The Hindu Business Line : Need for clear policy on retail sector

THERE is a need for a clear policy for the retail sector which is driven by the larger interest of the nation rather than small sub-groups or political constituencies. The whole FDI issue is overblown and the debate needs to shift from it to issues such as supply chain management and employment creation through an efficient value chain.

Emphasising the point that the whole FDI debate has masked the real issues, retail consultant and Managing Director of KSA Technopak India Pvt Ltd, Mr Arvind Singhal, said that the Government had to urgently work on laws governing retail trade instead.

Addressing a packed hall at the Madras Management Association's golden jubilee convention here today, Mr Singhal said that the Government needed to put in place laws on zoning, operating hours, retail sector worker rights, uniform taxation, closures and parking laws rather than focus on retail FDI. He favoured the Government opening up retail FDI with reciprocal arrangements for exports and other safeguards in place. "Even opening up retail to FDI, will not make it easy for foreign retailers to set up a supply chain here," he said.

Mr Arvind Singhal, Chairman, KSA Technopak.

Reeling out statistics, Mr Singhal said that organised retail was good for the consumer. According to an analysis done by his company, in five years' time, overall consumer goods prices would come down by 15 per cent because of the efficiencies created by modern retail.

Mr Singhal said that huge investments to the tune of Rs 40,000-50,000 crore were expected in the retail sector and supply chain in the next five years. By then, the size of the organised retail is expected to touch Rs 2 lakh crore and at least 2.5 million additional jobs are likely to be created. He dwelt at length on some popular perceptions about retail and the reality, significant among them the opinion that FDI would mean Wal-Martisation of the country. This would mean predatory pricing and dumping of cheap imported goods which could sound the death knell for the local store.

However, the reality is that even Wal-Mart has only 6 per cent of the US retail market and most global retailers with large formats have not succeeded in global forays. And, the local store faced as much threat from Indian-owned retailers such as Big Bazaar, Spencer's and Trent, said Mr Singhal.

Mr Raghu Pillai, MD & CEO, Home Solutions Retail Ltd.

Earlier, Mr Raghu Pillai, Managing Director & Chief Executive Officer, Home Solutions (Retail) India Ltd, speaking on the MMA convention theme of `This India Knows No Boundaries,' said that it was actually the poor who pay a "poverty penalty" for consumer goods rather than affluent consumers. This was because of inadequate access, local monopolies, poor distributions and strong traditional intermediaries. Quoting management guru C.K. Prahalad, Mr Pillai said that it was time for a paradigm shift in mindset to view the poor as a consuming class. The SEC C, D & E comprise 33 million urban households while rural households would be five times more. This, he said, would be a significant market worth Rs 2.5 lakh crore.

A strong organised retail industry could enable a change in the purchasing pattern to eliminate the poverty penalty by making goods and services cheaper for that consuming class. This, Mr Pillai said, could be a "thermal" growth engine, not only for retail as an industry but for the country as a whole.