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2009-2011 Batch
SIMS
Submitted by-
Raghav Gupta – 61Sanjay Kumar - 62Sanjay Rautela- 63Saumya Mishra-64Swati Sharma - 65Vikrant Garg - 66
Global Financial Management 17-Aug-2010
Should India Liberalize FDI?
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Table of contents 2
TABLE OF CONTENTS
TABLE OF CONTENTS ..................................................................................................................... 2
INTRODUCTION................................................................................................................................ 3
FOREIGN DIRECT INVESTMENT (FDI) ...................................................................................... 5
FDI V/S FII .......................................................................................................................................... 6
DETERMINANTS OF FDI IN DEVELOPING COUNTRIES........................................................ 7
PRESS NOTES .................................................................................................................................... 8
FOREIGN INVESTMENT PROMOTION BOARD (FIPB) .......................................................... 9
TYPES OF INSTRUMENTS ............................................................................................................ 11
BENEFITS OF FOREIGN DIRECT INVESTMENT .................................................................... 12
ENTRY ROUTES FOR INVESTMENT ......................................................................................... 13
SECTORS PROHIBITED ................................................................................................................ 14
SECTORS IN DISCUSSION ............................................................................................................. 15
Defence ......................................................................................................................................................... 15
Retail ............................................................................................................................................................. 16
CONCLUSION ................................................................................................................................... 18
REFERENCES .................................................................................................................................... 19
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Introduction 3
INTRODUCTION
India’s economic policy reforms have played a critical role in the performance of the
Indian economy since 1991. The Government of India in 1991 embarked onliberalisation and economic reforms with a view to bringing about rapid and substantial
economic growth and move towards globalisation of the economy. As a part of the
reforms process, the Government under its New Industrial Policy revamped its foreign
investment policy recognising the growing importance of foreign direct investment as
an instrument of technology transfer, augmentation of foreign exchange reserves and
globalisation of the Indian economy. Simultaneously, the Government, for the first time,
permitted portfolio investments from abroad by foreign institutional investors in the
Indian capital market.
Basically, foreign direct investment relates to direct investment in an Indian companyeither through a joint venture agreement or as a wholly owned subsidiary with
management interest. Foreign direct investment is also permitted through the route of
Global Depository Receipt/Euro issue/FCCB.
Among other things, the reforms have involved opening the economy, making it more
competitive, getting the government out of the huge morass of regulation, empowering
the states to take more responsibility for economic management and thereby creating a
kind of competition between the states for foreign investors. The GDP growth rate
which had collapsed to 0.8% in 1991-92 rebounded to a near normal 5.3% in 1992-93,and then accelerated to 6.2% in 1993-94. Subsequently, the GDP grew at an average
rate of 7.5% in the three years 1994-95 to 1996-97, before slowing down to 5.1% in
1997-98 and then again grew at around 9% in 2008.
In the backdrop of the East Asian crisis, growth did slow down a little bit, but India has
kept growing and has avoided the worst of the crisis. From the narrow financial point of
view two things that India did were quite helpful. One, it did keep some limit on the
short-term capital inflows and did not go overboard in borrowing short term from
abroad. This helped India to avoid the financial reversals of some of its neighbours.
Second, it kept the rupee flexible and the depreciation of the rupee definitely helpedkeep the Indian economy more competitive and kept economic growth going during this
period. In the context of the East Asian crisis, certain kinds of money fled while other
kinds did not. The hottest money was short-term loans from international banks.
Indeed, the reversal of short-term bank lending constituted a very large proportion of
the overall $105 billion reversal in capital flows. The banks put in $56 billion in net
lending in 1996, and then withdrew an estimated $21 billion in net loans in 1997, for a
swing of $77 billion (or 73 percent of the overall reversal). Portfolio equity investors
(e.g. country equity funds) also reversed gear, to the extent of $24 billion. Foreign direct
investors, by contrast, were very stable. It is estimated that net foreign direct
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Introduction 4
investment remained roughly unchanged between 1996 and 1997, at around $7 billion
in net flows each year.
It is significant to point out here that India went through a near disaster in 1991 that
was, among others causes, based on short-term borrowing. Of course, at that time it was
short-term borrowing from the non-resident Indians, (NRIs) but it was the same kind of
phenomenon - lots of short-term capital had come in and lots had moved out and
created a severe payments crisis. In terms of foreign investment, it is the direct
investment that should be actively sought for and doors should be thrown wide open to
foreign direct investment. FDI brings huge advantages (new capital, technology,
managerial expertise, and access to foreign markets) with little or no downside. But,
they are put off by the fact that they cannot get reliable power or that the road system is
so dreadful that even if they are producing effectively, they will not be able to get the
goods to the market or back to the port for exports. Continuing fiscal difficulties that are
often linked to the chronic infrastructure difficulties remain a major challenge for India.
