India & #BANNER1 & # is a booming economy and has a lot to offer to the development of retail in the coming years. At the India Retail Forum 2007, Bijou Kurien, president, Reliance Retail, discussed some of the opportunities in retail and the barriers that need to be overcome.
He started by highlighting some facts that reflect the socioeconomic status of Indians. He said that India has a per capita income of US$900 and, despite this fact, 25 per cent of the people in the country earn less than $1 per day. India generates the second largest number of engineers in the world, numbering around 4,00,000, but 90 per cent of students in the country do not receive education beyond the 10th standard. India also has the second highest GDP growth in the world, yet 35 per cent of the population, which is in agriculture, contributes not more than 3 per cent to the overall figure.
Considering all this, Kurien stressed a few factors that would contribute to the overall growth of retail. He said that with the economy growing over the past few years, there is going to be an increase in the urban population of the country. It is expected that 48 per cent of India will become urbanised in the next two decades. The demographic profiles of consumers are changing drastically and there is rising media penetration. There are more spending categories and brand choices with people today.
According to him, significant investment has been planned with a mix of national and international retail players stepping in. In the next five years, the retail industry is expected to grow to a figure of $400 billion from the current $312 billion. Also, the organised retail market, which contributes to only 2-4 per cent of the overall market share, will contribute 20-30 per cent.
Kurien remarked that the Indian retail industry can take inspiration from some of the other sectors of the economy that have grown significantly, such as the automobile industry. In 1996, there were only nine car manufacturers with 14 car models in the market, the prominent ones being Fiat and Ambassador. The overall sales were just $0.08 million. In a period of 10 years, the number of companies doubled to 19 with 48 models of cars and a sales figure of $1.25 million. Fiat and Ambassador were replaced by international players such as Mercedes-Benz and Toyota.
Similarly, in the scooter market, there were seven companies 10 years ago with sales of $0.25 million. Bajaj scooters were the prominent two wheelers. Now, there are nine scooter making companies with Honda, Bajaj, TVS and Yamaha being the prominent ones and their sales stand at $9.2 million.
The telephone industry has also evolved from 14 million fixed connections to 55 million fixed and 170 million mobile connections in 10 years. The airline industry saw a surge in the number of air travellers from 11.5 million to 36 million passengers. The number of airline companies grew from six to 11 during this period.
The retail industry, which has just started booming, is likely to benefit both farmers and the consumers by connecting them through stores. Farmers will get an international market for their produce and consumers will get value addition in terms of good quality at cheaper rates. Retail is a sector that has the potential to provide employment opportunities to the vast section of the population that is uneducated. The eventual consumption levels for goods and services will grow, which will further boost the size and overall growth of the market.
Kurien said that all this will be easier if some of the barriers to retail can be overcome. Currently, there is no government policy for retail. If a national policy could be created from the Centre and not from individual states, the retail industry will benefit all of the country equally. The government has to believe in the potential of the retail industry to contribute to GDP growth, he said. Retailers also face the challenge of acquiring or renting real estate at reasonable prices. A central governing body can make a lot of difference to the industry by formulating simple rules and regulations for upcoming retailers.