SWOT Analysis of INDIA in FDI

May 2014




1 SWOT Analysis of India in FDI
May 2014
Executive Summary
Foreign direct investment (FDI) is a direct
investment into production or business in a
country by an individual or company of
another country. It seems like a lifetime ago,
yet was only 2007 when the global economy
and FDI soared to all-time highs. Then,
standstill: a housing market collapse, banking
crises, rising unemployment, and falling
consumption, leading to two years of stagnant
growth and delayed investment. FDI took
major hit in 2008 and 2009, with a miniscule
rebound in 2010.

At last, investors appear ready to get back to business. Despite fiscal policy gridblock and unresolved debt
issues plaguing many developed countries in the world, as per 2013 surveyed reports are surprisingly
optimistic about the global economic outlook.
The FDI Confidence Index (Survey based report) in its 13
th
edition since 1998 ranks countries on how political,
economic and regulatory changes will effect FDI. In the report emerging markets continue to change ahead.
They account for 16 of the top 25 countries index, with China(2
nd
), Brazil (3
rd
), and India in (5
th
) all in the top
five.


2 SWOT Analysis of India in FDI
May 2014



3 SWOT Analysis of India in FDI
May 2014
India
Strength
Growth slowdown, but still strong. The global slowdown hasn't spared India, whose GDP growth rate
slipped to 5 percent, down from a 10-year average of 7.8 percent. Same-store sales volume growth
slowed in 2012 across retail, particularly for lifestyle and value-based formats. India falls nine spots in
the GRDI to 14th; its previous low ranking was 6th place in the inaugural Index in 2002, and it was first
as recently as 2009. High operating costs, low bargaining power with vendors, and heavy discounting
to improve sales have affected profits and expansion plans. Real estate cost and space availability also
remain important issues. Many players are actively looking at improving sales productivity, cutting
operating costs, and reducing store size.
50% of the population in 15-64 age bracket and favorable demographics with 52% people below 25
years of age.
Median age of Indian population will remain 30 even as late as in 2025
Fulcrum of Indian subcontinent can become feeder for market
Natural Tourism Boost the positive across sectors
Large English speaking population ranked 2 after US and Indian literacy rate 75%+




























4 SWOT Analysis of India in FDI
May 2014

Weaknesses
India is ranked 5
th
in the FDI confidence Index, However a cooling off in investor sentiments may be on
the way reflected in Indias slide spot in the index.
Falling growth and increasing inflation and deficit are possible sign of rough path ahead.
High Operating cost and low bargaining power with vendors and heavy discounting
Absence of developed supply chain
In multi-brand retail, the government allowed 51 percent FDI starting in early 2013. However, there
are preconditions about investment, sourcing, store locations, and state government approval.
Although the government has received multiple investment proposals, many multi-brand players are
taking a "wait-and-see" approach due to apprehensions about how the policy will be implemented.
Opportunity
Large pool of young skilled labor force, cost effective production facilities and large domestic market
Organized retail accounts for 10% of Indias roughly $435 Billion retail market and is expected to reach
25% by 2020.



5 SWOT Analysis of India in FDI
May 2014
Threats
Indias volatile political system could act as major threat in future. Economic and political tension may
accelerate or decelerate Firms entry and expansion decision.
Adoption or rejection of Central policies at State level can bring in unpredictability in ROI on Foreign
investment.
Wide spread corruption at based levels can promote unethical practices.
Indian market power is in hands of unorganized retail where 90% market is unorganized.
Changing technology
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References & Notes:
All figures in thousand US$
The entire analysis has done on publicly available reports
https://in.finance.yahoo.com/
http://www.atkearney.com/
http://www.india-opportunities.es
World bank report & Mckinsey Global Institute report 2007