A few of the Indian States have been more reform-oriented, such as Andhra Pradesh,
Gujarat, Karnataka, Maharashtra, and Tamil Nadu, but states, such as Haryana, Kerala,
Orissa, Madhya Pradesh, Punjab, Rajasthan and West Bengal have a lot to catch-up with.
Of course, Bihar and Uttar Pradesh are even further behind. States that are ahead in the
reform efforts right now are going to find that if they move against the populist policies
and set up regular markets for services, such as power and water then they are going to
be ahead of the rest in the game.
There are rather significant differences in reform interest and economic performancebetween a large part of northern India and southern India where Karnataka, Tamil
Nadu and Andhra Pradesh are quite dynamic now in trying to get the infrastructure, and
the policy regime right to attract large-scale foreign investment. In the north, in Bihar,
Uttar Pradesh one does not see the same kind of reform dynamism and the results are
therefore poor in terms of economic growth. These differences will be noticed politically
sooner rather than later, (as inequalities will become glaring) and the states that are
ahead will be rewarded with better performance and the states that are behind will find
that there is the demand to catch up with the states that are growing. That will spur a
kind of competition among the Indian states and make the reform process go muchfaster.
All over the world, FDI is seen as an important source of non-debt inflows, and is
increasingly being sought as a vehicle for technology flows, and as a means of building
inter-firm linkages in a world in which multinational corporations (MNCs) are primarily
operating on the basis of a network of global interconnections. In the current global
scenario, it is possible for India to achieve very dynamic growth based upon labour
intensive manufacturing that combines the vast supply of Indian labour, including
skilled managerial and engineering labour, with foreign capital, technology, and
markets.
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Foreign Direct Investment (FDI) 5
FOREIGN DIRECT INVESTMENT (FDI)
FDI eludes definition owing to the presence of many authorities:
Organization for Economic Co-operation and Development (OCED), International Monetary
Fund (IMF), International Bank for Reconstruction and Development (IBRD) and United
Nations Conference on Trade and Development (UNCTAD), all these bodies attempt to
illustrate the nature of FDI with certain measuring methodologies.
“Generally speaking FDI refers to capital inflows from abroad that invest in the production
capacity of the economy and are “usually preferred over other forms of external finance
because they are non-debt creating, non-volatile and their returns depend on the
performance of the projects financed by the investors. FDI also facilitates international trade
and transfer of knowledge, skills and technology.”
It is furthermore described as a source of economic development, modernization, and
employment generation, whereby the overall benefits (dependant on the policies of the
host government)
…triggers technology spillovers, assists human capital formation, contributes to
international trade integration and particularly exports, helps create a more competitive
business environment, enhances enterprise development, increases total factor productivity
and, more generally, improves the efficiency of resource use.
FDI in India is allowed through four routes –
Financial Collaborations
Technical Collaborations & Joint Ventures
Capital Market (Euro issues)
Private placement or Preferential allotments
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FDI v/s FII 6
FDI V/S FII
Both FDI and FII are related to investment in a foreign country.
1. FDI or Foreign Direct Investment is an investment that a parent company makes in a
foreign country. On the contrary, FII or Foreign Institutional Investor is an investment
made by an investor in the markets of a foreign nation.
2. In case of FII, the companies only need to get registered in the stock exchange to
make investments. But FDI is quite different from it as they invest in a foreign nation.
3. The Foreign Institutional Investor is also known as hot money as the investors have
the liberty to sell it and take it back. But in Foreign Direct Investment, this is not
possible. In simple words, FII can enter the stock market easily and also withdraw
from it easily. But FDI cannot enter and exit that easily. This difference is what makesnations to choose FDI’s more than then FIIs.
4. FDI is more preferred to the FII as they are considered to be the most beneficial kind
of foreign investment for the whole economy. Foreign Direct Investment only targets
a specific enterprise. It aims to increase the enterprises capacity or productivity or
change its management control. In an FDI, the capital inflow is translated into
additional production. The FII investment flows only into the secondary market. It
helps in increasing capital availability in general rather than enhancing the capital of
a specific enterprise.
