Foreign Direct Investment (FDI) in Retail in India: Raison Detre of Growth

According to the Investment Commission of India, the retail sector is expected to grow almost three times its current levels to $660 billion by 2015. Investments are sought by Indian Retailers also to get necessary push for evolution of organized retailing in India, which has been much slower as compared to rest of the world. This is significant to mention that despite of the on-going wave of incessant liberalization and globalization the absence of political will to attract advanced technology and to adopt new retail format is holding retail revolution. FDI in Indian Economy is present since ages, though it is revealed from the chart that there are some states and cities where FDI inflows are larger in comparison of rest of the India. Maharashtra, Tamilnadu, Delhi, Karnataka and Andhra Pradesh are attracting two third of the total investment being the main centers of IT development in last 15 years. Moreover, on city to city basis, it is revealed that there is huge segregation in the inflows as more than 50 percent inflows are dropping in few cities Bangloru, Mumbai and National Capital Region (NCR).


Indian Economy: paradigm shift towards mass consumerism
Indian Economy is considered one of the rapidly growing economies in the world as evident from the attention it grabbed from all corners in the global economy. The recent spur in growth specially sectoral growth rate revealed the growth spree across newly emerging sectors such as Fast Manufacturing Consumer Goods (FMCG) including wholesale & Retail, Information Technology Enabled Services (ITES), health and education. It is well cited that performance in post recession period has been dismal and economy has lost pace of growth cited earlier. However, under the new regime the recovery is anticipated. There were several obvious reasons for the debacle and certain steps taken by new government are pushing economy back on the path of development. In the previous regime opening up of the economy for rest of the world has been the centre of discussion. It was believed that to open up the retail trade sector to foreign investment was a change ushered in by policy makers to project Indian Economy as ever expanding market in order to attract investment in technology and innovation 1 . Still Indian masses, business class, and even policy makers carrying strong voting politics led reservations towards this issue considering employment opportunities, procurement from international market, competition and loss of share of local entrepreneurs are oblivion and doing away their fear by constantly debating the issue in public domain. Government tried to show some courage in a series of moves to open up the retail sector slowly to Foreign Direct Investment (FDI) but finding very difficult to make inroads amidst strong opposition on account of lack of strategy and defined road map. Recently Government has also brought up major policy change in terms of FDI in various sectors especially in defense and railways 2 .
According to the Investment Commission of India 3 , the retail sector is expected to grow almost three times its current levels to $660 billion by 2015. Investments are sought by Indian Retailers also to get necessary push for evolution of organized retailing in India, which has been much slower as compared to rest of the world. This is significant to mention that despite of the on-going wave of incessant liberalization and globalization the absence of political will to attract advanced technology and to adopt new retail format is holding retail revolution. This paper is genuine effort to evaluate the willingness of domestic retailers both organized and unorganized and experts under the various stimuli present and ongoing issues where some are real while many are simply preoccupied.

Review of Literature
N.V.Shaha and M.A.Shinde 2013 4 have analyzed the India being a signatory to World Trade Organization's General Agreement on Trade-in Services, which includes wholesale and retailing services, had to open up the retail trade sector to foreign investment. There were initial reservations towards this issue arising from fear of job losses, procurement from international market, competition and loss of entrepreneurial opportunities to locals. However, the government in a series of moves opened up the retail sector slowly to Foreign Direct Investment (FDI).

Gaurav Bisaria 2012
5 has discussed about various modes of Foreign Direct Investment (FDI) in retailing in India. FDI or foreign investment refers to the net inflows of investment to acquire a lasting management interest (10 percent or more) in an enterprise operating in an economy other than that of the investor. Foreign direct investment is the sum of equity capital, reinvestment of earnings and other long or short term capital as shown in the balance of payments. It usually involves participation in management, joint venture, transfer of technology and expertise. 6 Retailing is one of the world"s largest private industries. Liberalizations in FDI have caused a massive restructuring in retail industry. The benefit of FDI in retail industry superimposes its cost factors. Opening the retail industry to FDI will bring forth benefits in terms of advance employment, organized retail stores, availability of quality products at a better and cheaper price. It enables a countries product or service to enter into the global market.

