Retail sector bound to take big leap

The Indian retail sector is bound to take a big leap forward. This was the unanimous opinion of the speakers at a seminar on 'Organised Retail: Opportunities in Andhra Pradesh', held here on Tuesday by the Confederation of Indian Industry (CII).

The factors responsible for the development of the retail sector are stated to be liberalisation of the Indian economy, fast growing middle-class, changing aspirations and lifestyle, a younger earning population, rising disposable income and easy availability of finance.

Referring to the estimates of the National Council of Applied Economic Research (NCAER), they pointed out that Indian middle-class, pegged at 57 million households in 2001-02, was expected to rise to 153 million by 2009-10. This apart, 81 per cent of India's population was currently below 45 years of age.

According to Shishir Baijal, managing director and chief executive officer of PFH Investment Advisory Company, India was witnessing the next evolutionary stage in retail and the total market size was expected to increase to around Rs 1,09,500 crore by 2010 from the current level of Rs 35,000 crore.

Delivering the keynote address, Baijal pointed out that the number of malls in the country increased from just three in 1997 to 90 today. By 2008, as many as 460 malls would be operational in the country. PFH alone would be developing close to 7 million square feet of retail space within the country.

Managing director of Trammell Crow Meghraj, Anuj Puri, said that India was emerging as the number one destination for foreign direct investment (FDI) in the retail segment. Retailers like Wal-Mart, GAP, Tesco, JC Penny, H&M and Karstadt-Quelle were stepping up their sourcing requirements from India and moving from third-party buying offices to establishing their wholly-owned and wholly-managed sourcing and buying offices.

He said that the buying volumes of many of these multinational companies were already in the range of Rs 1,000 crore to Rs 2,000 crore per year and they were reportedly planning to step up the volumes to Rs 10,000-15,000 crore.

As per the existing policy, FDI was not allowed in retailing. However, foreign retailers could operate in the country through wholesale operations (Metro Cash and Carry), local manufacturing (Benetton), sourcing from small sector, non-resident Indian and overseas corporate bodies (Lifestyle) and franchising (Tommy Hilfiger).

Puri said the government was likely to open up FDI in retail sector, particularly in the food and grocery segment. The retailers, on the other hand, want the government to allow FDI first in the high value lifestyle brands. "There will be some clarity in this regard in the next 12 months," he said.

CII Andhra Pradesh chairman M K Patodia said that the organised retail segment, which was a mere 2 per cent of total retail market at present, was expected to grow at 30 per cent annually in the next five years to touch Rs 45,000 crore.

Coming to Andhra Pradesh, Baijal said that Hyderabad had the presence of all popular branded stores. Pantaloon itself had launched two Big Bazaars and was looking at launching many more food bazaars in the state. He, however, said retailers had so far made only a small dent in places like Vijayawada, Visakhapatnam and Tirupati, which offer huge potential for retail activity.