5. The Foreign Direct Investment is considered to be more stable than ForeignInstitutional Investor. FDI not only brings in capital but also helps in good governance
practices and better management skills and even technology transfer. Though the
Foreign Institutional Investor helps in promoting good governance and improving
accounting, it does not come out with any other benefits of the FDI.
6. While the FDI flows into the primary market, the FII flows into secondary market.
While FIIs are short-term investments, the FDI’s are long term.
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Determinants of FDI in developing countries 7
DETERMINANTS OF FDI IN DEVELOPING COUNTRIES
1. Host countries with sizeable domestic markets, measured by gross domestic product
(GDP) per capita and sustained growth, measured by growth rates of GDP, attractrelatively large volumes of FDI.
2. Resource endowments of host countries, including natural resources and human
resources are a factor of importance in the investment decision process.
3. Infrastructure facilities (including transportation and communication networks) are
an important determinant of FDI.
4. Macroeconomic stability, signified by stable exchange rates and low rates of
inflation, is a significant factor in the FDI decisions.
5. Political stability in the host countries is a significant factor in the investment
decision process of TNCs.
6. A stable and transparent policy framework towards FDI is attractive to potential
investors.
7. TNCs place a premium on a distortion free economic and business environment. An
allied proposition here is that a distortion free foreign trade regime, which is neutral
in terms of the incentives it provides for import substituting and export industries,
attracts relatively large volumes of FDI than either an import substituting or an
export-promoting regime.
8. Fiscal and monetary incentives in the form of tax concessions do play a role in
attracting FDI, but these are of little significance in the absence of a stable economic
environment.
India fares well on the attributes relating to market size and growth. Its growth rate of
around 6% per annum since the 1990s is substantial if not dramatic. India's overall record on
macroeconomic stability, saves for the crisis years of the late 1980s and 2008s, is superior to
that of most other developing countries. And judged by the criterion of the stability of
policies it has displayed a relatively high degree of political stability.
It is, however, India's trade and FDI regimes that are major impediments to increased FDIinflows. Admittedly, the 1991 reforms considerably relaxed the regime, which prevailed for
more than four decades. Even so, the product and factor market distortions generated by
the earlier policy regime continue to persist. And liberalization of the economy has not
progressed much since the 1991 reforms. Also there seems to be a wide gap between intent
and practice of policies towards FDI. But in past few years India has made a significant move
towards liberalizing its FDI regime.
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Press Notes 8
PRESS NOTES
FDI into India is regulated through "press notes" that publicly state the government's
position on FDI policy. Regulations made under the Foreign Exchange Management Act (FEMA), the only statute enabling such policy always play catch up with the press notes.
Often, the press notes and FEMA regulations are inconsistent.
FDI policy since India opened up in 1991 can be divided into two major eras –
Between 1991 and 1999, activities in which FDI was permitted were specifically spelt
out. Unless specifically permitted, FDI was prohibited. Where permitted, one needed
government's approval in most cases. Naturally, access to New Delhi mattered
immensely. Annual FDI into India struggled to match monthly FDI into China.
Gradually more and more activities moved into the "automatic approval" list. However,
in early 1999, a fundamental shift occurred. FDI in specific areas became prohibited or
regulated. Except for such areas, FDI in any activity became freely permitted.
Under this regime, which coincided with FEMA being legislated, the world was put on
notice that it was welcome to invest in any activity in India. If there were areas where
the government found a free run of FDI undesirable, the world would be transparently
told. Access to New Delhi ceased to be a key success factor. FDI inflows materially
improved.
FDI Policy
Between 1991-
1999After 1999
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Foreign Investment Promotion Board (FIPB) 9
FOREIGN INVESTMENT PROMOTION BOARD (FIPB)
The Foreign Investment Promotion Board (FIPB) has been set up by Government to
enable expeditious disposal of proposals involving foreign investment in specifiedsectors. As per the FIPB guidelines and extant practice, the constant endeavour is to
ensure that Government decisions are communicated within a time frame of six weeks,
from receipt of the proposal. In order to adhere to the specified timelines the FIPB
normally meets twice a month to consider proposals that have been circulated in
advance to the consulting Ministries/Departments.
