Interviews
Demand for FDI in retail sector voiced
21 Nov '05
2 min read
Urvi Piramal, Executive Vice-Chairperson, Piramal Holdings attends a conference organized by the ladies' wing of the Indian Merchant's Chamber (IMC). She stated that the organized retail sector, which is growing at a rate of 30 per cent with a capital-to-turnover ratio of 1:4, is likely to touch the Rs 1,10,000-crore mark by 10.
Among the many hot topics discussed on the 'booming' retail sector in India, the most debated one is whether or not FDI be allowed in the sector. Given that up to 24 per cent is permitted in the secondary market, does it make sense to allow the same or more in the primary market?
Ms Piramal indicted that a sum of Rs 20,000-25,000 crore is required for the sector to grow, out of which only Rs 4,000-5,000 crore is provided by domestic retailers. For the balance Rs 15,000-20,000 crore to come in, FDI is necessary. She added that this could be made possible by allowing up to 24 per cent FDI in the primary market and by allowing FDI in the form of foreign retailers.
She also stated that there is no harm if this is done judiciously, for example, only in certain cities or one outlet in each city. The move will help retail grow in volumes, bettering the supply chain, developing infrastructure and providing employment.
Some other challenges faced by the organised retail sector include lack of funds, lack of recognition as an industry, complex taxation structures, infrastructural impediments and limited availability ofhuman resources. Owing to VAT, the vendor-to-shelf procedure will speed up and the cost of goods for consumers will come down. One of the plus points enumerated by her pointed towards India's demography.
She pointed out that though 20-25per cent of the population is in the 20-59 year bracket where disposable income is higher and more than 50per cent is below 25 years of age, the highest spends are on groceries at 47per cent, followed by 9per cent on eating out.
Among the many hot topics discussed on the 'booming' retail sector in India, the most debated one is whether or not FDI be allowed in the sector. Given that up to 24 per cent is permitted in the secondary market, does it make sense to allow the same or more in the primary market?
Ms Piramal indicted that a sum of Rs 20,000-25,000 crore is required for the sector to grow, out of which only Rs 4,000-5,000 crore is provided by domestic retailers. For the balance Rs 15,000-20,000 crore to come in, FDI is necessary. She added that this could be made possible by allowing up to 24 per cent FDI in the primary market and by allowing FDI in the form of foreign retailers.
She also stated that there is no harm if this is done judiciously, for example, only in certain cities or one outlet in each city. The move will help retail grow in volumes, bettering the supply chain, developing infrastructure and providing employment.
Some other challenges faced by the organised retail sector include lack of funds, lack of recognition as an industry, complex taxation structures, infrastructural impediments and limited availability ofhuman resources. Owing to VAT, the vendor-to-shelf procedure will speed up and the cost of goods for consumers will come down. One of the plus points enumerated by her pointed towards India's demography.
She pointed out that though 20-25per cent of the population is in the 20-59 year bracket where disposable income is higher and more than 50per cent is below 25 years of age, the highest spends are on groceries at 47per cent, followed by 9per cent on eating out.
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