Footfalls
December 7 - 8, 2005, New Delhi

Address By Smt. Alka Sirohi, Additonal Secretary, Department Of Consumer Affairs

Mr Vivek Bharati, Advisor National Policy and Programmes, FICCI

Mr Pranay Sinha, Member FICCI Retail Committee & Chief Executive Officer, Select Infrastructure Ltd.
Ms Nandini Chopra, Director, KPMG
and all other esteemed guests & delegates.

I am happy to be present here at the FICCI International Conference on opportunities and challenges in Retail Sector in India. I congratulate FICCI for taking this initiative and coming out with an important report in partnership with KPMG.
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Despite its immense potential, retailing had not received adequate recognition in policy formulation and has hitherto been somewhat of a neglected sector.

Retailing is one of the important sectors of an economy, both in terms of contribution to GDP and share in the total employment. Amongst developing countries, this sector accounts for around 10% of GDP of India and 8% of GDP of China. The sector is labour intensive and contributes significantly to employment. As brought out by the other speakers the scope and opportunities for further employment in retailing cannot be over emphasized. At present, organised retailing in India is at its infancy and is largely unorganized and only 3% is in the organised sector.

The dominance of food items in retailing world-wide indicates that major beneficiaries of growth of organised retailing are likely to be agriculture and agro processing industries. Thus retailing shows even more promise in a country like India where agriculture contributes significantly to the economy.

Unorganised retailing is characterised by distorted real estate market, poor infrastructure, inefficient upstream processes, lack of modern technology, inadequate funding and absence of skilled manpower. Therefore, there is a need to promote organised retailing.

Development of organised retailing has to be seen as a major step in achieving the objective of creating an Indian single-market. It is the foundation for free flow of intra and inter-State movement of goods and services. The Sarkaria Commission on inter-State relations had aptly observed that free flow of trade and commerce within and across inter-State borders is an important pre-requisite for ensuring economic unity, stability and prosperity of a country having a two-tier polity. Limitations for the common good are inherent in such freedom, lest it should degenerate into a self-defeating licence.

Effective enforcement of consumer protection laws too necessitates that there is a well organized system of retailing.

The Task Force on Employment Opportunities,2001 which was headed by the Dy Chairman, Planning Commission had emphasized the need for development of organised retailing in terms of improving the quality of employment. The Task Force has emphasized that expansion of modern retailing is extremely important for several reasons and has stated that it will improve the quality of employment provided in this sector and improvement of quality of employment must necessarily be an important objective over the next ten years. Thus the Task Force had visualized retailing as provider of quality employment.

In India, the cost of intermediation is very high. An Indian consumer pays 3 to 4 times the farm-gate prices for fresh produce and basic dry foods, whereas a consumer in countries with well-developed retail formats pays only 1.5 to 2 times the farm-gate prices. On the other side, farmers in India receive only 25% of the consumer price in case of unprocessed fruits and vegetables. Organised retailers, due to economies of scale in their operation, and the ability to source goods directly from manufacturers/producers in bulk would help reduce the final price to the consumer even while providing better prices to producers and farmers. In the process, retailers would reduce the cost of intermediation which would be beneficial to both consumers and the producers.

Retailing is the principal link between the producer and the consumer and plays a major role in price formation. Retailers can play their role effectively only by establishing an efficient and cost-effective supply chain. Supply chain is an integration of business process from the end producers through original suppliers that provides products, services, and information that add value for customers. Retailers are the most important link in the supply chain. A well developed supply chain reduces the wastages and transaction cost thereby reducing the cost of inventories to be maintained by the producers and the traders. A reduction in the cost of inventory management leads to a reduction in the final price to the consumer.

Last but not the least, with the dismantling of Quantitative Restrictions and reduction in import tariff, domestic competitiveness needs to be enhanced. International competitiveness for Indian products is contingent on domestic competitiveness.

However, today despite tremendous potential, there are many constraints impinging on the growth of organised retailing. Some of these are restriction on movement of goods, absence of zoning laws, distorted rental markets, inefficient supply chain and at times antiquated regulations.

I am happy to share with you the fact that Government has paid serious attention to review legislations, especially those that affect trade and commerce. The Essential Commodities Act, 1955 has been reviewed with a view to deleting certain provisions which may not be relevant in present day context. The Standards of Weights and Measures Act, 1976, and the Standards of Weights and Measures (Enforcement) Act, 1985 have been comprehensively modified with a view to updation and bringing in the best international practices. The Standards of Weights and Measures Packaged Commodity Rules, 1977 are similarly being revised in consultation with stakeholders. An Integrated Food Bill has already been introduced, which will reduce duplication.

Retailing has been identified as a thrust area for promotion of textiles, processed foods, agricultural and horticultural produce. Despite its tremendous potential, this sector has not received its due attention. However, there are several constraints that have to be overcome for this opportunity to be tapped. The Conference will no doubt identify these issues and growth areas for the further development of the retail sector in India.

I hope the Conference focuses on developing an appropriate business model for retailing. The model has to conform to the realities of the Indian situation; economic, social and cultural. In view of the fact that retailing in India is poised for a 100% growth in the next three years, these deliberations have come at a very opportune time. We in the Government look forward to industry and other stakeholders' response to the future of retailing in India and the recommendations of the Conference.

Thank you