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Indian retail sector largely unorganised, but organised stores on rise
Friday, 14 December, 2018, 14 : 00 PM [IST]
Our Bureau, New Delhi
The $700-billion Indian retail market makes up 11 per cent of the country’s gross domestic product (GDP), of which 90 per cent is contributed by either traditional or unorganised retail stores (also known as kirana stores/mom-and-pop stores). However, with increase in per capita income of the Indian population, organized retail stores and e-commerce platforms are gaining momentum to cater to the demands of domestic consumers.

On the one hand, modern retailers are keeping in tandem with the need to satisfy the demands and expectations of consumers by providing convenience of proximity, quality, choice and control, and on the other, they can also be seen as a threat to the existence of traditional (unorganised) retail stores. A balanced approach is needed to create a favourable ecosystem for the existence of both modern as well as traditional retailers, and hence, this calls for a guiding policy that would encourage their co-existence.

According to a Confederation of Indian Industry (CII)-AT Kearney Report, titled National Retail Policy: Now or Forever Late, retail is the third largest contributor to India’s GDP, but is a highly fragmented sector with the presence of distinct unorganised, organised and e-commerce retail formats. This has led to a disintegrated approach of governance for the multiple formats, having a singular purpose, that of selling directly to the consumer.

To address this issue, the CII–AT Kearney report recommends the formation of an overarching National Retail Policy that will introduce much-needed uniformity, standardisation and synchronisation in this sector. It will also guarantee the co-existence of the different retail formats by providing an ecosystem of level playing field for modernising traditional retail in the process.

Suresh Prabhu, minister for commerce and industry and civil aviation, Government of India, said the country had the potential to become a $5-trillion economy where the service and the manufacturing sectors will play a key role.

“Guidelines for export policies, software development for ease of doing business and a logistics portal are being prepared and will soon be brought in public view,” he said at the fifth Confederation of Indian Industry (CII) National Retail Summit.

Shashwat Goenka, chairman, CII National Committee on Retail, and sector head, retail, RP-Sanjiv Goenka Group, said that the Indian retail sector was at the cusp of change.

“It is the third largest in Asia and the fourth largest in the world. Increase in per capita income will be accompanied by not only the emergence of a new middle class with a higher spending capacity, but also a rural cohort of spenders,” he added.

Debashish Mukherjee, partner, AT Kearney Ltd, said that the retail sector has immense potential to facilitate the growth of an envisioned $5-trillion Indian economy.

“One fifth of digital transactions and 14 per cent of start-ups in India belong to the retail sector. Moreover, the sector has the potential to provide a thrust to the MSMEs (micro-, small and medium enterprises) to grow,” he highlighted.

“To drive and regulate its progress the sector needs to be given an industry status and a provision for certification. New retail formats, such as the e-commerce platform, will enable the reach of brands and products to rural India, but will require strategic thinking and innovation,” Mukherjee said.

“This year, India jumped 30 notches to secure a spot among the top 100 of World Bank’s ease of doing business index. However, ease of doing business can be made easier if interventions are carried out in labour laws, clearance in protocol, food regulations and land acquisition in the retail sector,” he added.

Retail is not only going to provide an immense opportunity for employment, innovation, technology growth, but it also has the potential of driving the growth of MSMEs, particularly in the food processing industry by increasing their supply to organised retail companies.

These positive impacts will be felt the most when organised, unorganised and e-commerce formats are subsumed into one single sector dedicated to customer service.
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