Com­pe­ti­tion from un­or­gan­ised sec­tor

Cargo Talk - - Guest Column -

Al­though In­dia has a large con­sumer base, In­dian con­sumers are price sen­si­tive and there is con­sid­er­able het­ero­gene­ity in con­sumers’ tastes, prod­uct choices and shop­ping be­hav­iour. They are ex­per­i­ment­ing across brands and brand loy­alty is low. More­over, the un­or­gan­ised sec­tor is strong and of­fer sig­nif­i­cant com­pe­ti­tion to or­gan­ised play­ers, es­pe­cially in sec­tors such as food and gro­cery. and it has led to merg­ers and ac­qui­si­tion. re­tail is a dif­fi­cult busi­ness with long ges­ta­tion lags. Its suc­cess de­pends on a num­ber of fac­tors in­clud­ing ef­fec­tive lo­gis­tics net­work, avail­abil­ity of re­tail space, and sup­port­ing reg­u­la­tion. A num­ber of reg­u­la­tions which can not only help this sec­tor but the en­tire lo­gis­tics net­work are pend­ing. Im­ple­men­ta­tion of GST in In­dia is a much big­ger re­form for re­tail mod­erni­sa­tion than al­low­ing FDI in re­tail. The gov­ern­ment should make nec­es­sary changes in the FEMA Act so that profit repa­tri­a­tion re­lated is­sues of for­eign re­tail­ers are ad­dressed. Un­less this is done, for­eign re­tail­ers would not in­vest in In­dia. FDI in re­tail should be delinked from do­mes­tic reg­u­la­tions. While it is im­por­tant to reg­u­late re­tail, reg­u­la­tions should be trans­par­ent and non-dis­crim­i­na­tory. Also, reg­u­la­tions should sup­port scale ex­pan­sion, growth of man­u­fac­tur­ing and link­ages of In­dian man­u­fac­tur­ers into global value chains of re­tail­ers. Con­di­tions re­strict­ing scale ex­pan­sion of man­u­fac­tur­ers such as re­quire­ments to source from SMEs will not en­able In­dian man­u­fac­tur­ers to grow and be­come part of global value chain of re­tail­ers. The role of the gov­ern­ment is to pro­vide the sup­port­ing in­fra­struc­ture and reg­u­la­tory trans­parency. If that is done, in­dus­try will come for­ward and in­vest in re­tail.

The growth of or­gan­ised re­tail will lead to qual­ity em­ploy­ment cre­ation, en­hance tax rev­enue earn­ings of the gov­ern­ment, lead to in­vest­ment in the sup­ply chain and sup­port the growth of lo­cal man­u­fac­tur­ing and brand build­ing, among oth­ers. It is closely in­ter­linked with the growth of other sec­tors such as trans­port, tourism and con­struc­tions. Coun­tries such as UAE (Dubai), Hong Kong, Sin­ga­pore and Thai­land earn a sig­nif­i­cant amount of for­eign ex­change through re­tail. In­di­ans spend a lot in shop­ping abroad and In­dia can it­self be­come an at­trac­tive tourism and re­tail desti­na­tion. At present, the num­ber of tourists re­ceived by In­dia is much lower than East Asian coun­tries and Dubai. It is also im­por­tant to note that con­sumerism and growth of re­tail have in the past en­abled economies to come out of slow­down and In­dia can re­turn to the fast track growth path through a holis­tic ap­proach to de­vel­op­ment of mod­ern re­tail which takes into ac­count its in­ter­link­ages with other sec­tors of the econ­omy.

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