and is mostly carried out by the family members (self-employment and captive business). Such people are not academically and professionally qualified. No Industrystatus, hence creating financial issues for retailers: The retail sector in India does not enjoy industry status in India, thereby making difficult for retailers to raise funds.

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3. Opportunities (benefits):
There will be more organization in the sector: Organized retail will need more workers. According to findings of KPMG, in China, the employment in both retail and wholesale trade increased from 4% in 1992 to about 7% in 2001, post reforms and innovative competition in retail sector in that country.

Healthy Competition will be boosted and there will be a check on the prices (inflation): Retail giants such as Walmart, Carrefour, Tesco, Target and other global retail companies already have operations in other countries for over 30 years. Until now, they have not at all become monopolies rather they have managed to keep a check on the food inflation through their healthy competitive practices.

Create transparency in the system: The intermediaries operating as per mandi norms do not have transparency in their pricing. According to some of the reports, an average Indian farmer realises only one-third of the price, which the final consumer pays.

Intermediaries and mandi system will be evicted, hence directly benefiting the farmers and producers: The prices of commodities will automatically be checked. For example,according to Business Standard, Walmart has introduced Direct Farm Project at Haider Nagar in Punjab, where 110 farmers have been connected with Bharti Walmart for sourcing fresh vegetables directly.

Quality Control and Control over Leakage and Wastage: Due to organisation of the sector, 40% of the production does not reach the ultimate consumer. According to the news in Times of India, 42% of the children below the age group of 5 are malnourished and Prime Minister Dr.Manmohan Singh has termed it as national shame. Food often gets rot in farm, in transit and in state-run warehouses. Cost conscious and highly competitive retailers will try to avoid these wastages and losses and it will be their endeavour to make quality products available at lowest prices, hence making food available to weakest and poorest segment of Indian society.

Heavy flow of capital will help in building up the infrastructure for the growing population: India is already operating in budgetary deficit. Neither the government of India nor domestic investors are capable of satisfying the growing needs (school, hospitals, transport etc.) of the ever growing Indian population. Hence foreign capital inflow will enable us to create a heavy capital base.
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There will be sustainable development and many other Economic issues will be focussed upon: Many Indian small shop owners employ workers, who are not under any contract and also under aged workers giving rise to child labour. It also boosts corruption and black money.

4. Threats:

Current Independent Stores will be compelled to close: This will lead to massive job loss as most of the operations in big stores like Wal-Mart are highly automated requiring fewer work forces.

Big players can knock-out competition: They can afford to lower prices in initial stages, become monopoly and then raise prise later. India does not need foreign retailers: as they can satisfy the whole domestic demand. Remember East India Company, it entered India as trader and then took over politically. The Government hasnt able to build consensus.

In view of the above analysis, if we try to balance opportunities and prospects attached to the given economic reforms, it will definitely cause good to Indian economy and consequently to public at large, if once implemented. Thus the period for which we delay these reforms will be loss for government only, since majority of the public is in favour of reforms. All the above mentioned drawbacks are mostly politically created. With the implementation of this policy all stakeholders will benefit whether it is consumer through quality products at low price, farmers through more transparency in trading or Indian corporate with 49% profit share remaining with Indian companies only.

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CHAPTER IX ARTICLES ON ORGANISED RETAIL SECTOR REGARDING FDI

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TIMES OF INDIA

The retail sector in India is growing at a phenomenal pace. According to the Global Retail Development Index 2012, India ranks fifth among the top 30 emerging markets for retail. The recent announcement by the Indian government with Foreign Direct Investment (FDI) in retail, especially allowing 100% FDI in single brands and multi-brand FDI has created positive sentiments in the retail sector.

