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Retailing a revolution

The $300 billion retail industry is truly set to explode, thanks to higher disposable incomes of an increasingly prosperous middle-class not only in the metros but also small towns.

india Updated: May 18, 2008 23:08 IST

India is, no doubt, experiencing a boom in organised retail but the surprise really is that its growth trajectory is perhaps a lot faster than popularly believed. Considering the political backlash against big retail in several states of the country, the impression was that business groups had become somewhat less ambitious with their roll-out plans for organised retail till the policy environment became more conducive. There are no prizes for guessing the political sensitivities involved as India, too, is a nation of small shopkeepers. Mom’n’Pop stores and kirana shops account for 97 per cent of unorganised retailing and there is concern that they will be adversely impacted by the spread of organised retail. This is why the UPA government has not moved at all on allowing more foreign direct investment in this business, especially in an election season.

For such reasons, the latest projections of Deloitte Haskins and Sells, an accounting firm, that organised retailing will account for 25 per cent of the business by 2011, from current levels of 8 per cent appear somewhat optimistic. These numbers are much higher than the study (prepared at the behest of the government) by the Indian Council for Research on International Economic Relations (Icrier) that indicated organised retail would have a 16 per cent share of the business by 2012. Significantly, the government has not chosen to proceed with retail trade reforms as it is aware of Icrier’s findings. Disturbingly, they include the fact that small stores are definitely affected by big branded retail chains when they are in the same location. Moreover, while 4.2 per cent of small stores down shutters every year, less than half of this is on account of competition from big retail and so on.

But all of this has not fazed big retail as the prospects of the Indian economy remain bullish. The $300 billion industry is truly set to explode, thanks to higher disposable incomes of an increasingly prosperous middle-class not only in the metros but also small towns and cities of urban India — leading many global and national players to announce huge plans to invest $22 billion over the next five years to set up shop all over India.