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Change business model, India tells global retailers

India currently permits up to 51 per cent foreign equity in single brand retail and 100 per cent in cash-and-carry wholesale trade.

india Updated: Jan 27, 2007 04:11 IST

Global retailers interested in entering India to capture the vast potential market must change their business models, a top official in the commerce and industry ministry said in Davos on Friday.

Speaking at a discussion on 'Innovation in Retail' at the annual meeting of the World Economic Forum (WEF), Ajay Dua, secretary in the ministry, said a global model for retail trade was unlikely to work in India.

"The differentiation will have to be both at the stage of entry and subsequent operations. It will also need to be based on unique country characterisation and no single global model would be adequate," Dua said.

India currently permits up to 51 per cent foreign equity in single brand retail and 100 per cent in cash-and-carry wholesale trade. But multi-brand retailers are not allowed entry at the moment.

Dua said all markets of any significant size have concerns about safeguarding the existing retailers who, in the case of India, number about 15 million and provide employment to approximately 22 million people.

While organised retail formats in all the emerging markets are growing, given the rise in disposable incomes and rapid additions to the middle class, they would have to co-exist with the traditional 'mom-and-pop' stores, which have their own place in the scheme of things of consumers.

"The global retail chains need to adopt an approach, which not only takes care of the national laws and regulations, but also builds on the strengths of the small retailers."

The small shopkeepers provide huge business opportunities to organised logistics, processing and retail, both domestic and foreign, by becoming their suppliers of better quality goods, services and technology.

"These small shopkeepers are so numerous and do such voluminous business that the operations of global chains in these new markets can become viable very quickly," Dua added.

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