Research Methodology
Analytical, descriptive and comparative methodology was adopted for this study. To make study more pressing and direct reliance has been equally distributed on primary and secondary data sources such as books, journals, newspapers and online database. However, the interpretation of the data and suggestions made assume importance for the healthy growth of the retail sector in the country. For the convenience of study and the topic it was assumed on the basis of deliberations in the above segment of the paper departmental stores are most sought avenue for FDI and local kirana stores are going to face more competition. Brand Value was taken as dependent variable because FDI seems to be attracted by organized branded retailers in both single retail and multi brand retail segments and its relations was studied with three other variables. Moreover, perception M a y 0 8 , 2 0 1 5 of retailers, customers and experts was also taken into reference for detailed analysis using correlation, regression tabular presentation.
So far the FDI in Indian Economy is concerned following statistics is important to confirm necessary initializing of the FDI in various sectors economically, geographically and inter-sectoral basis.

FDI in India: Schematic Representation
Foreign Direct Investment in India most sought and debated issue after the inception of New Economic Reforms and policy of Liberalization, Privatization and Globalization (LPG). The issue of FDI in retail though debated strongly on the issues of employment and losses of local small entrepreneurs is diagonally related to the other aspects of mass consumerism, socio-economic development and transforming economy. Before going in detailed discussion of the various dimension of FDI in retail pertaining to consumer perception this will be better to provide adequate insight of the FDI in India since ages

4.1FDI: Pathways and Servicing
In Indian Economy FDI and other investments are routed through strict governmental control. There are distinct pathways for various investments but automatic route is opened for FDI. (Fig-1

Regional FDI flow in India
FDI in Indian Economy is present since ages, though it is revealed from the chart that there are some states and cities where FDI inflows are larger in comparison of rest of the India. Maharashtra, Tamilnadu, Delhi, Karnataka and Andhra Pradesh are attracting two third of the total investment being the main centers of IT development in last 15 years. Moreover, on city to city basis, it is revealed that there are huge segregation in the inflows as more than 50 percent inflows are dropping in few cities Bangloru, Mumbai and National Capital Region (NCR) (Fig-2). M a y 0 8 , 2 0 1 5

Fig-4 Series of steps to open up FDI for various sectors in India
It is evident from the regional inflow of the FDI that FDI is not sector specific rather business specific and route plays an important role. In case it is automatically routed the investment surge if visible. Citing the approval and actual turn up of investment in domestic circuit clearly reveals the inflows intensity. Despite of 100 percent approval in cash and carry inflows are meager till date because the investments are routed through government approval (http://indialiaison.com/fdifinal.htm March 13, 2015).

FDI inflows and need of the hour
The need of the foreign investments in every economy more or less depends upon its capital formation economic growth. The growth accompanied by foreign investments in the form of technology and monetary terms always desirable and pushes economy forward. The adjoin figure clearly reveals potential of FDI in India increased in the last 10 years which could not be converted into actual investment.

4.3FDI in various sectors
FDI ironically was not realized in equal terms despite of being approved absolutely routed through many ways. Barring 4-5 sectors such as telecom, advertising and pharmaceutical sector FDI in figures has not been very attractive. Even in telecom foreign companies are facing lot of structural problems in operations and distribution. Here it is advisable that Indian Retail Sector and its structure is going to be major factor in attracting investment. M a y 0 8 , 2 0 1 5

Structure of Indian Retail Sector
Retail is a sale for final consumption in contrast to a sale for further sale or processing (i.e. wholesale), a sale to the ultimate consumer. Thus, Retailing is the last link that connects the individual consumer with the manufacturing and distribution chain. A retailer is involved in the act of selling goods to the individual consumer at a margin of profit. However, in operations retail industry in India is dichotomously divided into exclusively organized and unorganized, Unorganized and local without establishment Retailing. Organized retailing refers to trading activities undertaken by licensed and integrated retailers, that is, those who are registered for sales tax, income tax and applying various modes and applications of marketing and operational integration. Excusive organized retailing comprises MNCs and corporate-backed hypermarkets and retail chains, exclusive departmental stores and also the individual and localized large retail businesses. Unorganized retailing, on the other hand, refers to the traditional formats of low-cost retailing for example, the local kirana (provision or grocery store) shops, sole-proprietor general stores etc. While various formats of individual disintegrated localized vending shops, convenience stores, hand cart and pavement vendors, etc constitute local without establishment retail shops and vendors. The Indian retail sector is highly fragmented on the basis of domestic geographical and socio-economic set up where most of the business is held by local retailers to fetch the need of localities.
Citing the structure of retail sector in India it is envisaged that application of FDI in any retail format is no issue but to identify the avenues of investment in suitable format and business. Mere statement that Indian retail industry has huge growth potential and mass consumerism in rural and urban segments in the last decade has attracted all big retailers to focus on India is not going to help in finalizing the road map for the FDI in retail.

