ASSOCHAM calls for granting 'industry status' for retail sector
08 Jun 2009
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has put forward a proposal to grant industry status to the retail sector in India, the fifth largest global retail market.
According to the chamber, this could help boost the share of the organised retail sector from the current 3 per cent to 20-22 per cent, and the share of organised retail could increase significantly as over $30 billion worth of investments were in the offing from domestic and foreign players in the next five to seven years. The sector is expected to reach $427 billion by the year 2010, as per an earlier study conducted by the chamber.
Chamber president Sajjan Jindal submitted a note to the ministries of commerce and industry and consumer affairs, calling for reform of the Indian retail sector through this status. The ASSOCHAM proposal will help invite greater focus on retail development, fiscal incentives, availability of organised finance and provision of insurance norms. A case in point is the hotel industry which showed improved investment after obtaining industry status, the chamber noted.
According to a press release from ASSOCHAM, ''(The) fundamental issue is to bring the retail sector at par with other countries. Simultaneously, India needs to study the mechanism adopted by other countries as to how they have grown over the years in leaps and bounds and what sort of fiscal and regulatory mechanism they have adopted in their respective countries has been stressed.''
At present, every retail outlet has to seek multiple licenses and permits in order to commence operations. These range from trading, product specific issues, and pollution clearance. Multi-chain players require these individually for each operating unit, the chamber observed.
In order to facilitate growth in retail, the chamber identified how the retail sector can benefit from a comprehensive legislation that keeps the current developments taking place in the retail sector in mind so as to require minimum regulatory changes in future. It would include such elements as asking for clearance only once from multi-outlet retail chains, and a timeframe for approval.
As part of the broader proposal, commodities exchanges could also improve their infrastructure in order to create a world class market. According to the chamber, the exchanges should exercise more powers, and abstain from banning items in the futures market. The government too could play a role by discouraging speculative transactions, and making stricter penalties for hoarders and black marketers. The chamber further called for removing archaic laws and regulations (Essential Commodities Act, APMC Act, licensing restrictions) and other stumbling blocks such as market fragmentation in order to develop the commodities futures market.
With the entry of big companies such as Reliance, Tatas and the Aditya Birla Group, the Indian retail sector is seen as an attractive destination, inviting the attention of international majors like Wal-Mart and Tesco. AT Kearney rated it the most attractive retail destination for three consecutive years from 2006 to 2008 in the annual Global Retail Development Index (GRDI).
However, the economic slow down has generated caution among overseas investors, and a focus on essential goods and services in the domestic market. While major operators like the Futures group and Birla are reportedly re-consolidating their outlets, the Subhiksha chain has been a casualty, having to shut its stores.
According to Indian Brand Equity Foundation, retail trade accounts for 12 per cent of the country's GDP and is expected to approach 22 per cent by 2010. A report from McKinsey, 'The rise of Indian Consumer Market', foresees the Indian consumer market growing by four times by the year 2025.
