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Will a single nodal agency help Indian retail?

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Estimated to grow at 13 per cent annually from USD 322 billion in 2006-07 to USD 590 billion in 2011-12, according ICRIER estimates, retail accounts for over 10 per cent of India’s GDP. Fuelled by increasing customer base, rising disposable income, changing lifestyles and growing absorptive power of the domestic market, organised retail which now constitutes a small four per cent of total retail sector is likely to grow at a much faster pace of 45-50 per cent per annum and quadruple its share in total retail trade to 16 per cent by 2011-12.

However, India is a fragmented market in terms of policy and economic laws at the state level, and varying regulations affect the industry’s competitiveness adversely. Over 77 per cent respondents opposed retail sector being jointly regulated by ministries of commerce and industry and consumer, after IndiaRetailing asked its readers if multiple governance agencies in retailing sector need to be eradicated. While a mere 5.5 per cent were undecided on the question, a more substantive 16.6 per cent insisted on carrying on with the existing regulations.

Quite recently, Assocham also emphasised that retail operations ought to be regulated by a single national agency to ensure harmonious co-existence of modern and traditional retailers.

In India today, the department of commerce alone is responsible for making policies for retailing, but when it comes to implementation, it becomes the domain of consumer affairs ministry. Meanwhile, FDI’s element is in the hands of commerce & industry ministry and consumer affairs ministry regulates retailing in terms of taxes, licenses, legislation, essential commodities act, weight & measurement act.

“This causes distortions and ambiguities in growth of retail. The Retail sector should be governed by a single central authority that not only makes policies but ensures their proper implementation,” says DS Rawat, secretary general, Assocham.

On the same lines, Anand Ramanathan, manager, KPMG, says, “This practice of multiple governance causes confusion and hinders the growth of the retail sector as it is extremely difficult to operate the retailing function when two separate ministries are required to regulate the retailing. For a prosperous mutual existence of modern and traditional retailers and removal of distortions and ambiguities in retail growth, there needs to be a single nodal agency which makes policies for the retail industry, ensures their proper implementation and is the only authorised body to address various issues concerning the retailers.”

A major impediment to the growth of retail in India is the huge number of licenses and permissions required to operate, coupled with the fact that retail does not enjoy industry status.
The retail sector in India is certainly a beneficiary of the growth of the Indian economy, but it is also a key cause and catalyst of that growth, and will remain so for at least 15 years. Considering that modern retail will have a positive, multiplier effect not only on the economy, but also on employment, direct and indirect government revenue, industrial output, urban and rural development, strengthening of infrastructure, etc, it would be fair to expect the government to play a supporting role. Paradoxically, instead of doing so, it seems to be placing impediments in the path of organised retail. “A major impediment to the growth of retail in India is the huge number of licenses and permissions required to operate coupled with the fact that retail does not have industry status and adequate fiscal or policy support from the government. Multiple governance makes the situation even more complicated for an industry raring to go forward,” says Gurpreet Wasi, co-founder and COO of India’s leading retail consulting and solutions company Go Fish Retail Solutions.

“Retailers in India create a single strong lobby to push their case with the government for a single window for the retail business in India as well as a drastic simplification of the process of multiple licenses,” adds Wasi.

It is interesting to note that the bulk of the retail development in India has taken place through self-motivated efforts of the Indian retail industry, with no external support from government agencies or for that matter, industry lobbying of retailers. In many other south East Asian countries, government has played an important role in realising the potential of retail businesses and organising it under a single umbrella. For example Malaysian retail is governed by the ministry of domestic trade and consumer affairs and most of the transactions regarding information, licenses, approvals, applications, taxes etc can be done online through an easy-to-operate ministry website.

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