Retail needs FDI fizz to sizzle

Foreign investment in retail should be in phases: Biyani.

Kishore Biyani, managing director, Pantaloon Retail, and chairman, CII retail committee, today said it is important that foreign direct investment (FDI) in retail be allowed in phases in India. He stressed that it is more a question of "when and how" rather than "whether".

Outlining the need for allowing foreign equity investment in India, Biyani said allowing FDI would provide a huge boost to the retail sector, which, in turn, would lead to increased employment as well as better value for customers.

He added that a unilateral approach would not work; a collaborative effort between all players in the organised and the unorganised retail sectors is needed to make this happen.

At present, most modern-format retailers are concentrated in the metros, and there are opportunities of exploring the tier-II markets for creating the necessary infrastructure.

And this can be done through FDI. The organised retail sector in India is currently valued at Rs 9,30,000 crore and is growing at a rate of 30 per cent.

Krish Iyer, chief operating officer, Piramyd Retail, said the biggest hindrance to the growth of retail in India today is the lack of capital.

"As the first step, the government can allow private equity investment in the primary markets and in unlisted companies before allowing the foreign players to set up there outlets in India," he said. Currently, private equity investors are allowed to invest only through the secondary markets.

Marut Sen Gupta, regional director, CII, emphasised the need for a regulatory body, on the lines of Trai, to govern the retail sector. He said the committee planned to discuss this proposal with the government as well.

Another proposal is to align the industry with the Ministry of Commerce and Industry in order to address the necessary regulatory issues.

The potential of retail in the country can be gauged by the fact that the organised sector has grown from less than 0.5 per cent in 2000 to 3 per cent in 2005 only through domestic investors. Today, retail is the second largest employment generator in the country after agriculture. An AT Kearney report on emerging markets ranks India at the No. 1 in terms of attractiveness of its retail market.