As long as the economy and consumption remain robust, organised and unorganised retail will both continue to grow. That said, reforms such as improving the supply chain, enabling ?farmers markets? and implementing GST are essential
With the shrill debate relating to foreign direct investment in the retail sector now (hopefully) behind us, can India?s dilapidated and dysfunctional ?farmer to consumer? and ?manufacturer to consumer? distribution become modernised, more efficient, and then suitably expanded to keep pace with the growing economy and consumption?
The real panacea to India?s multiple challenges, such as providing the farmer, and the small and medium scale (consumer goods) manufacturer the correct price for their products, moderating the consumer price inflation, and creating tens of millions of jobs for India?s burgeoning unskilled workforce, lies in putting aside political ideology and rhetoric, bypassing irrational glamorisation and eulogising of the disorganised retail sector of the country, and instead, focusing on the creation of a dynamic, inclusive vision for a vibrant retail ecosystem. With the right vision, and the right policies, there is no reason to believe that a progressive and healthy retail ecosystem would not support various forms of retailers including the street vendors, independent small grocers and other retailers, medium size modern independent retail outlets, and corporatised retail behemoths.
Let us, therefore, start by looking at the facts relating to retail consumption and retail business in India.
The most important fact is that India?s consumption is growing very steadily, and will continue to grow for the next many decades. Even at a real GDP growth rate of 6% per year for the next 10 years (the government?s projections are closer to 8%), India would consume an additional $340 billion (in 2011 dollars) of retail merchandise. Medium and large retail (including corporatised one) constitutes barely $ 33 billion of the current $470 billion, and may?at best?grow to about $150 billion by 2021, implying that traditional retailers (micro and small, independent retailers and hawkers) will have an additional $223 billion or more of the market (in 2011 prices) to cater to. It is, therefore, of no surprise that as per Technopak?s projections, the number of such traditional retailers will steadily increase in the next 10 years to 21 million or more, and the direct employment in traditional retail will increase from about 22.5 million in 2011 to about 31.5 million by 2021. No estimates have been made for 2031 but it is safe to believe that the number of independent outlets and direct employment therein will increase very substantially?simply because Indian retail is not a ?zero-sum? game as long as the economy continues to grow steadily and the growth in consumption remains robust.
It is extremely important that the larger issue the nation needs to address should come up with suitable reforms in the entire value chain?from the producer to the consumer. In the agriculture sector, it must start with the consolidation of land holdings through the formation of farmers cooperatives, dismantling of APMC, and seamless movement of farm goods across India without imposition of octroi and other levies, which also add to wastage of perishable items.
The next important reform relates to smoothening of the internal-trade within India and the implementation of the GST.
Town planning must take into account that rising consumption implies the rising need for planned, authorised, and affordable space for retail activity. If we really wish to create tens of millions of new micro-entrepreneurs through micro-retail enterprises instead of making mere ?sales boys and girls? as one political party claimed in Parliament recently, it is very important that the planners create tens of millions of new retail shops across India, change mixed-use land development norms to also provide for some mandatory space for retailing, allow retail shops to be operated in residential areas, including the mixed use of residential property itself (subject to suitable norms), and finally, drastically increase the floor space index (FSI) for new retail developments and exclude the space provided for car-parking from the allowed FSI.
In addition, every city in the country should create licensed spaces for ?pop-up? weekly (or twice a week) farmers? retail markets to come up at centrally-located public spaces like stadiums, large paved squares, and even select large paved roads where spaces (and sales racks) should be provided by the local municipal corporations to farmers and other small scale producers of consumer products to directly sell to the consumers in a limited time window of 4-6 hours on an approved day. Such ?farmers? markets exist everywhere in Europe and the US, and can provide much better value both to the producers and the consumers. A market for every 100,000 population would be a very good start, implying 150-200 such markets for the mega cities, and then 10-20 for the million-plus population cities.
States and cities must come up with simplified licensing and permissions procedures, which currently cause more trouble (and more extortion from the armies of corrupt inspectors and regulatory staffs) for the small, independent retail shopkeeper and the footpath vendors.
NSDC (and select other ministries such as the ministry of rural development) should include training of the retail workforce as one of the key skills development sectors since many of the tens of millions of employment-seekers (especially women) in rural areas can be more easily absorbed by the retail sector compared with the more complex skills needed in sectors such as construction and manufacturing.
The banking sector should also be made to consider giving some priority lending to micro-enterprises engaged or wishing to be engaged in the retail trade so that their numbers can steadily grow.
And, finally, labour reforms are the need across all sectors. Retail has its own special needs since consumers would like to shop on all 365 days of the year, and at late hours of the day (once they return from work). A pragmatic labour policy is needed in every state that seeks to safeguard the interests of the workers. But at the same time, states must provide the flexibility to the employers to fine-tune their hiring pattern based on the shopping behaviour of the consumers.
Let the Centre and the state governments now put their heads together on the streamlining, modernisation, and expansion of the Indian retail sector.
The author is chairman of Technopak Advisors Pvt Ltd
arvind.singhal@technopak.com
