The Indian consumption story is still strong but lack of foreign investment could curb expansion of Indian retail, say sector analysts. Last week, the Finance Minister, Mr Pranab Mukherjee, made it clear that the Government was in no hurry to allow foreign direct investment (FDI) in multi-brand retail, and the matter would be referred to the States, a move that quashed the plans of many international players.
The Indian retail industry is estimated to be between Rs 12 lakh crore and Rs 14 lakh crore, with about 5 per cent of its sales coming from the organised sector. The industry is growing at 10 per cent annually, with modern retail growing at 25 per cent. “It would continue to grow at those levels but FDI would have helped speedier ramp-up of the players,” points out Mr Kumar Rajagopalan, chief executive, Retailers Association of India. Its inherent long gestation period before yielding returns necessitates retailers with deep pockets to scale up and sustain their operations, explains Mr N.V. Sivakumar, Leader, Retail, Industrial and Consumer Products, PwC India.
Mr Arvind Singhal, Chairman of consulting firm Technopak Advisors, says the stand taken by the Government defies both economic and political logic, as the Government is grappling with inflation in the last two years. “The issue is not about growth of the modern retail industry. The bigger ground reality is how to make the producer-consumer and the farmer-consumer supply chain more efficient.”
Foreign investment would also help create millions of jobs for those who are not well-trained or qualified to take up other careers, points out Mr Singhal. But with most large business houses involved in the retail sector, employment opportunities still look rosy, feels Mr Rajagopalan. “What will, however, be curtailed is the facelift that international players can give to the sector. Our submission was for partial opening of FDI for retail. ”
While consumers in India will have to wait to shop at some of their favourite international retail brands, Mr Rajagopalan points to the positive side: “Their appetite would still be fulfilled as Indian retailers are sharpening their merchandise offerings and coupling it with better consumer-centric selling. Of course, international competition could have hastened the process of customer-centricity for retail.”
The effect of the Government deferring a decision on FDI will be neutral, says a consumer, “We won't miss what we don't have.”
No comments:
Post a Comment