India: Icrier backs more organized retail

Despite impact on small stores, 14-month-long govt-backed survey seeks faster big retail rollout, self-regulation

Rasul Bailay and Udit Misra. Livemint.com 27 May 2008
 
New Delhi: Endorsing the opening up of India's retail market for branded chains despite evidence that clearly suggests small retailers will be hurt-at least initially-Icrier, a think tank, has asked the government to reduce the number of licences required to expand organized retail and to facilitate "a private code of conduct" for such retailers.

The politically correct and cleverly worded study, which Icrier took 14 months to finish after it was asked by the commerce and industry ministry to study the impact of organized retail on mom-and-pop stores, says if left alone, the unorganized sector, which accounts for more than 95% of all retail in India, will emerge as "a major bottleneck to raising productivity in both agriculture and industry".

The long delay in the submission of the report was seen by some political observers as a way for the Indian government to try and bury an issue that flared up in early 2007.

That's when Sonia Gandhi, the chairperson of the ruling Congress-led UPA government, responding to protests and political tensions over the spread of organized retail, asked the Prime Minister's Office to look into the impact of domestic and foreign retailers on India's millions of small traders, who are widely dispersed but have strong pockets of influence in urban India.

Indeed, the study finally made public on Monday by Icrier follows a series of stories in December and April in Mint that had extensively reported on the survey findings as well as proposed recommendations of the Indian Council for Research on International Economic Relations.

Though Icrier publicly disputed the initial Mint stories, claiming its survey findings will be different, the final report is very much in line with the same reported recommendations and findings, including those that showed small retailers and vendors will be hard hit by big stores, though they will find ways to innovate to try and stay in business.

Overall, across both the "treatment sample", or stores in areas where there is head-to-head competition with organized retail outlets, and the control sample, sales of small stores were down 8% and profits 9%. The study also found that while around 4.2% of the total number of small stores in the country down their shutters every year, less than half this, or around 1.7% of them go out of business on account of competition from big retail.

Rajiv Kumar, director and chief executive of Icrier, noted that entry of big retail was inevitable.

Full article at http://www.livemint.com/2008/05/27004402/Icrier-backs-more-organized-re.html