Don't Open Up Retail Sector in Single Stroke: ASSOCHAM, Retail Sector in Single Stroke, Retailing Should Not Be Offered to MNCs in a Single Stroke, Retailing Sector Growth At Steady Pace in India

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SME Times News Bureau | 26 May, 2010
The Associated Chambers of Commerce and Industry (ASSOCHAM) Tuesday urged that 100 percent foreign equity in multi-brand retailing should not be offered to MNCs "in a single stroke" as is being proposed by Ministry of Commerce and Industry.

Retailing in India is just growing at a steady pace which so far gone to an extent of 12 percent of entire retailing and until it picks up a scale of 50 percent, 100 percent equity in single brand retail be avoided under current FDI's regime, ASSOCHAM viewed in a press release.

"Consequences for 100 percent opening up of multi brand retail sector for MNC ought to be weighed in a caliberated manner and a cooling off period of minimum 5 years be provided before India is able to create a space for established retailers overseas to open up their shops for selling off items and products under the Sun without any restriction," said ASSOCHAM President Swati Piramal,

The industry body also urged the government to first consult domestic industry before finalizing and announcing entry of overseas mega malls in the country. ‘"Consultation with the domestic players is needed before any policy announcement is made’", the chamber stated.

Many of the retail firms in the domestic sector favoured export commitments on the FDI investment; by as much as 20 times. They also wanted FDI investment in backend infrastructure like cold storage so that the supply chain becomes smooth.

According to industry players, it is difficult to compete with the giant foreign players run a huge number of stores worldwide giving them the economies of scale and managing their global supply chain.

Besides, the domestic players suffer from the lack of infrastructure - the biggest bottleneck being the prohibitive prices of large retail spaces in the upmarket or central locations in the large Indian cities.

This is primarily because the private holdings are fragmented and the impact of the Urban Land Ceiling Act. The pro-tenancy Rent Control Acts have distorted the property markets in the cities leading to exceptionally high prices, ASSOCHAM viewed.

It added that a plethora of bureaucratic hurdles and high capital cost also place the domestic retailing firms at a disadvantage against the international players who have over the years placed efficient chains in order at a low capital cost.

It is estimated that for opening a single store in the country as many as 13 licences are required.

"Absence of single window clearance, coupled with other issues like lack of property infrastructure, work as a major impediment to the growth of the retailing", the industry body added.

The industry body viewed that the retailing has a great future in India since its total size of over 200 billion dollar comes close to being one-third of the size of the total economy. Although the share of the organized sector in the retail trade is only three percent but it is expected to reach 10 percent by 2010, throwing big opportunities for the prospective new players, it said.