Main countries in terms of the number of investment proposals in 2009 were-
The important sectors covered, in terms of the number of proposals were as follows:
i. Industrial appliances
ii. Telecommunication
iii. Software development (though on automatic route, such proposals came to the
FIPB because of conversion, warrants, share swap, etc.)
iv. Information and Broadcasting sector (including publication and print media)
v. Trading
vi. Power
Mauritius
USA
Singapore
Germany
Japan
Neitherlands
UK
France
Italy
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Foreign Investment Promotion Board (FIPB) 10
Advantage FIPB –
1. The voyage of foreign direct investment through the FIPB route is quite an
interesting one. It is not merely confined to giving approvals or rejecting
applications. It is also about amendments, both procedural and substantive. This
process entails discussion, debate, dialogue and interpretations within the
constituents of the Board, the administrative ministries, the FIPB secretariat, the
authorised representatives and, at times with the investor as well.
2. Needless to mention, such mass of thinking throws light on new ideas, leads to
re-visiting old schools of thought and offers a broad panoramic view on many
aspects of corporate governance - in an era of mergers and splits across
boundaries, upcoming areas of investments, the risks and the failures alike.
3. The Board is in a unique position to influence FDI Policy. During the year 2009, it made a very strong intervention about the treatment of contraventions of the
Policy. It adopted an approach that placed more faith in the investors and
ignored their bonafide acts of commissions and omissions.
4. It is a matter of satisfaction and pride that no decision of Board was reversed or
even modified in number of court cases in different High Courts of the country.
5. Overall the Board deserves credit for being fair, transparent, quick and objective
in its decision making process - by no means a small achievement.
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Types of Instruments 11
TYPES OF INSTRUMENTS
1. Indian companies can issue equity shares, fully, compulsorily and mandatorily
convertible debentures and fully, compulsorily and mandatorily convertiblepreference shares subject to pricing guidelines/valuation norms prescribed
under FEMA Regulations. The pricing of the capital instruments should be
decided upfront at the time of issue of the instruments.
2. Other types of Preference shares/Debentures i.e. non-convertible, optionally
convertible or partially convertible for issue of which funds have been received
on or after May 1, 2007 are considered as debt. Accordingly all norms applicable
for ECBs relating to eligible borrowers, recognized lenders, amount and
maturity, end-use stipulations, etc. shall apply. Since these instruments would be
denominated in rupees, the rupee interest rate will be based on the swap
equivalent of London Interbank Offered Rate (LIBOR) plus the spread as
permissible for ECBs of corresponding maturity.
3. The inward remittances received by the Indian company vide issuance of DRs
and FCCBs are treated as FDI and counted towards FDI.
4. Issue of shares by Indian Companies under FCCB/ADR/GDR
5. Two-way Fungibility Scheme: A limited two-way Fungibility scheme has been
put in place by the Government of India for ADRs / GDRs. Under this Scheme, a
stock broker in India, registered with SEBI, can purchase shares of an Indian
company from the market for conversion into ADRs/GDRs based on instructions
received from overseas investors. Re-issuance of ADRs / GDRs would be
permitted to the extent of ADRs / GDRs which have been redeemed into
underlying shares and sold in the Indian market.
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Benefits of Foreign Direct Investment 12
BENEFITS OF FOREIGN DIRECT INVESTMENT
Attracting foreign direct investment has become an integral part of the economic
development strategies for India. FDI ensures a huge amount of domestic capital,production level, and employment opportunities in the developing countries, which is a
major step towards the economic growth of the country. FDI has been a booming factor
that has bolstered the economic life of India, but on the other hand it is also being
blamed for ousting domestic inflows. FDI is also claimed to have lowered few regulatory
standards in terms of investment patterns. The effects of FDI are by and large
transformative. The incorporation of a range of well-composed and relevant policies
will boost up the profit ratio from Foreign Direct Investment higher. Some of the biggest
advantages of FDI enjoyed by India have been listed as under:
1. Economic growth- This is one of the major sectors, which is enormouslybenefited from foreign direct investment. A remarkable inflow of FDI in various
industrial units in India has boosted the economic life of country.
2. Trade- Foreign Direct Investments have opened a wide spectrum of
opportunities in the trading of goods and services in India both in terms of
import and export production. Products of superior quality are manufactured by
various industries in India due to greater amount of FDI inflows in the country.
3. Employment and skill levels- Foreign Direct Investments have also ensured anumber of employment opportunities by aiding the setting up of industrial units
in various corners of India.
4. Technology diffusion and knowledge transfer- FDI apparently helps in the
outsourcing of knowledge from India especially in the Information Technology
sector. It helps in developing the know-how process in India in terms of
enhancing the technological advancement in India.
