Indian Retail - An Update:Arvind Singhal / New Delhi April 24, 2008

In recent weeks, the attention of the nation seems to be largely riveted on issues such as inflation, political realignments and posturing in the backdrop of impending state and general elections, meltdown in equity and real estate markets, and the Indian Premier League. In this din, the media, the politicians, and a motley group of rabble rousers have almost overlooked the extraordinary developments that have been taking place in the Indian retail sector in the last few months.
After the entirely inexplicable sound and fury of 2006 and 2007, when even the rumours of a mid-level manager appointment at Reliance Retail made headline news, when spokespersons of the Left (and a few other parties) routinely frothed venom at the danger of modern, organised retail, and when a report from ICRIER on the impact of modern retail was being awaited with greater anticipation than J K Rowling’s latest Harry Potter tome, the near silence at the much-awaited debut of Bharti Retail’s (and Wal*Mart’s?) Easy Day supermarket at Ludhiana recently is deafening. Aditya Birla Retail successfully launched its first hypermarket a few weeks ago and again, the event was hardly taken note of. Shopper’s Stop won the prestigious “emerging market retailer of the year” award at a recent international retail forum and its managing director, BS Nagesh, was inducted into the World Retail Congress hall of fame (in the august company this year of Sir Phillip Green of the UK, Amancio Ortega of Inditex, and Mike Drexler of Gap fame) and yet, the media entirely ignored this very creditable international recognition of India’s (arguably) first home-grown organised retailer. Shoppers Stop, incidentally, has also been the first to launch (a few weeks ago), the first really serious catalog shopping venture in India in partnership with Argos of the UK. Finally, it has been a pleasant surprise that the recent announcements from Reliance regarding their joint ventures with a few leading global iconic retailers including Marks & Spencer have so far been taken in their stride by the traditional strident opponents of modern and international retail.
It may be yet premature to believe that India has matured as far as modern retail is concerned. However, it is certainly maturing in its acceptance of the right of modern retail to coexist with the traditional one. Despite many modern retailers clocking monthly revenues (or poised to clock very shortly) that will make each of them a billion US dollars or bigger business in the current or the next fiscal year, there is no sign of the massive socio-economic disruption the Cassandras and Don Quixotes were fearing. If at all, the spectre of rising inflation has made the need and the relevance of strong, organised national and regional retail chains even more obvious and especially of those whose business models are based on discounting/every day low prices. At the same time, it is also very heartening to see the maturing of the Indian media, which is now getting out of the “breaking news” syndrome about announcing entries and partnerships of major global retailers even when there was no basis for such reporting.
Hopefully, the media will now start focusing on the actual performance of the many large retail businesses already operating in India and even perform the role of unofficial ombudsmen in the absence of any cohesive government policy or regulator relating to the retail sector.
The next 24 months will see heightened activity in the Indian retail sector. At the recently concluded World Retail Congress at Barcelona, while the official theme was “sustainability”, the unofficial theme was “surviving slowdown in the developed markets by focusing on the developing ones”. This time, India again was the star attraction and more than one global mega-retail CEO talked seriously about their interest in India. Hence, whether FDI is permitted or not, modern retail (of Indian and international origin) will continue to grow exponentially and is now well poised to hit the $100 billion (about Rs 400,000 crore) revenue mark in 2013 or 2014 and perhaps $200 billion (about Rs 800,000 crore) in revenues by 2018 or 2019. Of course, even at that level, it will just account for about 25 per cent of all retail consumption in India and hence the so-called traditional retail will have also grown by almost 50 per cent from the level in 2008. Rather than behaving like the ostrich in the sand, the government must now firmly accept the reality that India needs an efficient and organised retail sector to supplement the traditional retail system especially when it comes to categories such as food and other basic needs. The government must facilitate this by formulating a holistic, inclusive policy framework that allows the coexistence and growth of both the large and the small in a pragmatic way. Unrestricted access to capital will be a major need for both Indian and international retailers, and hence any dogmatic restriction on the origin of this capital will be counter-productive for India itself and especially for Indian retailers who now need much more capital to compete with the global giants.