India is the only country where different policies exist for different segments of retail business and e-commerce, though “logically, there should be one policy”, lamented Amitabh Kant, CEO, NITI Aayog, at a recent FICCI event. Analysts, however, say that “retail” is not on the government’s agenda at the moment; so it is not ruminating over it seriously enough. “But sooner or later, some thought has to be created around it,” feels Shilpa Gupta, director, Regulatory Services, PwC. That retail sector contributes over 45% to India’s GDP in itself calls for wrapping it up with one retail policy, “one that centers around customers”. In the absence of clear policy guidelines, “the industry (especially foreign players) would not invest a single paisa in the sector,” cautions Gupta.
The government is well aware of the potential loss. But it is trying to avoid the situation right now for reasons quite known. Stakeholders feel that the reformative government cannot ignore the growing chorus among stakeholders for having one broad policy that governs different subsets of retail like single brand or multi- brand retail and e-commerce etc. The lingering fear that bigger fish would eat away domestic kirana stores (and the jobs they now provide) seems more assumed than real. The fact that there are over 14 crore kirana stores (double the official estimates) in India reflects the vibrancy of its internal trade. So “why not give a policy around that,” ask experts.
Though internal trade (retail) is a state subject, for the sake of coherence, there is a need to have umbrella legislation instead of having 30 odd by each state. Beside the absence of a policy, there is no single window clearance or ease for opening up a retail business that still requires about 51 licences (permissions).
Analysts argue that the Indian retail market which would double up to $1 trillion by 2020 would have enough space for every model of retail. The e-commerce vertical, embraced so whole-heartedly by Indians, would grow to about $120 billion in the same period, thus suggesting that e-commerce would still remain a small part (12%) of the retail universe. It is similarly placed even in advanced economies. The other sub sector, packaged consumer goods, is also expected to cross $100 in next five years.
Since the Modi government wants domestic companies to compete with their global counterparts to become an essential cog in the global supply chain, it needs to open its doors to such competition. The FICCI expects that the government’s continued focus on ease of doing business should run like a golden thread across all sectors. The government, it seems, may open up multi-brand retail, but only after providing a level-playing field to domestic stakeholders.