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Restrict flight of domestic capital to curb FDI in retail: Assocham

Restrict flight of domestic capital to curb FDI in retail: Assocham
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First Published: Mon, Jun 04 2007. 10 38 AM IST
Updated: Mon, Jun 04 2007. 10 38 AM IST
New Delhi: Organized retailing is estimated to cross $23 bn (Rs92,000 crore) by 2010 and create a sprawling business space for global retail giants which are drawing up their expansion plans for India.
Industry chamber Assocham has suggested the opening up of retail to FDIs in a calibrated manner so as to restrict the flight of domestic capital.
This will create adequate breathing period to domestic retailers to enable them prepare and face competitors like Wal-Mart. They would also be in a position to have a proportionate share in the projected retail business which is pitched at $23 bn. Currently, organized retailing is estimated between $7.5 bn to $8 bn.
In India it currently occupies about 50 mn sqft of quality retail space within the organized sector and is projected to exceed 150 mn sqft by 2012.
Suggestions based on feebdack from Industry:
* Involvement of stakeholders before any significant policy decision is key to systematic expansion and organization of the retail sector.
* Strengthen domestic infrastructure to establish a realistic price structure. Currently prices of large retail spaces in upmarket and central locations in metros are prohibitive, essentially because private holdings are fragmented and impact of Urban Land Ceiling Act is more pronounced. Also, pro-tenancy Rent Control Acts have distorted property markets in cities leading to exceptionally high prices.
* Address and minimize bureaucratic hurdles and high capital costs which place domestic retailing firms at a disadvantage vis-a-vis international players who have over the years placed efficient chains at low capital costs. According to estimates as many as 13 licences are needed to open a single store in the country.
* Absence of single window clearance, coupled with issues like lack of property infrastructure, are an impediment to the growth of the retailing.
Retail has emerged as a major driver for real estate and urban development, accounting for nearly 10% GDP in most countries. It is also a major employer in most economies: up to 16% in US, 15% in Brazil and 12% in Poland. India employs roughly about 40 million people in its real state and retail sector directly.
Presently global retail giants are drawing up expansion plans in India and looking for opening up foreign investment in the sector. With the right policies, the boom could have a healthy effect down the line.
While, Assocham has welcomed the decision of the government for allowing the entry of single branded MNCs in India, it is of the opinion that there is need to further discuss and debate the key factors that drive India’s retail industry in the light of the paradigm shift that is taking place in the retail environment.
Retail industry is expected to create over two million jobs by 2010. Shortage of professionals will remain a big challenge. To overcome this, retail management programmes and institutes will have to be set up so that trained professionals can help realise projected outcomes.
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First Published: Mon, Jun 04 2007. 10 38 AM IST