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CII sees retail industry at $300 billion by 2010

Our Correspondent

The Confederation of Indian Industry expects the retail industry in India to have a market size of $300 billion by 2010, if it continues to grow as fast as the GDP -- say about 6-7% annually.

Taking into account a situation when the supply chain constraints have been eased, real estate markets made more organised and tax structure rationalised, retailing in India has the potential to grow even as large as $450-500 billion by 2010, according to a CII-McKinsey report on 'Retailing in India'.

In keeping with the outlined potential, the CII organised a CEOs' policy forum on retailing to delve into the emerging trends and opportunities in the sector as part of its efforts at national level.

CII said that, currently, various estimates put the total market size, across sectors, at about $180 billion, with grocery being the largest chunk at around 50 per cent or $90 billion.

Retail businesses and growth of organised retailing, especially in the grocery and apparel sectors, could change the face of India's retail sector, according to CII.

However, despite the size and the phenomenal potential that exists, it is the least evolved of the Indian industry sectors.

This underlines the fact, that India was on the threshold of witnessing emergence of very large retail businesses, stated CII.

In order to bring about the required growth and development in Indian retailing industry, CII believes that it should be given an industry status. The policy ambience, the confederation noted, is currently unfavourable to big strides in organised retailing.

Given the huge investments that need to be made, government should look into allowing 100 per cent foreign direct investment in the sector.

The CII pointed out that the retail industry has been consistently pressing that they be linked to the tourism industry, the way Singapore has. Such a measure would allow them to offer innovative vistas such as shopping festivals as part of general tourist attractions.

Commenting on the regulatory environment, CII stated that the absence of VAT, complex sales tax rates, octroi and excise structures were major deterrents. While the recent Union budget has set the stage to move towards simpler tax structures, state-level initiatives needed to be strengthened.

Other impediments to growth of organised retail in India, according to CII, included high intermediation, high supply chain costs, inadequate supply chain infrastructure; inflexible labour laws especially relating to part - time staff; multiple licensing requirements - statewise; inadequate investment in education/training to build retail talent - managerial and skilled retail staff, etc. Real Estate in India was also not geared to facilitate organised retailing, stated CII.

Outlining the retail industry trends, CII highlighted the emergence of local and national players; for example, Foodworld, Shoppers' Stop, Pantaloon, etc at national level and Kids Kemp, Akbarally's at local level.

As retailers develop into national brands and build their own clout, another important trend the Indian retail sector is gradually witnessing is the power-shift to retailers.

Elaborating on the significance that the retail industry held globally, CII pointed out that it was the largest private industry in the world with total sales of $6.6 trillion, ahead of financial services ($5.1 trillion) and engineering ($3.2 trillion).

The industry accounts for 8 per cent of the GDP in western economies and has generated 18 per cent shareholder returns between 1994 and 1999 as compared to banks (9 per cent) and insurance (15.2 per cent), added CII.

CII has constituted a retailing committee at the national level to look into the issues before the retailing industry in India and work in partnership with the government for its growth.

The CEOs forum was well attended by major retailers from all over India: Shoppers' Stop, RPG Retail group (Musicworld, Foodworld), Trent, Titan, Tanishq, ITC, Pantaloon, Zodiac, Lacoste, Mother Dairy Fruits & Vegetables, Kendriya Bhandar, McDonald's, Domino's, Ansals, Rahejas, Ebony, Essel E-city Entertainment amongst others.

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