Entire sector may turn NPA, will need ventilator support: Retail body CEO

If the retail sector is supported with a package, it would have a positive ripple effect on the manufacturing sector and the supply chain, said RAI CEO Rajagopalan

As no economic package has been announced so far and restrictions for shops and retail stores still exist in most states across the country, Retailers Association of India's (RAI) CEO Kumar Rajagopalan feels that the condition of the retail sector is becoming untenable now and, will soon require "ventilator support".

Speaking to IANS, Rajagopalan said that in the absence of government support and further regulatory relief from the Reserve Bank of India (RBI) there will be a large number of non-performing assets (NPA) in the retail sector, which may go up to Rs 75,000 crore.

"If the banking sector and the government does not come and help now, the retail sector will become an NPA, then they will have to handle a very different problem, which would be a much larger problem. NPAs could be as much as Rs 75,000 crore from retail," he said.

He said that if the retail sector is supported with a package, it would have a positive ripple effect on the manufacturing sector and the supply chain.

"I think slowly the retail industry is going to have the need for a ventilator. If retail is safe then obviously the supply chain of manufacturers, all of them gets saved, because the money comes from retail to the manufacturers. It's one industry that has the maximum amount of multiplier effect," Rajagopalan said.

He said that in case a package is not provided 20-25 per cent of the retail sector will be out of business, which would include a large number of medium scale players.

Among other measures and reliefs, the industry body had urged the government to provide wage subsidy of up to 50 per cent on salaries up to Rs 25,000 and moratorium of 6 to 9 months for repayment of loans. It has also asked for 25 per cent additional working capital credit line to pay salaries and wages, along with reduction in GST for the retail sector.

Rajagopalan observed that retail is not a high margin business and retailers don't sit on large cash reserves like other industries.

On the sales volume for the organised retail sector, he said: "Retail will be achieving about 60 per cent of what it was suppose to achieve this (fiscal) year, a 40 per cent dip." He was of the view that even when the sector opens up it will not be operational in a full-fledged manner.

"Slowly customers will build capability to come back and there will be number of times when the government will have to make interventions," the RAI CEO said.

Regarding relaxations for shops and retail stores during the lockdown period, he said that only a few states have so far come up with clear guidelines regarding opening of stores after the Ministry of Home Affairs latest order on resumption of neighbourhood shops.

He told IANS that clarity is required regarding the guidelines.

"So currently we are waiting for some slightly less complicated notice to come. Anyway its next Monday (May 4, when the lockdown is scheduled to be lifted), I think the whole point has to be to try and see how relaxations happen from Monday rather than try to hurry it up and create confusion."

The ongoing nationwide lockdown is scheduled to end on May 3, if not extended.