FDI in retail: The argument continues... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

FDI in retail: The argument continues...

Mar 25, 2011

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.

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.

Present regulatory framework
Nature of business Limit
Wholesale cash and carry 100%
Single brand retailing Up to 51% with Government approval
Multi brand retailing Restricted

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

FDI in retail The argument continues Series - Next | All Articles


Equitymaster requests your view! Post a comment on "FDI in retail: The argument continues...". Click here!

  

More Views on News

TITAN 2019-20 Annual Report Analysis (Annual Result Update)

Aug 7, 2020 | Updated on Aug 7, 2020

Here's an analysis of the annual report of TITAN for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of TITAN. Also includes updates on the valuation of TITAN.

TITAN Announces Quarterly Results (4QFY20); Net Profit Down 1.5% (Quarterly Result Update)

Jun 10, 2020 | Updated on Jun 10, 2020

For the quarter ended March 2020, TITAN has posted a net profit of Rs 3 bn (down 1.5% YoY). Sales on the other hand came in at Rs 47 bn (down 3.6% YoY). Read on for a complete analysis of TITAN's quarterly results.

PC JEWELLER Announces Quarterly Results (3QFY20); Net Profit Down 76.8% (Quarterly Result Update)

Feb 19, 2020 | Updated on Feb 19, 2020

For the quarter ended December 2019, PC JEWELLER has posted a net profit of Rs 321 m (down 76.8% YoY). Sales on the other hand came in at Rs 16 bn (down 25.0% YoY). Read on for a complete analysis of PC JEWELLER's quarterly results.

PC JEWELLER 2018-19 Annual Report Analysis (Annual Result Update)

Oct 18, 2019 | Updated on Oct 18, 2019

Here's an analysis of the annual report of PC JEWELLER for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of PC JEWELLER. Also includes updates on the valuation of PC JEWELLER.

More Views on News

Most Popular

My View on ITC (Fast Profits Daily)

Oct 23, 2020

What do the charts say about ITC?

The 'Seedhi Baat, No Bakwaas' View on ITC (Profit Hunter)

Oct 12, 2020

Is ITC an investment or a speculation at current levels?

Why ITC and not HUL is my Idea of a Good Investment Right Now Views On News (Views On News)

Oct 15, 2020

Rahul Shah discusses HUL's lost decade and its implications for ITC.

Why India's Drone Revolution is a 4x Profit Opportunity (Profit Hunter)

Oct 16, 2020

My research on India's leading defence companies brought me to one major player in drone manufacturing.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

COMPARE COMPANY

MARKET STATS