Avenues for FDI in retail
The structure of retail in India is self driven and has its own ecosystem to thrive. Not whole of the retail is in need of the FDI. It is noteworthy that FDI in retail sector became the part of business strategies of Multi National Corporations (MNCs) and various countries interested to trade with India. The FDI in Indian retail can be explained on the basis of five types of FDI given by Chryssochoidis, Millar & Clegg, 1997 7 (see notes). Indian retail and FDI is firstly is type one of FDI as first type of FDI which is usually found in the countries like India is taken to gain access to specific factors of production, e.g. natural resources such as coal, land & labour, technical knowledge, material know-how. Such factors of production are not readily available in many foreign countries, and are not easy to transfer therefore the foreign firm try to invest in India in order to secure access. Recent governments" initiative of "Make in India" is also dwelling upon the first type of FDI. Make in India initiative also targets second type of FDI in which company shall invest in order to gain access to cheaper factors of M a y 0 8 , 2 0 1 5 production, e.g. low-cost labour 8 . However, third and fifth type of FDI are most talked issue in recent perspective of FDI in retail. The third type of FDI is especially being targeted for Retail sector involves international competitors undertaking mutual investment in one another, e.g. through cross-shareholdings or through establishment of joint venture, in order to gain access to each other's product ranges. The fifth type of FDI which is very recent in Indian Perspective relates to the trade diversionary aspect of regional integration. This type occurs when there are location advantages for foreign companies in their home country but the existence of tariffs or other barriers of trade prevent the companies from exporting to the host country. The foreign companies therefore jump the barriers by establishing a local presence within the host economy in order to gain access to the local market. The local manufacturing presence need only be sufficient to circumvent the trade barriers, since the foreign company wants to maintain as much of the value-added in its home economy 9 .
On the basis of types of FDI in any economy Indian retail would like to invite FDI in order to find employment for low-cost labour, to utilize available infrastructure, to acquire advanced retail formats and technology and to provide competitive edge to domestic retailers.

Avenues and fear of FDI
As per the FDI and its avenues in Indian Retail there are several fears and issues which are needed to be answered in order to provide necessary back up for the investment.

Customer Perception
As per customer perception regarding organized retailing and application of FDI they were found concerned with various services and facilities at various stores in malls and markets. From data it is observed that there are many common areas of preference for customers in both local kirana stores and organized departmental stores. On the attributes and preference level for these attributes the number is quite large and absolutely significant to the attributive advantage at departmental stores and local kirana stores M a y 0 8 , 2 0 1 5  Out of 150 customers contacted 99 preferred departmental stores especially in malls and organized retail over local kirana stores. M a y 0 8 , 2 0 1 5 Chart 5: Retailer"s Perception for expansion to take advantage of FDI in retail

Perception of FDI
Most of those retailers who have not expanded much and operating with huge investment accept that no of footfall may go down and also market share will be affected. However, retailers with investment lower than Rs 4 Lacks would see no considerable impact at all.
Chart 5: Retailer"s Perception for effect of FDI in retail on their establishment and business

6.3Experts
All of the experts from various domains are refuting any fear of job losses and loss of local entrepreneurs on account of FDI in single and multi brand retail segments rather they find significant improvement in the competitiveness and growth of all the sectors apart from retailing in India.

Result & Discussion:
R 2 value is significant to the dependent variable and location of outlets has positive correlation with brand name. Findings reveal preferred perception of all the respondents to the brands, organized retailers and quasi-organized retailers (domestic retailers camouflage the organized big retailers). It is also established that the retailers with large investment are more concerned with competition and their parallel growth and expansion to survive. Table 4 Dependency of brand value on location, service delivery and product quality

Limitations of the Study
The major limitations of the presented study are given below:-1. The primary limitation is the uncontrollability of some variables like cultural impact on the buying behaviour of customers. 2. There is possibility of sample respondent bias in their reporting of perceptual and attitudinal underpinnings on certain statements. 3. There is a problem in generalizing some findings as there are some unique variables at play. 4. The sample size may also be an issue as it may not reflect the true behaviour of the universe. 5. The study was conducted during January 2014 to February 2014 a period which is observed as the time of vibes operating against policies of incumbent government.