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Should organised retailing be encouraged in India

A session on 'Will there really be a retail revolution' was held during the India Economic Summit (IES) on Monday, reports Prerna K Mishra.

india Updated: Nov 28, 2006 00:01 IST

The questions were familiar, but the answers differed widely. At a session on 'Will there really be a retail revolution' held during the India Economic Summit (IES) on Monday, panellists tried hard to find an elusive consensus.

Should organised retailing be aggressively encouraged in India? Should a glut of FDI without too many restrictions be permitted? Or will excessive haste gobble up the huge unorganised sector of neighbourhood stores presently in retailing where 21 million people are employed, directly or indirectly?

"The retail revolution can create purchasing power at the bottom of the pyramid by working together with agri-stakeholders in the rural areas. It can create 1- 2 million jobs every year for the next decade. But there is a right way of doing it and that is to partner with the last mile provision stores and taking them along," said Reliance Industries CMD Mukesh D Ambani.

Ambani's view was endorsed by Adi B Godrej, Chairman of the Godrej Group. "Modern retail presently constitutes a very small part of the market but is expected to grow rapidly. But in order to live the retail dream we need to grow at a compounded annual growth rate of 70 per cent by 2010."

Citing McKinsey, UAE-based Emmar Properties Chairman Mohamed A Alabbar
said, "Retail forms nearly 40 per cent of the GDP for any country. The retail
space per person in the United States is 13 sq ft per person while for Asia it is 7 sq ft. If we were to juxtapose this model on just the 300 million strong middle class population in India with an average of 5 sq ft per person of retail space, one gets a fair idea of what we are sitting on."

Introducing a voice of caution, Department of Industrial Policy and Promotion Secretary Ajay Dua pointed out that estimates of the Indians purchasing power
have been blown and are inflated. "There are nearly 110 million Indians in the income group of between $1500 and $4000 per year. And over 40 million Indian households earn below $1500 a year," he said.

"India has just 1.2 million households who go for branded consumer durables
living in eight cities and maybe 40 million households in the middle class. But
there too majority of the young ones are investing first on education and
then on real estate. Also, given that 55 per cent of the consumption expense
comes from 156 million of the rural population, the promise of Indian retail seems to be over-stated," Dua pointed out.

Party Spoilers

Demands pull apart, the government needs to move fast on reforms. The areas
crying for attention are:

*Agri Produce Marketing Act
* Basic power for cold chains
* Infrastructure
* Supply of real estate property
* Urban Land Ceiling Act
* Competition from private labels