Investment Opportunities in India

October 30, 2012

FDI in retail sector to create 10 million jobs in India

India has emerged as the fifth most favourable destination for international retailers, outpacing UAE, Russia, Indonesia and Saudi Arabia, according to A T Kearney’s Global Retail Development Index (GRDI) 2012. “India remains a high potential market with accelerated retail growth of 15-20 per cent expected over the next five years,” highlighted the report.

The foreign direct investment (FDI) inflows in single-brand retail trading during April 2000 to June 2012 stood at US$ 42.70 million, according to the latest data released by the Department of Industrial Policy and Promotion (DIPP). Cash and carry represents an opportunity worth around Rs 8,250 billion (US$ 154.45 billion) of the Rs 27,500 billion (US$ 514.84 billion) annual retail business in India. Online retail business is another format which has high potential for growth in the near future. India’s e-retail industry is likely to touch Rs 70 billion (US$ 1.31 billion) by 2015, up from Rs 20 billion (US$ 374.43 million) currently, as per an industry body report.

The recently announced FDI guidelines in the Indian retail sector are likely to create 10 million jobs over the next 10 years, according to Indian Staffing Federation (ISF). The report also mentioned that the new job opportunities in the sector will make it the largest sector in organised employment.

The federation has welcomed the new FDI in retail announced by the Government of India. For the record, the Government has announced its decision to allow 51 per cent FDI in multi-brand retail and 100 per cent FDI in single-brand retail. In addition, the Government has also opened up the aviation sector and put up four PSUs for disinvestment.

The ISF said that FDI in retail sector will have a much wider impact on organised employment as compared to what happened in the IT sector over a decade ago. The federation also said that these measures will open doors for the low-skilled people.

It is believed that logistics and supply chain companies are also expected to make rapid progress considering the fact that they will be the link between small manufacturers, farmers and the organised retail chains.

The close integration within the organised retail chains will support the small producers in gaining access to the latest processes, systems and technologies available in the market.

With increasing disposable incomes, expansion of stores and supporting economic factors, retail sector in India is expected to grow to about US$ 900 billion by 2014, according to a report by global consultancy and research firm, PricewaterhouseCoopers (PwC).

The next generation of India’s retail environment is favourable for the rise of luxury goods. Consumer markets in emerging market economies like India are growing rapidly owing to robust economic growth. The retail sector in India is highly competitive because of ever changing consumer preferences and the need for marketing differentiation. The retail enterprises need to focus on costs throughout the consumer value chain because of proliferation of new products and categories and ever increasing demands to optimise value chains.

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