Feasibility Analysis of Overseas Investment by Sky super Market through India and Mexico

Feasibility Analysis of Overseas Investment by Sky super Market through India and Mexico

Feasibility Analysis of Overseas Investment by Sky super Market through India and Mexico

Introduction

The current debate on allowing foreign direct investment (FDI) in India's super market trade primarily focuses on two issues - employment and consumer welfare. Supporters of this move have developed consumer centric arguments while the opponents are more concerned with its adverse impact on employment. In a recent article in the Economic and Political Weekly, Guruswamy et al. (March, 2005) deliberated on this issue in detail and made an empirical estimation of the future job losses, should the government allow entry of FDI in super market sector. The estimated job loss ranged between 4,32.000 and 6, 20,000. In percentage terms this works out to over 1.0% -1.5% of current work force of around 40 millions (The Telegraph; UK, estimates it as 80 millions) engaged in super market trade in India.

Though FDI in retailing is not allowed (as of December 26, 2005), the Government of India has a more liberal policy towards wholesale trade; franchising and commission agents' services. Foreign retailers have already started their operations in India through (i) joint venture where the Indian firm was an export house (ii) franchising (KFC, Nike) (iii) sourcing from small-scale sector; (iv) cash and carry operation (Giant in Hyderabad) (v) non-store formats- direct marketing (Amway). Large international retailers of home furnishing and apparels like Pottery Barn, Gap and Ralph Lauren have made India as one of their major sourcing hubs. In February 2002, the world's largest retailer, Wal-Mart opened a global sourcing office in Bangalore. Up to 100% FDI is allowed in Cash and Carry wholesale. The Great Wholesaling Club Ltd is one such example. (Mukherjee, 2000).

In the latest 'revised conditional offer' submitted by the GOI to WTO in August 2005, under article XIX of the GATS, India has offered to undertake extensive commitments in a number of sectors/sub-sectors including wholesale trade services and distribution services (limited to services incidental to energy distribution but excluding energy trading and load dispatch function), marine and air transport services. (WTO,TNS/O/IND/Rev.1, 24.8.05).

In the revised offer by the GOI under the on going GATS negotiation, we observe a systematic move towards creating the basic infrastructure essential for the smooth functioning of modern super market chains. The bottlenecks like lack of proper storage facilities and efficient logistic services have been addressed through liberal FDI policy in air and maritime transport services and maritime auxiliary services, which included storage and warehousing services in the ports.

The Countries

Country A (United Kingdom)

The super market environment is one of the most competitive and fragmented retail sectors, with operators battling for growth in a relatively low growth environment. UK super market Multiples 2008 profiles a representative sample of smaller, but influential and explores the dynamics, growth trends and drivers of the market and retailers responses.

Countries B: India and Mexico

Super market trade in India ...