Economists see organised retail share below 30%

Economists at the Centre for Economic and Social Studies (CESS) here expect that the share of organised retail in India will not exceed 30 per cent of the total retail trade in the country even after allowing 51 per cent foreign direct investment in (FDI) in multi-brand retail.

"Studies based on international experience reveal that the organised retail trade, at best, can capture 25-30 per cent  share of the total retail trade," according to R Radhakrishna, president of Indian Society of Agricultural Marketing (ISAM) and honorary professor of CESS.

CESS director Manoj Panda and faculty members, N Chandrasekhar Rao and Venkat Reddy, besides Kiranmayi of the Institute of Public Enterprise (IPE) concurred with the views of Radhakrishna.

On the other hand, S Galab, also of CESS, pointed out that FDI in retail exceeded 30 per cent of the market share in countries like Thailand and Malaysia.

However, the other economists said this would not be the case in the country. Indian consumer's general preference for products would confine the market share of organised retail in food and groceries to under 20 per cent.

Worldwide, 85 per cent of the sales of supermarkets is in processed and semi-processed products . Only 15

per cent of the sales is in fresh produce like fruits and vegetables, they pointed out.

At present, organised retail trade in the country accounts for just 4 per cent of the total trade. In the case of food sector and groceries, it was stated to be less than 1 per cent. This is despite the estimated 8 per cent combined annual growth rate of organised retail in the country in the past three years.

Close on the heels of the Union government allowing 51 per cent FDI in multi-brand retail, ISAM  in association with CESS and IPE is organising an international seminar on 'Organised Retailing vis-a-vis Farm Economy of India'. The two-day seminar would be inaugurated by  C Rangarajan, Chairman of the Prime Minister's Economic Advisory Council, on Friday.

Radhakrishna, who recently stepped down as chairman of the Indian Statistical Commission, said the entry of supermarkets led to a structural transformation in the agri-food system. This transformation impacted both upstream on the wholesalers, processors and farmers and downstream on consumers and traditional retailers.

He said the seminar would debate various aspects of the organised retail, specifically its impact on transaction costs, technologies used, risks faced, net incomes, productivity, quality of produce and access to credit.