INRnews - Indian Real Estate News

ASSOCHAM, the apex industry association, has proposed this so that the domestic players in the organized retailing get at least two to three years’ time to prepare for competition from global retailing giants. It has argued that the organized retail is still at a very nascent stage and forms only three per cent of the entire retail trade.

In a note submitted to the Commerce & Industry Ministry, ASSOCHAM has suggested that the government first consults with the domestic industry before finalizing and announcing entry of overseas mega malls in the country. ‘’Consultation with the domestic players is needed before any policy announcement is made’’, the Chamber stated.

According to one leading retailer, “If we open up the sector now, the country will attract a small sum of foreign investments compared to what we can attract a few yeas later. In a few years, the share of organized retail will be significantly higher and the country will be far more attractive and ripe to attract higher levels of FDI”. In support of this argument, the retailer cites the example of China that has opened up its retail sector to FDI only after its domestic organized retail industry was large enough to face competition from foreign players.

Many of the retail firms in the domestic sector favored export commitments on the FDI investment; by as much as 20 times. They also wanted FDI investment in backend infrastructure like cold storage so that the supply chain becomes smooth.

Both Indian and foreign players are impacted by the lack of large retail spaces in central locations and the high real estate prices for new developments.

A plethora of bureaucratic hurdles and high capital cost also place the domestic retailing firms at a disadvantage against the international players who have over the years placed efficient chains in order at a low capital cost. It is estimated that for opening a single store in the country as many as 13 licences are required.

"Absence of single window clearance, coupled with other issues like lack of property infrastructure, work as a major impediment to the growth of the retailing’’, ASSOCHAM said.

Notwithstanding the policy issues, retailing has a great future in India since its total size  of over 200 billion dollar comes close to being one-third of the size of the total economy. However, the share of the organized sector in the retail trade is only three per cent but it is expected to reach 10 per cent by 2010, throwing big opportunities for the prospective new players.