Basic HTML Version
84
|
The Textile Magazine
DECEMBER 2011
consulted and studies commissioned based on international
experiences of organised retailing.
Modernisation of retail trade is an essential part of India’s
growth story. It is well known, from experiences of countries
such as China, Indonesia and several others, that modern retail
trade and traditional traders can, and do, prosper side by side,
raising employment along the supply chain, improving farm
incomes, reducing spoilage and delivering affordable products
to consumers.
Opposing investment in modern retail for the sake of it is
only defending vested interests to the detriment of the vast
majority. The farmers, the consumers and the common people
must raise their voices against this false drama of apprehen-
sion against investment and modernising trade in agriculture
and consumer goods. For example, in a district which grows
the largest amount of potatoes in the country, more than 50
per cent rots in the fields due to inadequate cold storage facil-
ity and supply chain, to the utter distress of the farmers and at
the cost to the end consumers. There are thousands of similar
events every year across the country.
What is intriguing and bewildering is that the false alarm of
FDI is continuing to be used after so many years as a bogey in
modern times against foreigners and foreign investment. It is
completely baseless to argue that kirana shops will be wiped
out with the onslaught of FDI in retail. What does hurt the
kirana shops are their having to down their shutters to support
bandhs.
It is important to articulate the economics of FDI in retail. It
is illusory to believe that the market will be flooded with FDI.
Retailing is not an easy business – margins are thin, large par-
cels of real estate are not easily available and the supply chain
logistics ranging from warehousing, cold storage to transpor-
tation pose a major challenge. More importantly, the Central
Government’s role in retail FDI is minimal. The greater onus
lies with the State Governments as a maze of laws ranging
from the Shops and Establishments Act to the APMC Act,
amongst several others, falls within the State’s domain. Pro-
gressive States that wish to attract FDI in retail will encourage
investments and vice versa. Either way, the fruits of organised
retailing will not happen overnight, but will take several years.
To conclude, this is a call to the saner sections of Corporate
India to come out and strongly support progressive measures
and reforms with the same spirit and gusto with which we take
the liberties to criticise policies or issues we do not appreciate.
w
While there has been a lot of media cover-
age on the hot debate about the benefits and
pitfalls of allowing 51 per cent FDI in multi-
brand retail, several important issues have not
been properly highlighted either by the Gov-
ernment or by those opposing the move.
The most important is the impact on direct
and indirect tax revenues for the exchequer.
Another is a correct estimate of what amount
of actual foreign investment India can expect.
How many kiranas will actually get impacted?
One of India’s most respected retail consult-
ants – Asipac – has come out with a simple
and factual white paper covering these impor-
tant issues:
l
By 2015, Urban India will have 423 mil-
lion people and will need 635 million sq. ft.
of space for food retail (including pharma,
beauty and FMCG) compared to 511 million
sq. ft. today (total space occupied by modern
trade and neighbourhood kiranas).
l
Assuming that the organized sector (in-
cluding the existing players) captures 7.5 per
cent market share in four years, we will have
47.63 million sq. ft. of hypermarkets, super-
markets and pharmacies by 2015, compared
to 15.3 million sq. ft. today. Even if foreign
retailers capture 50 per cent of this and have
23.82 million sq. ft., at average ownership of
1,200 sq. ft. per kirana owner, this will only
affect 19,850 businessmen and not crores of
businessmen, as has been hyped.
l
There’s much more to retail than just food
& grocery. A total of 423 million urban In-
dians will need 3,680 million sq. ft. of space
for non-food retailing. Assuming 20 per cent
FDI
in
Retail