1. 1. The retail sector in India is severely constrained by limited availability of bank finance.

The Government and RBI need to evolve suitable lending policies that will enable retailers in the organised and unorganised sectors to expand and improve efficiencies. Policies that encourage unorganised sector retailers to migrate to the organised sector by investing in space and equipment should be encouraged. 2. A National Commission must be established to study the problems of the retail sector and to evolve policies that will enable it to cope with FDI as and when it comes. 2. 3. The proposed National Commission should evolve a clear set of conditionalities on giant foreign retailers on the procurement of farm produce, domestically manufactured merchandise and imported goods. These conditionalities must be aimed at encouraging the purchase of goods in the domestic market, state the minimum space, size and specify details like, construction and storage standards, the ratio of floor space to parking space etc. Giant shopping centres must not add to our existing urban snarl. 3. 4. Entry of foreign players must be gradual and with social safeguards so that the effects of the labour dislocation can be analysed & policy fine-tuned. Initially allow them to set up supermarkets only in metros. Make the costs of entry high and according to specific norms and regulations so that the retailer cannot immediately indulge in predatory pricing. 4. 5. In order to address the dislocation issue, it becomes imperative to develop and improve the manufacturing sector in India. There has been a substantial fall in employment by the manufacturing sector, to the extent of 4.06 lakhs over the period 1998 to 2001, while its contribution to the GDP has grown at an average 17 rate of only 3.7% . If this sector is given due attention, and allowed to take wings, then it could be a source of great compensation to the displaced workforce from the retail industry. 5. 6. The government must actively encourage setting up of co-operative stores to procure and stock their consumer goods and commodities from small producers. This will address the dual problem of limited promotion and marketing ability, as well as market penetration for the retailer. The government can also facilitate the setting up of warehousing units and cold chains, thereby lowering the capital costs for the small retailers. 6. 7. According to IndiaInfoline.com, agro products and food processing sector in India is responsible for $69.4 billion out of the total $180 billion retail sector (these are 2001 figures). This is more than just a sizeable portion of the pie and what makes it even more significant is the fact that in this segment, returns are likely to be much higher for any retailer. Prices for perishable goods like vegetables, fruits, etc. are not fixed (as opposed to, say, branded textiles) and

therefore, this is where economies of scale are likely to kick in and benefit the consumer in the
17

Calculated from Monthly abstract of Statistics, Volume 57, No.7, July 2004, Central Statistical Organisation, GOI, GDP figures from India Observer Statistical Handbook (2004).

form of lower prices. But due attention must be given to the producer too. Often the producer loses out, for example, when the goods are procured at Rs.2 and ultimately sold to the consumer at about Rs.15 as in the case of tomatoes now. The Government themselves can tap into the opportunities of this segment, rather than letting it be lost to foreign players. And by doing so, they can more directly ensure the welfare of producers and the interest of the consumers. 8. Set up an Agricultural Perishable Produce Commission (APPC), to ensure that procurement prices for perishable commodities are fair to farmers and that they are not distorted with relation to market prices.

Recommendations for the Food Retail Sector: With 3.6 million shops retailing food and employing 4% of total workforce and contributing 10.9% to GDP , the food-retailing segment presents a focused opportunity to the Government to catalyze growth & employment. 1. 1. Provision of training in handling, storing, transporting, grading, sorting, maintaining hygiene standards, upkeep of refrigeration equipment, packing, etc. is an area where ITIs and SISIs can play a proactive role. 2. 2. Creation of infrastructure for retailing at mandis, community welfare centers, government and private colonies with a thrust on easier logistics and hygiene will enable greater employment and higher hygiene consciousness, and faster turnaround of transport and higher rollover of produce. 3. 3. Quality regulation, certification & price administration bodies can be created at district and lower levels for upgrading the technical and human interface in the rural to urban supply chain. 4. 4. Credit availability for retail traders must be encouraged with a view to enhancing employment and higher utilization of fixed assets. This would lead to less wastage (India has currently the highest wastage in the world) of perishables, enhance nutritional status of producers and increase caloric availability. 5. 5. Several successful models of integrating very long food supply chains in dairy, vegetable, fish and fruit have been evolved in India. These one off interventions can be replicated in all states, segments and areas. Cross integrations of these unique food supply chains will provide new products in new markets increasing consumer choice, economic activity and employment. 6. 6. Government intervention in food retail segment is necessitated by: a) The lack of any other body at remote/grassroots level. b) Need to provide market for casual and distant self-employed
18

18

Chengappa, P.G., Achoth, Lalith, Mukherjee, Arpita, Reddy, B.M. Ramachandra, Ravi, P.C. Evolution of Food Retail Chains: The Indian Context (Nov. 2003)

growers and gatherers. c) Maintain regulatory standards in hygiene. d) Seek markets in India and abroad (provide charter aircrafts, freeze frying, vacuuming, dehydrating, packing facilities for small

producers at nodal points). e) Provide scope and opportunity for productive self-employment (since Govt. cant provide employment).

