Government Investments In Retail Industry
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Government Investments in Retail Industry

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Team Leader
Retailing in India is one of the pillars of its economy and accounts for 14 per cent to 15 per cent of its gross domestic product (GDP). The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value. India is one of the fastest growing retail markets in the world, with 1.2 billion people.

Indian retail industry, considered as a sunrise sector, offers huge growth potential. The sector is expected to grow almost three times its current levels to US$ 660 billion by 2015, according to Investment Commission of India.

The foreign direct investment (FDI) inflows in single-brand retail trading during April 2000 to June 2012 stood at US$ 42.70 million, according to the latest data released by Department of Industrial Policy and Promotion (DIPP). Cash and carry represents an opportunity worth around Rs 8,250 billion of the Rs 27,500 billion annual retail businesses in India.

Major Investment in Indian Retail Sector

Some of the major investments in Indian retail sector are as follows:

  • Max Hypermarket India has partnered with French retail giant, Auchan Group to open franchise hypermarket stores in India. The existing stores of Max Hypermarket will be rebranded as 'Auchan' and shall operate under a franchise agreement. Max Hypermarkets and Auchan plan to open 12-15 new stores in a year across various geographies in India
  • Sahara India plans to enter the retail sector and will invest Rs 3,000 crore (US$ 542.50 million) initially to set up the business. The company will start its retail business under the ‘Q’ brand name and plans to expand its reach in nearly 1,000 cities and towns by 2013
  • BhartiWalmart plans to invest Rs 104 crore (US$ 18.81 million) in expanding its outlets across the country. In all, BhartiWalmart has about 17 stores in India

Government Initiatives

The Government of India is playing a vital role in making the Indian retail industry the most lucrative for non-resident Indians (NRIs) and person of Indian origin (PIOs). Some of the major initiatives by the Government are as follows:

  • The Government of India has allowed 51 per cent foreign direct investment (FDI) in multi-brand retail and 100 per cent FDI in single-brand retail
  • DIPP is likely to consider relaxing the sourcing norms for global retailers to establish shops in India, as IKEA is asking for further relaxation of mandatory conditions
  • The Union Ministry of Finance has provided relief to the Rs 18,000 crore (US$ 3.25 billion) software industry by replacing a multi-level structure of tax deducted at source (TDS) on distributors with a single TDS. This would be deducted by the first distributor—one who directly purchases packaged software from a developer

The federation has welcomed the new FDI in retail announced by the Government of India. The Government has announced its decision to allow 51 per cent FDI in multi-brand retail and 100 per cent FDI in single-brand retail. In addition, the Government has also opened up the aviation sector and put up four PSUs for disinvestment.

The ISF said that FDI in retail sector will have a much wider impact on organised employment as compared to what happened in the IT sector over a decade ago. The federation also said that these measures will open doors for low-skilled people.