Pourquoi le secteur de la distribution indienne prospère-t-il ?

Why Indian Retail Sector Is Booming Economics Essay

Retailing is one of the most active and attractive sector of the decade. In the recent past it has witnessed a large number of big players like Reliance, Tata, Pantaloon, Birla etc leaping into it. Emergence of organized retail sector in India has more to do with increasing purchasing power of buyers. It is a known fact in today’s marketing scenario that it is easy and cost efficient to maintain existing customers than to attract new customers. The Government’s decision to allow foreign investors to open single brand retail stores would stimulate multiple effects and stimulate mall culture. Single brand retail having received 51% FDI investment sanction would improve investment scenario of the country. This in turn will lead tough competition in Indian retail sector and hence the need for innovative marketing strategies.

Why Indian retail sector is booming?

Changing age profile: India is witnessing a change in the age and income profiles of its over 1 billion population, which is likely to fuel accelerated consumption in the years to come.

Disintegration of joint family: The gradual disintegration of the traditional Indian joint family system has led to nuclearisation of families, which in turn has led to enhanced demand.

Growing disposable income: Indian households are getting added to the consuming class with the growth in income levels.

Overall View of FDI allocation in India

Foreign direct investment is the acquisition of assets in a country by foreign entities for the purpose of control. FDI is ownership of at least 10% of a business. According to the Ministry of Commerce & Industry, "FDI is freely allowed in all sectors including the services sector, except a few sectors where the existing and notified sectoral policy does not permit FDI beyond a ceiling.

Present Scenario of FDI in Retail Sector in India

FDI in Multi-Brand retailing is prohibited in India. FDI in Single- Brand Retailing was, however, permitted in 2006, to the extent of 51%. Since then, a total of 94 proposals have been received till May, 2010. Of this, 57 proposals were approved. An FDI inflow of US $ 194.69 million (Rs. 901.64 Crore) was received between April, 2006 and March, 2010, comprising 0.21% of the total FDI inflows during the period, under the category of single brand retailing. The proposals received and approved related to retail trading of sportswear, luxury goods, apparel, fashion clothing, jewellery, hand bags, lifestyle products etc., covering high-end items. FDI in cash and carry wholesale trading was first permitted, to the extent of 100%, under the Government approval route, in 1997. It was brought under the automatic route in 2006. Between April, 2000 to March, 2010, FDI inflows of US $ 1.779 billion (Rs.7, 799 crore) were received in the sector. This comprised 1.54 % of the total FDI inflows received during the period.

FDI in Multi Brand Retailing – Global Scenario

FDI is permitted in the retail sector in Brazil, Argentina, Singapore, Indonesia, China and Thailand without limits on equity participation, while Malaysia has equity caps on FDI in the retail sector. FDI in retailing was permitted in China for the first time in 1992. Foreign retailers were initially permitted to trade only in six Provinces and Special Economic Zones. Foreign ownership was initially restricted to 49%. Thailand permits 100% foreign equity, with no limit on the number of outlets. For the retail business, it has a capital requirement of TBH100 million and TBH20 million for each additional outlet, while it has a capital requirement ofTBH100 million for each wholesale outlet.

Analysis of the Possibility for allowing FDI to India’s Multi Brand Retail Sector

While analyzing the total FDI flow into the country as per Department of Industrial Policy & Promotion Ministry of Commerce and Industry, FDI in single brand retailing was 909.77 Crore rupees which is 0.16% of the total FDI in India. India having a total of 5, 42,773 crore rupees FDI inflow during the last year had only 909.77 Crore rupees from retail single brand sector. Why the Government is reluctant to allow more FDI flow in retail sector?

Arguments in Support of Allowing FDI in Multi Brand Retail in India

India is not an integrated homogeneous market; it is a hierarchy of markets catering to people of many different income levels and tastes. Hence small retailers can very well survive in our economy.

Entry of sophisticated branded products affects the unbranded mass market only marginally as income of vast population in India lies in low level income zone.

It is more convenient and cost-effective for customers to purchase many of their daily requirements from the neighborhood stores, especially as these establishments stock goods that are in particular demand in the locality. Hence, the pop-and-mom street corner shops can very well survive.

The benefits from greater exports would be particularly high in the farm sector if FDI is allowed. Right now, there is a tremendous amount of wastage and value loss of agricultural products due to lack of storage, refrigeration, transportation and processing facilities.

To the extent the large retailers establish a direct linkage with the farmers by cutting out many layers of middlemen, develop the processing facilities and export the products to meet their

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