fdi in indian retailing industry b.v.raghunandan
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Foreign Direct Investment in Multi-Brand Retailing in India
-B.V.Raghunandan, SVS College, Bantwal
Post-Graduate Department of Management,
Sri Devi College, Kenjar, MangaloreDecember 5, 2012
Classes of Foreign Investment
• Foreign Institutional Investment• Foreign Direct Investment
Retailing: Brand Modes
• Single Brand : Also known as vertical brands
- Single Line Format - Multiple Locations - Limited Investment• Multi-Brand : Many brands
including private brands - Limited Locations - Huge Investment
Recent Government Move• 51% FDI in Multiple Brand
Retailing• 100% FDI in Single Brand
Retailing• 30% Outsourcing Locally
from MSME units• Brands need not be
Owned by the Parent, but by any of the Subsidiaries
• In cities with a population of not less than 10 lakh
The Widespread Opposition
• Political Parties are Dominated by Mandis
• Fear of the Middlemen being Removed
• Economic Issues are Adopted when Political Ideologies Whither Away
• Kiranawala is only an eye wash argument
Consistency in Political Stand• Party in Power Favours it
for Achievement• Parties in Opposition Use it
to Create an Emotional Hype
• Political Mileage is Obtained
• Creation of a Mass Hysteria
• Less Healthy Discussion• Doomsday Attitude for
Every Change
Impact on Local Kiranawalla• Near the Location of
the Customers• Flexibility on the Basis
of Requirements of Customers
• No need to Scale up the Model
• Low Employee and Establishment Costs
• Customer Services• Limited Suitability for
Large Retail Format
Need for FDI • Encouraging Contract Forming• Better Processing of
Agricultural Produce• Networking with Local Retailers• Commercial Warehousing in
Rural Areas• Better Dissemination of Market
Information• Healthier Agricultural Practices• Better Seeds and Organic
Farming• Better Agricultural Research• Avoiding Wastages
Earlier Examples
• ITC’s E’Choupal• Pepsi’s Contract Farming in Punjab• EID Parry’s Farmers-Connect• AMUL’s Success• Nestle’s Dairy Development• Private Dairies
Some of the Indian corporates in Linkage with Agri value chain
• Adani Agrifresh : Apple value chain• TATA CHEMICALS LTD : Extension Services• ITC : Agri allied sector• Jain irrigation : Water conservation• Marico : Safflower value chain• National Spot Exchange : Enhancing farm income• Global Green Co Ltd : Value chain integration in Gherkin• Chambal Fertilisers Ltd : Improving Agri Productivity
Some of the MNCs in Linkage with Agri value chain
ADM : Soybean value chain SAB MILLER : Barley value chain PEPSICO : Potato value chain BHARTI WALMART : Supply chain across diverse crops MONSANTO : Sustainable value chain in Maize SUMINTER INDIA ORGANICS : Sustainability in organic farming FIELDFRESH FOODS LTD : Fruits & Vegetable value chain
• 3,500 small & marginal farmers ( < 1Ha)
• 4000 Acres under contract farming of baby corn
• Increase in farm output by 20%
• Technology transfer in conservation of water, chemical fertilisers and pesticides
• Efficient weather insurance• Modern post harvest facility• Rural employment
next previous
ITC
•
Marketing support Retail linkage Watershed development Wasteland development Sustainable off-farm livelihood
IMPACT 1.03 lac Ha wasteland converted
into green land Increase in farmer income by
>50% E-choupal covers 4 million farmers
with direct market linkage Direct linkage with retailing Company with maximum impact
on farmers
PEPSICO INDIA
Contract farming in special variety of Potato for their chips brand Lays
Engaged with farmers in Bihar, Gujarat, Karnataka, Maharashtra
PPP in R&D and Agriculture extension
Technical assistance on latest cultivation practices
IMPACT 11,000 farmers Increase in yields / net farm
income by 40% Price support against volatility
ADM- Soybean revolution in Maharashtra
• ADM has an oilseed process plant in
Latur, a backward district in Maharashtra with no soybean crop.
ADM, initiated extension services in this area.
Agri advisory centres were set up for a cluster of each 20 villages and farmers were introduced to soybean cultivation
Women farmers were trained as they work in fields.
High yielding variety seeds were produced through farmers with linkage to Universities
End to end technical guidance was given to farmers
ADM- Soybean revolution in Maharashtra
IMPACT
2002 : 19,500 HA
2003 : 49,500 HA
2004 : 1,38,500 HA
2005 : 1,75,000 HA
2006 : 1,80,000 HA
2007: 1,86,000 HA
2008 : 2,05,000 HA
2009 : 2,26,000 HA
2010 : 2,43,000 HA
2011 : 2,74,000 HA
2012 : 3,03,000 HA
More crop per drop
Maximise yields with minimum water sources
Develop models for each crop.
Saving on fertiliser and judicious use of micronutrients
Reduce cultivation costs Well administered R&D
to manage emerging challenges
Interest of FDI• Large Markets• Stable Income Levels in
India• Sourcing of Agricultural
Produce• Festivals and Special
Occasions (Multi-etnic and Multi-religious)
• Cash Based Transactions• Diversified Consumption
Problems for the FDI
• Limited Working Hours• Working Hours Unsuitable for Indian Customers• Expensive Real Estate• High Salary to the Employees• High Establishment Expenses• Unsuitable for Many Lines of Products• Indian Corporate Retailers paint a sad Story• Younger Demography
Focus• Development of Infrastructure in Rural Areas• Better Price for the Farmers• Effective Utilisation of Grains in the Godowns of Central and State
Warehousing Corporation• Better Processing Facilities• Increasing the Storage Facilities• Better Farming Practices• Better Farmer Education using Modern Technology
THANK YOU
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