PwC bearish on retail business

Report asks MNCs to treat India with caution

Even as the country finds itself in the midst of a retail boom, professional services firm PricewaterhouseCoopers (PwC) has asked multinational retail companies to treat India with caution on account of strong regulatory controls and an element of political risk.

PwC has recommended caution for India, Indonesia, Malaysia, the Philippines and Taiwan in a recent report "" Retail in Consumer Growth Dynamics From New Delhi to New Zealand "" covering 14 countries in the Asia-Pacific region.

"We have recommended caution to foreign investors looking at India because of the industry and political risks. Foreign companies cannot invest in retail in India. They can invest in cash and carry, that too only for wholesale trading," PwC Executive Director NV Sivakumar told Business Standard.

Commenting on the retail and consumer issues and opportunities in India, the report said the market was modernising selectively, with a long chain of intermediaries between producers and consumers.

But, the report added that there was a great scope for growth in the Indian retail machete because drastic changes were taking place in the income groups.

"At the moment, 98 per cent of the retail market is in the unorganised sector. There is a huge opportunity in terms of an untapped potential to transform India into a retail powerhouse. But for that a framework enabling foreign direct investment will be required," Sivakumar said.

"We see the gross domestic product growth rate for the entire Asia-Pacific region at 4 per cent for some years. The region offers a great opportunity to multinationals," he added.

Interestingly, India is the only country for which the PwC report has not come out with a clear-cut "winning format".

While there are specific recommendations for all the 13 other countries studied, the report says the Indian market is still under experimentation.

The PwC study also touches upon the high cost of real estate in the country, which may act as a hindrance to setting up retail outlets.

"Real estate costs have been amongst the highest in the world. Of late, however, due to demand-supply interplays, there has been some rationalisation in property prices across the country. It is difficult to find a suitable property in central and downtown locations for a large format retail store, primarily due to fragmented private holdings and infrequent auctioning of government-owned large vacant lands," it said.

Retail risks

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• Foreign companies can invest only in cash and carry, that too only for wholesale trading
• Retail chains may become targets of political violence
• There is a long chain of intermediaries between producers and consumers
• Real estate costs have been amongst the highest in the world. Also, it is difficult to find a suitable property in central and downtown locations