Govt mulls 26% FDI in multiple retail products

29 Sep '08

4 min read

The government will take a decision for allowing Foreign Direct Investments (FDI's) in multi-product retail at appropriate time as also set up Single Window System for giving clearances to retail sector as presently the issue is being debated and discussed within various departments of the government.

Stating this at ASSOCHAM organized International Retail Summit on Reinventing Retail India here, Additional Secretary, Deptt, of Consumer Affairs, Mr. Rakesh Kacker also disclosed that the government has yet to consider the demand of industry for establishing regulatory authority to facilitate retailing in India.

Mr. Kacker said that the issue of FDI in retail sector is still pending at various levels and the government has not yet decided whether FDI's should be allowed beyond 26% in multiple retail product.

On the issue of regulatory mechanism to facilitate retail trade in India, Mr. Kacker added that the issue is being examined at various angles whether the proposed mechanism could be set up within the framework of existing statute or a new legislation is required to facilitate setting up of regulatory authority for retail sector.

The Additional Secretary was non committal on this issue and evaded any direct answer on this, excepting saying that the government would take appropriate decisions at right time.

He emphasized the need for a single window system to permit retailers to set up their shops as currently as many as 30 clearances are required to set up retail trade.

Mr. Kacker releasing the Study jointly brought out by ASSOCHAM and KPMG said that single window system was necessary and hoped that the proposed single window system would not create another pocket for retail facilitation.

Among others who emphasized the need for single window clearances in retail sector include Mr. Amit Dev, Chairman, ASSOCHAM Retail Committee, Mr. Navin M Raheja, Managing Director, Raheja Developers and Mr. D S Rawat, Secretary General ASSOCHAM.

The ASSOCHAM study projects that 315 hypermarkets will come up in most of tier I and tier II cities by 2011 and sell off all articles from automobiles to needles under one roof. According to it, even in the year 2008 212 towns have sufficient market potential for hypermarkets for break even existence. That is a different matter that this potential has yet to be realized.

Given the expected growth in number of households as well as in income and consumption per household in urban India, particularly in its leading 25 towns, 5 or more hypermarkets per city are feasible even in 2008.

Going forward, in 2011, this number is anticipated to grow to 52 as a few tier III towns also gain the market potential to support 5 or more hypermarkets.

Tier IV towns that constitute the bottom of the pyramid, considered for this analysis emerge as unviable for modern retail formats not only in 2008 but also in 2011.

TheStudy however, pointed out that after 2011, the organized retail would grow by 15% as enough competition will have emerged by then and the Chamber expects that in most of 400 good towns in India, the number of hypermarkets would have risen to 475.

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