Shrugging aside concerns about several States stalling FDI in multi-brand retail, the chamber bodies described how the move would have a positive impact on the small and medium enterprises (SMEs) sector.
According to the Federation of Indian Chambers of Commerce and Industry (FICCI), the current size of the Indian retail market is $450 billion which is expected to increase to $850 billion in the next 10 years. At present, 35 per cent of products are sourced from SMEs. The projections are that by 2020, more than $298-billion worth products would be sourced from SMEs.
FICCI showcased global data on SME sourcing to stress its point. For instance, 96 per cent of the volume that Walmart sells in the US is sourced from SMEs.
The Confederation of Indian Industry (CII) Director-General, Mr Chandrajit Banerjee, said: “FDI can help SMEs supply in large volumes, improve quality and become cost-competitive in the global arena.” He said that traditional trade would continue to have its own place and not decline. “Even in the last three years when modern retail has grown at 24 per cent, unorganised retail has continued to grow, albeit at a slower rate of 10 to 12 per cent,” he pointed out.
Both chamber bodies hoped that the States would see the FDI move not from a political prism, but from an economic one. Once one State shows the model, the rest would learn from the benefits and follow suit, said Mr Banerjee.
Retail consultants, however, were less optimistic about the States' opposition. Mr Purnendu Kumar, Vice-President, (Retail),Technopak, said: “We need to wait and watch to see how the States' opposition to FDI in retail will affect investment to the sector”.
Mr Anil Talreja, Partner, Deloitte, said: “Foreign investors have been eagerly waiting for such a policy to come up but with majority of the States opposing it, I do hope that the Government will do maximum damage control. Westernised retail formats will work well in a country like India which has absorbed good amount of their culture.”