Retailing in India is one of the pillars of its economy and accounts for 14 to
15% of its GDP The Indian retail market is estimated to be US$ 450 billion and
one of the top five retail markets in the world by economic value. India is one of the
fastest growing retail markets in the world, with 1.2 billion people India's retailing industry is essentially owner manned small shops. In 2010, larger
format convenience stores and supermarkets accounted for about 4% of the
industry, and these were present only in large urban centers. India's retail and
logistics industry employs about 40 million Indians.
Until 2011, Indian central government denied foreign direct investment ...view middle of the document...
Fitch believes that the 30% requirement is likely
to significantly delay if not prevent most single brand majors from Europe, USA and
Japan from opening stores and creating associated jobs in India.
Benefits of FDI
The government's decision to allow FDI in multi-brand retail would help increase productivity and ensure an efficient foodgrain distribution network to tackle high food prices, RBI Deputy Governor Subir Gokarn said here today.
"The ultimate solution to high food prices is very simply more production of things that people consume more. You might debate the merits and demerits of FDI in (multi-brand) retail. But let's focus on the basic problem. We need to increase productivity and distribution efficiency", he said at a function here.
Observing that India has a low productivity (of foodgrains) and inefficient distribution, he said increasing the scale of investments in organised retail is one way to increase productivity and distribution efficiency. "FDI is an enabler of that".
"Whether you accept the argument that FDI will do this or not, we have low productivity,we have inefficient distribution (mechanism)", he said at the 102nd AGM of Southern Indian Chamber of Commerce and Industry.
He called for solutions to take the country's economy towards a strong growth momentum.
"We have to look at the stress points. What are the stress points?. We have to look at the sources of imbalances in the macro-economic situation and we have to find solutions that will provide robust responses to these constraints", he said.
The deputy governor also pointed out that if food prices keep on increasing, it would impact wages and subsequently lead to inflationary pressures.
"It is also important to recognise that if food prices keep growing, that impacts wages, which impacts expectations and in turn feeds into the inflationary process", he said.
He said RBI has been trying to play a "balancing act" to maintain credibility and meet expectations of various stakeholders "without putting undue disproportionate pressure on the growth momentum."
Retailing is being perceived as a beginner and as an attractive commercial business
for organized business i.e. the pure retailer is starting to emerge now. Indian
organized retail industry is one of the sunrise sectors with huge growth potential.
Total retail market in India stood at USD 350 billion in 2007-08 and is estimated to
attain USD 573 billion by 2012-13.
Organized retail industry accounts for only 5.5% of total retail industry and is
expected to reach 10% by 2012. AT Kearney, the well known
international management consultancy, recently identified India as the
‗second most attractive retail destination‘ globally from among thirty emergent
markets. It has made India the cause of a good deal of excitement and the cynosure
of many foreign investors‘ eyes. With a contribution of an overwhelming 14% to the
national GDP and employing 7% of the total workforce
in the country, the...