At a subsequent stage, these interventions can be integrated into the supply chains of the foreign retailers in India and abroad, creating synergy between national priorities, market realities, globalization, and private-public cooperation.

In this fashion, the Government can try to ensure that the domestic and foreign players are approximately on an equal footing and that the domestic traders are not at an especial disadvantage. The small retailers must be given ample opportunity to be able to provide more personalized service, so that their higher costs are not duly nullified by the presence of big supermarkets and hypermarkets.
Table 8: Employment in Organised Sector, 1992-1997 (Nos. in Lakhs)
Public/Private Sector 1992-93 1993-94 33.92 73.37 65.14 35.66 29.48 22.02 5.45 10.14 17.84 9.38 11.67 1.61 30.84 12.73 94.78 1994-95 33.95 73.55 65.2 35.74 29.46 21.97 5.39 10.16 17.56 9.35 11.64 1.62 31.06 12.83 95.04 1995-96 33.66 74.14 64.58 35.38 29.2 21.92 5.4 9.93 17.37 9.46 11.59 1.62 30.92 12.8 95.2 1996-97

Public Sector
Central Govt.(2) State Govt. Quasi Govt. Central State Local Bodies Agriculture, Hunting, etc.(5) Mining & Quarrying Manufacturing Electricity, Gas & Water Construction Wholesale & Retail Trade* (6) Transport, Storage & Communications (7) Financing, Insurance, Real Estate, etc. Community, Social & Personal Service

193.26
33.83 72.93 64.9 35.92 28.98 21.6 5.62 9.97 18.51 9.31 11.54 1.48 30.55 12.52 93.76

194.45 194.67 194.3

195.6
32.95 74.85 65.36 35.86 29.5 22.44 5.33 9.78 16.61 9.57 11.34 1.64 30.92 12.94 97.46

Private Sector
Large (3) Small (4)

78.5
69.46 9.04

79.3
69.98 9.32

80.58
71.18 9.4

85.11
75.5 9.61

86.85
77.06 9.79

Agriculture, Hunting, etc.(5) Mining & quarrying Manufacturing Electricity, Gas & Water Construction Wholesale & Retail Trade (6) Transport, Storage & Communications (7) Financing, Insurance, Real Estate, etc. Community, Social & Personal Service

9.16 0.96 45.45 0.38 0.73 3 0.55 2.77 15.5

8.83 1.01 46.3 0.4 0.5 3.01 0.56 2.82 15.85

8.94 1.03 47.06 0.4 0.53 3.08 0.58 2.93 16.03

9.19 1.07 50.49 0.42 0.53 3.17 0.6 3.06 16.58

9.12 0.92 52.39 0.41 0.55 3.17 0.63 3.23 16.44

Total Employment

271.76

273.75 275.25 279.41 282.45

Source: Monthly Abstract Statistics, Volume 57, No. 7, July 2004, Central Statistical Organisation

* This is the figure only for Organised Retail Sector *This is the figure only for Organised Retail
Sector

Table 9: Employment in Organised Sector, 1997-2002 (Nos. in Lakhs)

Public/Private Sector 1997-98 1998-99 1999-00 2000-01 2001-02

Public Sector
Central Govt.(2) State Govt. Quasi Govt. Central State Local Bodies Agriculture, Hunting, etc.(5) Mining & Quarrying Manufacturing Electricity, Gas & Water Construction Wholesale & Retail Trade* (6) Transport, Storage & Communications (7) Financing, Insurance, Real Estate, etc. Community, Social & Personal Service