"There are many factors contributing to the boom in this sector. To name a few, increased consumerism with a capacity to spend on luxury items and increased spending power in the hands of Indians. More Indians are travelling abroad and are exposed to different cultures and way of life and thereby more brands. India's internal consumption is also high and the consumption pattern owning to diversity in culture, religion and the family values that encourage spending on specific occasions keep the retail business well oiled. Marriages add a big dimension to the retail spends. Our culture expects a lot of give-and-take for marriages, festivals and other important events of life. Hence, it's imperative for people right from rural to the urban, irrespective of their caste and creed or economic status, to spend on gifts as a part and parcel of life. And that's the reason worldwide retailers eye the Indian market," says Swati Salunkhe, managing director, Growth Centre (I) Pvt. Ltd.

The size of India's retail sector is currently estimated at around $450 billion and organised retail accounts for around 5% of the total market share. Ratings agency Fitch has assigned a stable outlook to the retail sector for 2012 as factors like expected sales, growth-driven expansion and efficient working capital management are likely to benefit retail 9Mcompanies. It is estimated that the retail sector would continue to grow at 10-12 % per annum, which is extremely encouraging when the country's economy is only projected to grow at 6%.

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FINANCIAL EXPRESS

Multi Brand Retail FDI Good For India: RBI Chennai: Government's decision to allow FDI in multi-brand retail will help increase productivity and ensure an efficient food grain distribution network to tackle high food prices, RBI Deputy Governor Subir Gokarn said here today. "The ultimate solution to high food prices is very simply more production of things that people consume more. You might debate the merits and demerits of FDI in (multi-brand) retail. But let's focus on the basic problem. We need to increase productivity and distribution efficiency", Gokarn said at a function here. Observing that India has a low foodgrains productivity and inefficient distribution, he said increasing the scale of investments in organised retail is one way to increase productivity and distribution efficiency. "FDI is an enabler of that. Whether you accept the argument that FDI will do this or not, we have low productivity, we have inefficient distribution (mechanism)", Gokarn said at the 102nd AGM of Southern Indian Chamber of Commerce and Industry. He called for solutions to take the country's economy towards a strong growth momentum. "We have to look at the stress points. What are the stress points?. We have to look at the sources of imbalances in the macro-economic situation and we have to find solutions that will provide robust responses to these constraints", he said. The Deputy Governor also pointed out that if food prices keep on increasing, it would impact wages and subsequently lead to inflationary pressures. "It is also important to recognise that if food prices keep growing, that impacts wages, which impacts expectations and in turn feeds into the inflationary process", he said. He said RBI has been trying to play a "balancing act" to maintain credibility and meet expectations of various stakeholders "without putting undue disproportionate pressure on the growth momentum."

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Gokarn said the demand for two-wheelers, television sets and cell phones had grown by "leaps and bounds" in the last 10-15 years, but there was not as much demand growth for food products. "Why should we not expect to see the same for food and people moving beyond rice and wheat to other items?" he asked. He said the supply of two-wheelers, television sets and washing machines or air-conditioners was growing in multiples of 20 or 30 on their output. "This is not matched or not seen in the food sector, where productivity of many things has remained quite stagnant. Persistent imbalances in demand-supply have resulted in this very strong and structural inflationary pressure", he said. Observing that India has a "fiscal problem" and there is a need to find a solution to it, he said, "no solution will work with any effectiveness unless the (government's) subsidy is addressed because it is by far the largest single burden on government finances".

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CHAPTER X CONCLUSION

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CONCLUSION

The discussion above highlights: 1) Small retailers will not be crowded out, but would strengthen market positions by turning innovative/contemporary. 2) Growing economy and increasing purchasing power would more than compensate for the loss of market share of the unorganised sector retailers. 3) There will be initial and desirable displacement of middlemen involved in the supply chain of farm produce, but they are likely to be absorbed by increase in the food processing sector induced by organised retailing. 4) Innovative government measures could further adverse effects on small retailers and traders. 5) Farmers will get another window of direct marketing and hence get better remuneration, but this would require affirmative action and creation of adequate safety nets. 6) Consumers would certainly gain from enhanced competition, better quality, assured weights and cash memos. 7) The government revenues will rise on account of larger business as well as recorded sales. 8) The Competition Commission of India would need to play a proactive role.

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