5. Linkages and spill over to domestic firms- Various foreign firms are nowoccupying a position in the Indian market through Joint Ventures and
collaboration concerns. The maximum amount of the profits gained by the
foreign firms through these joint ventures is spent on the Indian market.
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Entry routes for investment 13
ENTRY ROUTES FOR INVESTMENT
Investments can be made by non-residents in the shares/fully, compulsorily and
mandatorily convertible debentures/ fully, compulsorily and mandatorily convertiblepreference shares of an Indian company, through two routes; the Automatic Route and
the Government Route. Under the Automatic Route, the foreign investor or the Indian
company does not require any approval from the RBI or Government of India for the
investment. Under the Government Route, prior approval of the Government of India
through Foreign Investment Promotion Board (FIPB) is required. Proposals for foreign
investment under Government route as laid down in the FDI policy from time to time
are considered by the Foreign Investment Promotion Board (FIPB) in Department of
Economic Affairs (DEA), Ministry of Finance.
Established under the Department of Industrial Policy and Promotion, the ForeignInvestment Promotion Board is the only agency in India that deals with all matters
relating to Foreign Direct Investment (FDI) and promotion of foreign investment in
India. The board is chaired by the Secretary Industry, Department of Industrial Policy
and Promotion, Government of India. The board, towards prompt clearance of the
proposals, presented to it through decisive negotiation and discussion with budding
investors. The primary functions of the Foreign Investment Promotion Board are
mentioned below:
1.
To ensure quick clearing of proposals for foreign investment
2. Periodically review the implementation of the cleared proposals
3. Regular review the policies pertaining to FDI with concerned agencies including
government bodies and private bodies in various sectors.
4. Doing investment promotion activities consisting of establishing contacts and
inviting overseas companies to do business in India
5. Identifying sectors while keeping the national internet in mind where
investments from aboard can be sought
6. Taking up activities for the promotion and facilitation of foreign direct
investment as and when required
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Sectors Prohibited 14
SECTORS PROHIBITED
FDI is prohibited in the following activities/sectors:
a) Retail Trading (except single brand product retailing)
b) Atomic Energy
c) Lottery Business including Government /private lottery, online lotteries, etc.
d) Gambling and Betting including casinos etc.
e) Business of chit fund
f) Nidhi company
g) Trading in Transferable Development Rights (TDRs)
h) Real Estate Business or Construction of Farm Houses
i) Activities / sectors not opened to private sector investment.
Besides foreign investment in any form, foreign technology collaboration in any form
including licensing for franchise, trademark, brand name, management contract is also
completely prohibited for Lottery Business and Gambling and Betting activities
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Sectors in Discussion 15
SECTORS IN DISCUSSION
DEFENCE Present Scenario
The policy for Foreign Direct Investment (FDI) in the Defence Sector was first notified
vide Press Note 4 of 2001, wherein the Defence Industry Sector was opened up to 100%
for Indian private sector participation, with FDI permissible up to 26%, both subject to
licensing and Government approval. Subsequently, guidelines for production of Defence
equipment were notified, vide Press Note 2 of 2002. The extant FDI sectoral cap for the
Defence Sector is, accordingly, 26%.
Other than the FDI policy, two other policy regimes govern the defence sector. These are
the Defence Procurement Policy and the Industrial License regime.
Concerns related to liberalising the FDI regime for the defence sector
1. The major reason for reluctance in encouraging the Private Sector into defence
production and welcome FDI in the sector is on account of concern for the
Defence PSUs and the Ordinance Factories. However, it is clear that if the import
continues at the present level, the role of the Defence PSUs and the Ordinance
Factories would only be further marginalised. If on the other hand, the major
arms and weapon manufacturer companies set up their manufacturing units inIndia, there is strong possibility that they will collaborate with Defence PSUs and
Ordinance Factories.
2. Another concern is that FDI could lead to ownership and control of firms
operating in a critical and highly sensitive industry being passed on to foreign
hands. Even if ownership or control does not pass on fully to the foreign
investors, raising of the cap could lead to their enhanced influence and say in
affairs of the company’s management. A related concern is that this could lead to
an increased dependence on foreign investment, for meeting our defence needs.
