The government should adopt pragmatic approach to attract foreign direct investment (FDI) in multi-brand retail trade, the Confederation of Indian Industry (CII) has said in a statement.
Accordingt to the statement, organized retail in India has been growing at a healthy CAGR of nearly 25 percent over the last five years, but still forms less than 10 percent of sales across most consumer categories in the country.
In categories like food and grocery, organized retail contributes less than three percent of sales.
This gap in sales through organized retail provides the growth opportunity.
As per a BCG study, the consumption set to more than triple in size over the next decade, and sales through organized retail could reach nearly 20 percent by 2020.
The study also found that FDI in Multi brand Retail will give a boost to the organised retail sector, which positively impacts several stakeholders, including producers, workers, employees and consumers and the government, and hence, the overall economy. Under a favorable regulatory and economic environment, opening up of FDI can increase organized retail market size to USD 260 billion by 2020.
FDI in multi brand retail will give a boost to the organised retail sector, which positively impacts several stakeholders including - producers, workers and consumers and hence, the overall economy.
This would result in an aggregate increase in income of USD 35-45 billion per year for all producers combined; 3-4 million direct jobs and around 4-6 million indirect jobs (e.g. in the logistics sector, distribution and repackaging centers, housekeeping in the stores)
A CII delegation led by Bharat Wakhlu, Resident Director, Tata Group and other members, including Abheek Singhi, Partner and Director, The Boston Consulting Group, Mukesh Mathur, Executive Director and Business Head, Oracle, C K Venkataraman CEO-Jewellery Division, Titan Industries, Pankaj Jaju, Executive Director, Axis Capital Ltd and C N Sinha from CII met Commerce and Industry Minister Anand Sharma and urged him to differentiate between multi brand retail trade (MBRT) in food and non-food categories separately.
The CII asked the government to consider changes in three key areas:
Strategic investment -Suggested that FII / PE investments be treated differently than strategic investments
Sourcing and back end investment - On the sourcing stipulations from SME, CII suggested that the SME sourcing be made preferable rather than compulsory and also suggested that sourcing from farm sector be considered as part of the 30%. On the backend investment, CII suggested that the investments made by retailers in backend directly or indirectly be consolidated.
State locations -CII emphasized a need to ensure consistency between the central and state government to facilitate investment.
The CII also urged the government to clarify that while the market opportunity has been positioned to international investors as being national, the rollout is at a regional or even state level. This disconnect is causing industry and investors to adopt a "wait-and-watch" approach.
The CII has consistently maintained that it strongly supports the introduction of FDI in multi-brand retail trading recognizing that it would benefit the consumers, producers (farmers and small and medium enterprises ("SMEs") and generate significant employment.
