Dec 17, 2008

Business - Unorganised retail sector to grow to $496bn in four years

NEW DELHI: The unorganised retail sector is expected to grow at about 10 percent per annum to reach $496 billion in 2011-12 despite the steady
expansion of organised retailers, a study released Wednesday said.

The report on the impact of organised retail on small shop owners, released in parliament by the Delhi-based think tank Indian Council for Research on International Economic Relations (Icrier), said the retail business in the country would grow at 13 percent annually from $322 billion in 2006-07 to $590 billion in 2011-12.

The unorganised retail industry was valued at $309 billion in 2006-07.

However, given the relatively weak financial state of the unorganised retailers and the space constraints on their expansion prospects, this sector alone will not be able to meet the growing demand, the report said.

Hence, the organised retail that now constitutes a small four percent of the total industry is likely to grow at a much faster pace of 45-50 percent per annum and quadruple its share in total retail trade to 16 percent by 2011-12, the Icrier said.

However, the Icrier added that small shop owners in the vicinity of organised retailers have experienced a decline in their volume of business and profit after the entry of bigger players.

According to the report, consumers have gained with the entry of organised retailers and their overall spending has also gone up.

While all income groups saved through organised retail purchases, the report revealed that lower income consumers saved more.

Moreover, the report said farmers benefit significantly from the option of direct sales to organised retailers.

Profit realisation for farmers selling directly to organised retailers is about 60 percent higher than that received from selling in local markets.

The study made certain recommendations like facilitation of cash-and-carry outlets, like Metro, for selling farmers' produce to unorganised retailers.

It also urged for encouraging cooperatives and associations of unorganised retailers for direct procurement from suppliers and farmers.

Also, simplification of the licensing and permit regime for organised retail and a move towards a nationwide uniform licensing regime in the states to facilitate modern retail have been recommended.

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