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Policy
 
AMIT BAGARIA,FOUNDER CHAIRMAN & CEO, ASIPAC
“Kiranas only cater to food retail”

Issue Date - 22/12/2011
 
B&E: With the Indian retail space developing rapidly, what are some of the changes you expect to see going forward?
AB: In the coming years, staff in retail will be better trained, customer service will improve, retail formats will become larger and there will be more choices of retailers in several underserviced categories such as home improvement and value fashion.

B&E: Foreign direct investment in the fast-growing retail sector is being viewed from a positive as well as negative perspective with respect to job creation. What are your views on the same?
AB: If FDI in multibrand retail is restricted to only cities with a one million plus population, around 4.6 million new jobs will be created. If this is extended across India, around 11 million jobs will be created. Inflation will also come down because of better efficiencies, lesser wastage and higher competition just like telecom.

B&E: Why should India open up the sector to FDI? Why not set up retail infrastructure from the country’s own resources?
AB: Indian retailers don’t have the resources. Telecom developed much faster after FDI was allowed and this helped bring down telephone call charges by 99% in 16 years based on purchasing power of the rupee. The same scenario was repeated in the automobiles sector. For decades, we were forced to buy horrible cars like the Ambassador and the Premier Padmini. With FDI being allowed, the Indian consumer today has a choice of more than 80 types of cars from 17 brands, and also at a wide range of price points.

B&E: There is a fear that India would be swamped by multinationals that would kill local entrepreneurs, especially the small shops. Do you believe that FDI can affect kirana stores across India in this manner?
AB: Kiranas only cater to food retail, which is just 30.3% of the total retail market in urban India. Modern retail can capture a maximum of 7.5% of the total food retail market in urban India, based on several factors. Thus, modern retail can displace a maximum of 20,000-odd kirana stores. On the other hand, modern food retail will help create new local entrepreneurs for providing various services to modern retailers – such as logistics, warehousing, delivery, security, housekeeping, parking management, staff uniform supply and laundry, POS materials, et al.

B&E: How are foreign retail giants perceiving FDI in retail in India? Will there be a change in the business model to complement the post-FDI regime as 50% of the investment is expected to be in the back end? How much investment can we expect from this route?
AB: All categories of retailers do not require to invest 50% in the back end. For example, in fashion retail, not much back end is required. The same is true of jewellery, watches, et al. If FDI in multi-brand retail is restricted to cities with a one million plus population, total FDI in five years is expected to be around $31 billion. If this is allowed across India, the total FDI in five years will be in the range of $55-65 billion.

 

          

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