Retail firms want industry status

NEW DELHI: While the UPA government is open to allowing foreign direct investment (FDI) in the retail sector, there's a debate on the issue. Domestic retail biggies firmly believe the government should give industry status to the sector before initiating FDI. While there's concern among small traders and kirana stores, big domestic retailers are worried more about the implications in real-estate pricing of retail chains than direct competition with MNCs.Moreover, retail chains are lobbying for single-window clearance and approval for licences, besides removal of infrastructure bottlenecks and amendment of land laws and the shops establishment Act. "FDI in organised retail is good, but Indian retail has not yet been recognised as an industry. Before allowing FDI in retail into India, the government needs to make the domestic industry investor-friendly,"said Raghu Pillai, president of RPG Retail, one of the country's largest retail group. Industry bodies like CII do not oppose FDI but favour government intervention to enable retail space planning, backend infrastructure development and evolution of efficiency in supply chain. CII further argued that the move would draw investments into retail and make finance available for expansion and restructuring. Ficci agrees in principle to FDI in retail, but says only branded retail should be allowed in the initial phase. Demands of most big retail groups — Shoppers Stop, Trent, Lifestyle — are similar. "We've been asking for industry status, but the government is not doing anything about this,"said Kishore Biyani, MD, Pantaloon Retail. Industry leaders argued that before deciding whether FDI should be at 26 per cent or 49 per cent, the government should regulate FDI policy, especially to protect small retailers. Already there's a retail boom in the country, with over 200 retail mall projects in the planning stage in 25 cities. The organised retail segment accounts for Rs 14,000 crore, about 2 per cent of the total retail market. According to an ETIG study, the organised retail industry is expected to grow 30 per cent in the next five years and touch Rs 45,000 crore. India has the highest density of retail outlets and there are over 15 million in the country. Over 98 per cent are in the unorganised sector. Industry experts said retail in food and grocery segment face the highest opposition to FDI. Experts said kirana stores across the country are family-run with minimum margins and currently source products through multiple media. HLL and ITC have entered this segment, while Amul and Pepsi are looking for export-product sourcing.Textiles is considered to be the next big thing for FDI. In the consumer durables sector, foreign players are already present through manufacturing. There are no major restrictions on imports of durables. The majority in the furniture segment are against FDI.