3. There can also be concern relating to availability or reliability of supplies in
times of war. The availability of maintenance and repair capability, spare parts,
material and other support to keep critical systems functioning in all
circumstances is a vital concern
4. The other concern is related to the issue of passing on of the critical equipment,
design or source code to other players-particularly, countries inimical to Indian
interests. Such an apprehension will exist even in the case of imported
equipment. In fact, in the case of indigenous equipment, the Government can
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Sectors in Discussion 16
exercise greater and more effective control on the production mechanism of a
company located in India and subject to Indian laws compared to a company
located overseas. Government can reserve the right to inspect or control the
production and dispatches in these facilities through deployment of necessary
security agencies/ personnel.
5. There is a general concern about the internal security aspect of manufacture of
defence equipment especially small arms and ammunition. This concern can be
met by devising a strong surveillance system in each factory/unit. This could
include posting of defence/security personnel on a whole time basis to these
locations
RETAIL Present Scenario
1. 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. Single brand retail outlets with FDI generally pertain to high-end
products and cater to the needs of a brand conscious segment of the population,
mainly attracting a brand loyal clientele, which often has a pre-set positive
disposition towards the specific brand. This segment of customers is distinctly
different from one that is catered by the small retailers/ kirana shops.
2. 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. 7799 crore) were received in the sector. This comprised 1.54
% of the total FDI inflows received during the period.
3. Trade is an important segment in India's Gross Domestic Product (GDP). As per
the National Accounts, released by the Central Statistical Organisation (CSO),
GDP from trade (inclusive of wholesale and retail in organised and unorganised
sector), at current prices, increased from Rs 4,33,963 crore in 2004-05 to Rs
7,91,470 crore, at an average annual rate of 16.2 per cent. The share of trade in
GDP, however, remained fairly stable at little over 15 per cent in last four years",
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17
The share of the private organised sector in total GDP from trade was 23.2 per
cent in 2008-09 and it grew at 15.0% during the year. The share of the retail
trade in GDP remained stable at 8.1 per cent during this period.
Limitations of the present setup
1. There has been a lack of investment in the logistics of the retail chain, leading to
an inefficient market mechanism. Though India is the second largest producer of
fruits and vegetables (about 180 million MT), it has a very limited integrated
cold-chain infrastructure, with only 5386 stand-alone cold storages, having a
total capacity of 23.6 million MT. ,80% of this is used only for potatoes. The chain
is highly fragmented and hence, perishable horticultural commodities find it difficult to link to distant markets, including overseas markets, round the year.
2. Intermediaries dominate the value chain. They often flout mandi norms and
their pricing lacks transparency.
3. There is a big question mark on the efficacy of the public procurement and PDS
set-up and the bill on food subsidies is rising.
4. The MSME sector has also suffered due to lack of branding and lack of avenues toreach out to the vast world markets.
Need for Investments in Agriculture Infrastructure and linked Retail Sectors
It is estimated that India will need substantial investment to develop infrastructure for
supporting retail development. A significant portion of this will need to be earmarked
for up gradation of the supply chain for fruits & vegetables. A major portion of his
investment is expected to come from the private sector, for which an appropriate
regulatory and policy environment is necessary. An 11th Plan working group has
estimated a total investment of Rs. 64,312 crore in agricultural infrastructure. A storage
capacity gap of 35 million tonnes has been assessed, requiring an estimated investment
of Rs. 7,687 crore during the 11th Plan.
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Conclusion 18
CONCLUSION
Given the engulfing resource and technological constraints that India is facing today,
India should liberalize it FDI policy but in calibrated and inclusive way so that small andmedium enterprises in India should also be able to grow.
The Indian middle class is large and growing; wages are low; many workers are well
educated and speak English; investors are optimistic and local stocks are up; despite
political turmoil, the country presses on with economic reforms. The rapid economic
growth of the last few years has put heavy stress on India's infrastructural facilities. The
projections of further expansion in key areas could snap the already strained lines of
transportation unless massive programs of expansion and modernization are put in
place. Problems include power demand shortfall, port traffic capacity mismatch, poor
road conditions (only half of the country's roads are surfaced), low telephonepenetration (1.4% of population). Although the Indian government is well aware of the
need for reform and is pushing ahead in this area, business still has to deal with
an inefficient and sometimes still slow-moving bureaucracy. The Indian market is
widely diverse. The country has 17 official languages, 6 major religions, and ethnic
diversity as wide as all of Europe. Thus, tastes and preferences differ greatly among
sections of consumers. The general economic direction in India is toward liberalization
and globalization.
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References 19
REFERENCES
http://www.business-standard.com
http://www.fipbindia.com
http://finmin.nic.in/
http://business.mapsofindia.com
http://www.rediff.com