New Delhi: The retail industry in the country is expected to grow to $427 billion (Rs17,93,400 crore) by value by 2010 and the share of organized retail in this could increase to around 22%, according to a recent study by industry lobby Federation of Indian Chambers of Commerce and Industry (Ficci) titled ‘Organised Retail: Unfinished Agenda and the Challenges Ahead’.
Current estimates put the size of the industry at $328 billion with organized retail accounting for just 4% of this number.
The numbers indicate that most of the growth in the next three years will come from the growth of firms such as Reliance Retail, the Bharti Enterprises-Wal-Mart combine, and the Future Group.
The Ficci study assumes that income and consumer demand will grow at a rapid pace. It says that the growth will be fuelled by investments from domestic and foreign firms, aggregating over $30 billion over the next five to seven years.
According to an estimate by Technopak, a consulting firm, 92% of these investments will be focused on building a retail presence in urban areas and 8% in rural areas. And out of the proposed investment in urban areas, 38% will go into building hypermarkets, 28%, into supermarkets, and 22% into specialty stores.
The retail industry comprises 13 million outlets and employs over 18 million people currently; it is the largest provider of jobs in the country after agriculture. According to Technopak, over 1 million people will need to be hired and trained to staff new retail ventures.
The Ficci study also says that the growth of the industry would depend on government policy, infrastructure development, economic growth, and changes in the retail supply chain. Currently, India’s laws limit foreign investment in retail to 51% of single-brand stores.
And most retail firms have to get around complex state-level laws if they wish to source fresh produce from farmers. Ficci has suggested that the government grant industry status to the retailsector.
“Industry status to retailing is the first step needed for reforming the sector. The advantages include greater focus on retailing development, fiscal incentives for retailing industry, availability of organised financing and establishment of insurance norms,” said Amit Mitra, secretary general, Ficci. The industry lobby has also asked the government to relax guidelines concerning foreign investment in retail.
However, it said that it would make specific recommendations on foreign investment in retail to the government, but only after the Indian Council for Research on International Economic Relations, a think-tank, submits its report on the same subject to the government.