Mar 25, 2011|
FDI in retail: The argument continues...
In our earlier articles we made an effort to simplify a couple of budget announcements with respect to retailing and explained how these affect the retail sector. Firstly, we discussed the impact of newly imposed excise duty on retail and then the basics about GST and its impact on retailers. In continuation of our endeavour, we will take up another very important regulation which when implemented will alter the retail landscape altogether - FDI in multi brand retail. The next two articles will focus on this.
Present regulatory framework
Although the latest Union Budget did disappoint the retail industry with no specific announcement on the much awaited FDI in multi brand retail, the finance minister in his budget speech focused on some issues that can be best dealt with by opening of the retail sector. So is FDI in retail in the offing in the near future?
Our finance minister remarked that at present 40% of the fruit and vegetable production in India is wasted. This he believes is on account of lack of storage, cold chain and transport infrastructure. These deficiencies in our supply chain management became even more evident in the recent high food inflation scenario. He also pointed out at the huge difference between wholesale and retail prices and between markets in different parts of the country.
A number of initiatives were announced by the government aimed at strengthening of storage and warehousing infrastructure. While these initiatives are likely to address the issues, foreign direct investment in retail is what India needs. It will provide assistance in the form of capital, technology knowhow and expertise by the global retailers.
The story so far
In 1993, the then finance minister had changed the law to permit FDI in retail trade. But, it was banned in 1996 on political concerns of the ruling United Front government. In 1997, FDI in cash and carry business was allowed up to 100% under the approval of the government. In 2006, it was brought under the automatic route. In the same year, FDI in single brands was permitted with prior government approval and the limit was set to 51%. Since the past few years, the Indian government has been mulling over opening foreign investment in multi-brand retail. But, the political controversies along with the protests from unorganized sector (smaller kirana stores) have delayed the policy so far.
|Nature of business
|Wholesale cash and carry
|Single brand retailing
||Up to 51% with Government approval
|Multi brand retailing
In the next article we will discuss the arguments for and against FDI in retail, how it will impact the Indian retailing industry and the views of industry experts on the same.
Source: IBEF, DIPP
More Views on News
Aug 10, 2017
However, growth at these levels are unlikely to be sustainable.
Mar 7, 2017
Equitymaster analyses Initial Public Offering (IPO) of Avenue Supermarts Limited.
Feb 14, 2017
Titan Industries declared its results for the third quarter of financial year 2017 (3QFY17). While topline growth was 14.7% YoY, net profit grew by 13.1% YoY during the quarter. Here is our analysis of the results.
Nov 16, 2016
Titan Industries declared its results for the second quarter of financial year 2017 (2QFY17). While topline growth was flat, net profit grew by 23.5% YoY during the quarter. Here is our analysis of the results.
Aug 9, 2016
Titan Industries declared its results for the first quarter of financial year 2017 (1QFY17). The company reported 3.3% YoY increase in sales, while net profit fell by 16.3% YoY during the quarter.
More Views on News
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 16, 2017
The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407