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INDIA'S FDI IN RETAIL AGAIN PUT ON HOLD

INTRODUCTION

India Retail Sector : R. Subramanian, Managing Director, Subhiksha, has said once, "Foreign retailers need Indian retailers more than the Indian retailers needing the foreign retailers." The Indian retail industry has witnessed extensive growth over the last decade. The industry has grown at a CAGR of 13.3% for the period FY06-10. The growth in the Indian economy since the last decade and the varying consumption pattern of the Indian populace in terms of higher proportion of upper middle class population, greater proportion of working women etc. ...

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INDUSTRY NEWS

• Chatwal Hotels plans 50 hotels in India
  January 10, 2012
• Seacret on an expansion spree
  January 10, 2012
• EVOK expands its footprints in Rajasthan
  January 09, 2012
• Best Western plans 100 hotels in India
  January 09, 2012
• Bata plans 70 global format outlets
  January 06, 2012
• KHIL seeks franchisees for The Orchid
  January 06, 2012
• Orient Tiles plans aggressive expansion
  January 05, 2012
• My Destination begins India operations
  January 05, 2012

Following are few facts on current scenario of India's retail sector

• The retail sector in the nation of 1.2 billion people is estimated to have annual sales of $500 billion, with nearly 90 percent of the market controlled by tiny family-run shops.
• Organized retail, makes up less than 10 percent of the market, but is expanding at 20 percent a year. This is driven by the emergence of shopping centres, malls, Emerging franchising industry and a middle class of close to 300 million people that is growing at nearly 2 percent a year. ...   

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Foreign Direct Investment and Indian retail Sector

India's economy has largely been driven by domestic consumption, where retail accounts for about 60% of the gross domestic product. A move to open up the sector for competition could have helped improve the sector and GDP alike. Also, Young consumers consume products very differently than older ones. They are far less emotional in their buying behaviour, and much more experimentative. ...

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Conclusion

As per the Union Cabinet's decision, 51 per cent FDI is allowed in multi-brand retail and 100 per cent FDI in single brand retail in India. The industry experts believe that new FDI norms in retail will help the Indian retail industry to grow faster. The consumers will also benefit from this move as they will be able...

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On balance, the move to hold back the opening up of the retail sector to FDI, is a step backward for India. While one may argue that political consensus is required to ensure that all the states implement the Retail FDI policy, it does smack of political opportunism, maybe to enable passage of other bills in this winter session of parliament and beyond. FDI in retail clearly benefits those participants who are the true value adders in the supply chain - the producers and the end consumers. With the entrance of large format international retail players, there would be fewer non value adding middlemen and lesser opportunities for speculation and hoarding. Better supply chain infrastructure would mean lesser rejections (currently at 30% for vegetables produce); faster time to the market would result in better quality and lesser wasteful inventory in the system. Producers are likely to get better prices due direct purchase from the large retailers while end consumers would be to able to choose from a wider variety at more competitive prices. But all this is possible only if the Government of India takes the bold step to implement the FDI retail policy. The political leadership of the country needs to rise above partisan interests and recognize that across the world the myth that unorganized retail will be wiped out has been debunked. Small shops are co-existing with large format retail in Europe as well as in Asia for more than two decades. As a matter of fact, unorganized retail itself has benefitted by their sourcing cost having come down to purchases from large wholesalers. The spin off benefits to real estate and infrastructure sectors and the consequent multiplier effect can serve as a boon for the economy, especially at this point in time when the Indian growth story is facing challenges Mr. Prasun Chowdhury (Director) Avenir

FDI on retail was proposed and planned to usher in an ear of next phase of progressive reforms in the country. It was quite unfortunate that the FDI in retail has been withheld; primarily entangled in socio-political clutches, rather than sound economics with key linkages to development and growt. While the subject of permitting FDI in multiband retail has fostered intense debate & extremist views across many sections of society; there is no doubt about the proven benefits to the consumer ; farmer / supplier and the much needed capital inflows with technology infusion & global practices into the retail sector. The process of globalization of markets is irreversible and we earnestly hope that sooner than later; the FDI norms in retail are progressively liberalized and balanced; leading to an all round development and growth in the economy . Mr. D K Jairath (CEO) EVOK