Even
50 years after independence, policymakers continue to be xenophobic.
The fear of foreign imperialism has not receded and continues
to be a barrier for the entry of foreign enterprises. India
has opened almost the entire manufacturing sector including
most sensitive defense equipment to FDI. The recent allow
of 100% FDI in the real estate is possible because of N K
Singh Panel Committee and such initiatives are needed in the
retail sector. By one or other way, 100% FDI in real estate
will bring up more cheers to retail industry, which are opening
shops/hyper-markets/supermarkets in different smaller/big
cities, as this movement will bring up the cost lower and
increase in the marginal costs. However, the current FDI norms
don't allow global retailers to step in, except for cash-and-carry
formats, franchisee operations and special licenses, because
it wanted to protect the economic sovereignty of the country.
In order to protect the interest of small retailers, government
has not allowed 100% FDI. There is also a lobby of small traders
who are against 100% FDI investment in retail industry, whose
livelihood is small family-run businesses, making the government
averse to the idea of FDI in retailing sector. Can the opponents
of FDI, be able to stall the move for more than two years?
Despite all these efforts, it is praiseworthy that the Government
of India has announced the FDI of 51% in single branded retail
shops (as shown in Exihibit) but is it possible to allow 100%
FDI in the retail sector in future? The question still remains
unanswered in the present scenario.
In
India, the retail sector is the second largest employer after
agriculture. The retailing sector is highly fragmented and
predominantly consists of small independent, owner-managed
shops. There are about 12 million retail outlets in India.
Organized retail in India (refer to Table 1) is estimated
to be worth around Rs. 15,000 cr, merely (less than) 2% of
total Rs. 11,00,000 cr retail sales. But there are indications
that the organized retailing is gaining acceptance in India.
Increasing urbanization, increasing number of working-women,
changing lifestyle, higher purchasing power, increasing literacy
level, increasing media penetration, increasing corporatization,
increasing disposable income, and orientation towards western
culture, have raised aspiration level of Indians. Moreover,
the dearth of timing resulted in demand for large variety
of product at one stop. Sudden downfall in the real estate
businesses, pushed the investors to look at retail activity
as an alternate option. Flourishing consumer financing activity
has further propelled the consumer demand. These factors are
giving new dimensions to the Indian retailing, which is highly
unorganized. |
