09-07-2012, 12:19 PM
FDI in India’s Retail Sector More Bad than Good
10-FDI-Retail-more-bad.pdf (Size: 211.95 KB / Downloads: 43)
The Indian Scenario:
Trade or retailing is the single largest component of the services sector in
terms of contribution to GDP. Its massive share of 14% is double the figure
of the next largest broad economic activity in the sector.
Employment in Retailing:
A simple glance at the employment numbers is enough to paint a good
picture of the relative sizes of these two forms of trade in India – organised
trade employs roughly 5 lakh people (see Tables 8 & 9), whereas the
unorganized retail trade employs nearly 3.95 crores5! According to a GoI
study the number of workers in retail trade in 1998 was almost 175 lakhs.
Given the recent numbers indicated by other studies, this is only indicative
of the magnitude of expansion the retail trade is experiencing, both due to
economic expansion as well as the ‘jobless growth’ that we have seen in the
past decade.
Retail as a ‘Forced Employment’ Sector:
It is important to understand how retailing works in our economy, and what
role it plays in the lives of its citizens, from a social as well as an economic
perspective. India still predominantly houses the traditional formats of
retailing, that is, the local kirana shop, paan/beedi shop, hardware stores,
weekly haats, convenience stores, and bazaars, which together form the
bulk. Most importantly, Indian retail is highly fragmented, with about 11
million outlets operating in the country and only 4% of them being larger
than 500 square feet in size.
The Waiting Foreign Juggernaut:
The largest retailer in the world ‘Wal-Mart’ has a turnover of $ 256 bn. and
is growing annually at an average of 12-13%. In 2004 its net profit was $
9,000 mn. It had 4806 stores employing 1.4 mn persons. Of these 1355 were
outside the USA. The average size of a Wal-mart is 85,000 sq.ft and the
average turnover of a store was about $ 51 mn. The turnover per employee
averaged $ 175,000. In 2004 Wal-Mart had a 9% return on assets and 21%
return on equity.11