194.18 194.15 193.14

32.53 74.58 64.61 35.36 29.25 22.46 5.3 9.37 16.16 9.54 11.09 1.64 30.84 12.88 97.37 33.13 74.58 63.85 34.72 29.14 22.59 5.15 9.26 15.69 9.62 11.07 1.63 30.84 12.94 97.94 32.73 74.6 63.26 34.13 29.13 22.55 5.14 9.24 15.31 9.46 10.92 1.63 30.77 12.96 97.71

191.38 187.73
32.61 74.25 61.92 32.91 29.01 22.61 5.02 8.75 14.3 9.35 10.81 1.63 30.42 12.81 98.3 31.95 73.84 60.19 31.95 28.24 21.75 4.83 8.61 13.5 9.23 10.26 1.56 30.09 12.03 97.35

Private Sector
Large (3) Small (4) Agriculture, Hunting, etc. (5) Mining & quarrying Manufacturing Electricity, Gas & Water Construction Wholesale & Retail Trade (6) Transport, Storage & Communications

87.48
78.21 9.27 9.04 0.91 52.33 0.42 0.74 3.21 0.65

86.98
77.7 9.28 8.71 0.87 51.78 0.41 0.71 3.23 0.69

86.46
77.19 9.27 9.04 0.81 50.85 0.41 0.57 3.3 0.7

86.52
77.09 9.43 9.33 0.79 50.13 0.52 0.57 3.39 0.76

84.32
75.08 9.24 8.55 0.68 48.67 0.42 0.56 3.35 0.76

(7) Financing, Insurance, Real Estate, etc. Community, Social & Personal Service

3.41 16.77

3.58 17

3.58 17.23

3.7 17.34

3.91 17.42

Total Employment

281.66 281.13

279.6 277.89 272.06

Source: Monthly Abstract Statistics, Volume 57, No. 7, July 2004, Central Statistical Organisation

Table: 10, State-wise Number of Workers Engaged in Retail Trade by Type of Enterprises in India (1998) Rural NDE DE
47320 473 20583 19512 2111 17573 2951 2275 2414 36915 35376 26141 30361 61 834 151 382 15367 7207 16027 399 83460 653 29957 29541 296 142 127 94699 3518 57992 91591 3158 46004 12441 10163 6945 83415 165253 58572 109955 1098 8204 743 1999 59629 24517 39612 1434 218380 6963 81505 213391 1186 525 410

States/UTs
Andhra Pradesh Arunachal Pradesh Assam Bihar Goa Gujarat Haryana Himachal Pradesh Jammu & Kashmir Karnataka Kerala Madhya Pradesh Maharashtra Manipur Meghalaya Mizoram Nagaland Orissa Punjab Rajasthan Sikkim Tamil Nadu Tripura Uttar Pradesh West Bengal A & N Islands Chandigarh D & N Haveli

OAE
638358 5659 218667 454703 11719 222208 91073 51504 45465 329875 302444 418997 493296 15869 9790 2877 5528 420735 119219 224212 3898 388859 29028 705928 803718 3111 866 865

ALL
780377 9650 297242 565806 16988 285785 106465 63942 54824 450205 503073 503710 633612 17028 18828 3771 7909 495731 150943 279851 5731 690699 36644 817390 1046350 4593 1533 1402

OAE
446500 2933 82218 306323 13117 365753 124590 17730 56870 276345 71970 437151 635164 19372 7333 7154 9730 136117 185621 256356 2142 297470 14422 753617 416387 1800 11226 260

NDE
217763 706 16768 61316 5390 73445 14999 3706 12082 130703 44521 55169 210386 1046 1840 898 2547 24826 33274 33960 583 248451 1106 86449 171080 794 7532 97

Urban DE
267496 3174 68448 171381 10167 196940 67512 10547 21327 243345 125383 166730 519775 5604 9156 1900 9647 70856 101943 113651 2034 531755 8166 401999 556196 1902 8404 545

ALL
931759 6813 167434 539020 28674 636138 207101 31983 90279 650393 241874 659050 1365325 26022 18329 9952 21924 231799 320838 403967 4759 1077676 23694 1242065 1143663 4496 27162 902

Daman & Diu Delhi Lakshadwep Pondicherry India

730 12503 257 3505 6035466

289 3872 43 994 433507

375 8693 53 2056 1414479

1394 25068 353 6555 7883452

1518 174315 273 9136 5140913

181 109134 63 7249 1578064

762 227370 138 10672 3934925

2461 510819 474 27057 10653902

Source: Economic Census 1998, MOSPI, GOI