As anticipated, when there is so much activity going on in the biggest retail market in the world, how can the champion stay behind?
As soon as the proposal of opening FDI in Retail has taken weight, the president of Wal-mart is planning on an Indian visit soon.
A few days back, Wal-mart had spoken to the major FMCG firms sourcing to the retailers in India.
Speaking of the Indian Retail industry, a latest whitepaper produced by FICCI and ICICI jointly gives out the figures for India:
Total Retail Industry: Rs. 9,30,000 Crores
Unorganized Sector: 97%, with approx 5% annual growth
Organized Sector: 3%, worth Rs. 28000 Crore, but growing at 35% annually. It is projected to touch 10% at Rs. 1,00,000 Crore by 2010.
FDI currently is allowed only in the groceries, and lately, infrastructure development, like construction of the Retail outlets, etc.
Commerce Minister Mr. Kamal Nath mentioned a couple of months back that the proposal would be to the effect that the traditional mom-and-pop stores are not effected, and the retailers, the giant ones, would be given space outside the city itself.
I have the specifics with me, will post them soon.
Also, the paper mentions that the main reason for FDI not being entertained in India is the capital being taken by the multinationals from the local resources, and not foreign capital being pumped in the economy. (Will get hold of the paper. Seems to be interesting!)
I don’t quite agree with this point, since though, there wont be any inflow of funds, but definitely, this would streamline the processes and the functioning of the entire industry altogether. One area where we lack expertise in, is the Supply Chain Management, and that is a competency which can be considered to be a foreign “intellectual” and “process” capital being brought in!
The local retailers would not get effected, since the fixed costs for the local kirana shops are so low, that to break even, there is not much that is desired.
There was an article in Business Standard long back, which mentioned 3 main advantages of Retail in India, and I quote:
(1) Modern technology
(2) Transparency in dealings
(3) Best practices
Couldn’t agree more….
The paper further mentions that allowing foreign capital would boost the GDP of the country, since Retail contributes 10% to the GDP currently, and is the largest private industry in the country.
The 7th KSA Retail Summit 2005 held in Delhi in March’05 reiterated the same points, adding that the spending pattern of the Indian Consumers has changed over the time, going from regular spends to the Lifestyle spends…
Anyway, guess there can be a long discussion on the Retail industry, since I get carried away sometimes. Will take a separate entry for this later.