Footfalls - 2002 : Global Convention on Corporate Strategies for The Business of Retailing
November 15-16, 2002, New Delhi

Welcome Address by Shri R S Lodha, President, FICCI 

• Dr Pronab Sen, Adviser – Perspective Planning, Planning Commission,  
• Mr Richard Kovac, Minister Commercial & Senior Trade Commissioner, High Commission of Australia;
• Mr Alan Rosling, OBE, Chairman, Jardine Matheson Group;
• Ms Sue J F Evans, Principal – Retail, A T Kearney Ltd,
• Ladies & Gentlemen,

We are indeed privileged to have Dr Pronab Sen with us today. We are most grateful to you, Sir, for kindly accepting our invitation to join us at this Conference.

We are also thankful to Mr Richard Kovac for joining us as a representative of the Guest Country for the convention. We are indeed grateful to the U.K. High Commssion for extending their support to the programme. We are especially thankful to all the participants who have come from far and wide to attend this conference.

Retailing is the largest private business sector in the world with an estimated turnover of US$ 6.6 trillion.
 
Out of the Fortune 500 companies, 10 per cent are retailers. 
In India, the size of the retail business is comparatively smaller, just about over 10% of the Gross Domestic Product. 

Retail is the largest employment provider. For instance, in USA, 17 per cent of total employment comes from this sector. 

In contrast, the same in India is just about 6 per cent.  And this, despite India having the distinction of the largest number of retail outlets. In our country, the rural and semi urban markets are saturated with small independent shops owned and controlled by independent family members.  

Recently, we, in FICCI, did a survey among all our affiliated regional chambers on the importance of the retail sector in the country. An overwhelming 82 per cent of the respondents confirmed that retailing had been the single most important activity in their area of operation. But, the unorganised nature of such outlets has led to low value addition since these stores are incapable of cutting out the long chain of middlemen. 

Unfortunately, the organised retailing is still in its infancy in India. Such stores account for a paltry 2 per cent of retail sales.  China, on the other hand, has seen a faster rate of growth of organised retailing, though it started reforming this sector only about ten years back, since 1992. The estimated share of organised retailing in China is now 20 per cent despite the presence of small shops and fragmented distribution system.  

China started cautiously on the path of liberalization in 1992 and by 1999, it had the necessary regulatory framework that attracted at least a dozen of the top 50 retailers in the world. In fact, Carrefour of France now ranks third and Wal-Mart fifth largest retailer in China. Shanghai Hualian Group with 1200 retail outlets and a turnover of US$ 1.3 billion is the number one domestic retailer in China. 

From the Chinese experience, we observe that there have been three critical advantages due to opening up of the retail sector:

1) Made in China goods have got a direct outlet for export through the purchasing system of such multinational chains. According to State Economic and Trade Commission (SETC), the total purchase in China of global chain groups was US$ 30 billion in 2001. This was 12 per cent of gross Chinese exports during the year. Carrefour, for instance, has set up purchase outlets in eleven Chinese cities and buys 30 to 40 per cent of its gross purchase around the world from China. 

2) The other advantage from the presence of large foreign buyers in China has been low price due to huge volume. The domestic consumer benefited as a result. At the same time, Chinese exports remained price competitive in the global market. 

3) The inflow of foreign direct investment in the retail sector has led to improved infrastructure. As a result, there has been a tremendous growth of construction, parking facilities, good quality shopping malls, roads and other infrastructure facilities.

The experience of China illustrates why India, too, should follow the liberalization route in the retail sector. It is heartening to note that organised retailing has taken its  root in our country also, though not at the same scale as in China. Our survey has shown that organised retail chains like Pantaloon, Food World and Shoppers Stop have good presence across the country. In fact, 73 per cent of our responding chambers felt that with the spread of organised retailing, economic growth in their area will be boosted. 

As of now, Indian retail lacks modernisation and there are multiple causes for this low level of modernisation of Indian retail.

Also there is hardly any integrated effort by the Government to address these issues. It is important that India wakes up to this reality and supports development of this sector. Retailers and government need to act immediately and expedite efforts for orderly growth of this area.

I would like to touch upon some of the key issues for consideration by the government:

• The government need to ease operational constraints and recognise retail as an industry. A number of constraints which impede the development of retail markets today are a result of the low importance given to the sector.

• A constrained real estate market often acts as a critical barrier to the rapid expansion of retailing. In India, the land markets are extremely disorganised and distorted by regulations, leading to a shortage of quality retail space. Some of the issues that distort the real estate market include – restrictive zoning legislations, non availability of government owned land, fragmented ownership of private property and lack of clear titles and transparency.

• The existing tax structure actually imposes multiple levies in various forms on retail chains operating in different locations.  There is an urgent need to put in place a simplified tax system.

• The multiple labour laws applicable to store workers tend to constrain the operation of modern retailers. Such laws restrict working hours and create inflexibility which affects growth of retail business. I strongly feel that there should be special labour laws for operation of retail chains. 

• Studies show that in order to leverage investment for developing highly skilled and flexible business systems, retailers prefer to enter into  joint ventures with foreign players. For instance, in Thailand 70 per cent retailers have foreign equity. Similar picture is seen in China, Brazil and Poland. Like other important sectors of the economy, this area also needs to be considered for infusion of FDI for its healthy growth.

• Currently, retailers need to obtain multiple clearances from different agencies before commencing operations. This cumbersome process has to be  repeated for each new outlet. We strongly feel that there should be a single window clearance for opening retail outlets.

• Since there is no single Government Agency for retail facilitation, FICCI would urge upon the Government to consider creating a separate cell to coordinate all retail development action. FICCI would be delighted to assist the Government in this initiative.

Thank you.