Govt Policy Changes required

Retail business in India is the second largest employer after agriculture. Numerous studies have indicated, entry of a retailing giants like Wal-Mart does significantly impact sales at other local establishments. The government does not want to antagonise the labour-intensive sector and hence the government seeks to safeguard small retailers from adverse impact of growing organised retail.

The Central Government is a key stakeholder in the development of the retail sector in India.
It has to review some of its existing policies to ensure that all bottlenecks in the path of growth of the retail sector are removed and an appropriate environment is provided to facilitate the growth of the Indian retail sector. The Central Government needs to take up the following initiatives to achieve this goal: Grant industry status to the retail sector Establish minimum quality assurance standards Reformulate the Small Scale Industries policy

The first two initiatives have been accorded the highest priority while the third initiative has been given medium priority. Much has been written and said about FDI in the retail sector. FDI in retail has become a political issue and will require political strength to pass it through. Grant industry status to the retail sector Granting industry status to the retail sector should be the first initiative on the part of the Central Government to ensure growth of the retail sector in the country. A regulatory body, on the lines of TRAI - the telecom regulator, should be set up to legislate on industry norms, tax enforcement and consumer protection. A related step would be to ease up bank financing for the sector, including insurance norms that do not exist currently. This action would facilitate financing options that would enable the retail industry to expand and grow rapidly. It would also result in a much-needed nodal agency for business aspirants in the retail space that will help in simplifying the processes and procedures. Going forward, this step is extremely critical in strengthening the sector's competitiveness and building a platform for the growth the retail industry promises. Establish minimum quality assurance standards Another key step towards ensuring the development of retail sector in India would be to mandate compulsory assurance for product and service quality. This would help in establishing minimum quality assurance standards for the entire industry. The Central Government should also facilitate setting up a system to provide certification on quality assurance, skills standards, customer service, etc., to ensure minimum best practices across the industry. The element of quality is extremely crucial for the future of the current retail boom in India. It would be essential for the retail industry to spruce up quality standards as they grow at a rapid pace. As and when the FDI opens up, the challenge to meet world-class quality standards in order to sustain

the exhilarating growth would only get tougher. Although the players need to gear up now, the key to implementation of 'minimum quality assurance standards' lies with the Central Government, and hence, the Government should respond to this need, proactively. Reformulate Small Scale Industries policy The Central Government should periodically review its small-scale industry policy and gradually remove reservations on SSI manufacturing of 506 items to promote consolidation of supply base. The government should also study the applicability of China's TVE structure for India. TVEs or Township and Village Enterprises are a form of rural cooperatives in China that are partly subsidized by the government. Although the SSI policy has been formulated to guard the interest of small players in the industry, it's time we looked at the long list of 506 items for serious revision, urgently. Otherwise this policy would act as an unnecessary safeguard for categories which would actually benefit from healthy competition, and thus, would provide customers with more choice, better products and better price. Policy on Foreign direct investment (FDI) The current government policy is FDI up to 51% in retail trade of Single Brand products would be subject to the following conditions: i. Products to be sold should be of a Single Brand only. ii. Products should be sold under the same brand internationally. iii. Single Brand product-retailing would cover only products which are branded during manufacturing. Retail: 100% FDIThe FDI upto 51% in trade of single brand should be modified to 100% FDI in multiple-brands. The sentiment towards 100 percent FDI in retail sector is gathering pace. The proposed FDI norms will open up strategic investment opportunity for global retailers, who have been waiting to invest in India. This may have a significant impact on the current arrangement of foreign players. This policy will require investment from retailers in areas of supply chain, especially for perishable products, thus helping farmers to get better income leading to an inclusive growth in the country. Given the large number of SKUs that retailers stock Small and Medium Enterprises (SME) sector is also set to gain from this move due to preference given by retailers to private label brands. The move will also encourage smaller suppliers to take their products to a national platform that they could not previously manage due to lack of an organised supply chain of their own. This policy will also open up avenues for attracting, developing and retaining talent. Contract manufacturers would also benefit from these policy changes. Retail: 100% FDI

State Governments
The respective state governments in various states within India have a key role to play in the development of the retail sector in the country, as many of the key policy formulation decisions fall in their domain. These policy decisions will play a vital role in significantly easing the constraints

under which the retail sector is currently operating in various Indian states. The state governments need to take up the following initiatives to facilitate the development of the Indian retail sector: Amend labour laws Undertake real estate reforms Undertake taxation reforms Amend state level policies to simplify retail operations set-up and supply chain practices Improve logistics and utilities infrastructure Develop IT infrastructure

Of the above mentioned initiatives, the first four have been accorded the highest priority while the last two have been given medium priority. Amend labour laws The government should amend the Shops and Establishment Act to allow flexibility in working hours, including seven-day operation of stores. It should also simplify hiring / firing rules to promote at-will employ- ment and performance measurement systems. It is an area that directly controls industry's ability to respond to growth opportunities, and hence, it requires a transformation that recognizes the growth opportunity and its impact on the country's economy. Currently, the industry is struggling to capitalize on the growth prospects and is unable to maximize its resource potential. In an environment where the sec- tor is leading the country's economic growth, this scenario is alarming and should prompt the authorities to urgently make the necessary amendments. Undertake real estate reforms A key initiative to be undertaken by the respective state governments is to bring about reforms in the real estate sector. This would entail reforming land use regulations, including Urban Land Control Ceiling and Regulation Act and Rent Control Act to simplify usage and increase transparency for retail operations in renting places and utilization of those premises. It would also require the state governments to reduce peak stamp duty on commercial property to 2 per cent to promote healthy registration practices. There is definitely a case for reduction of stamp duty when one compares that even the lowest Indian stamp duty is 5 per cent, whereas in countries like the UK, the stamp duty for retail property ranges from 0 to 4 per cent. Another step for easing registrations would be to computerize land records so as to allow visibility of all registrations, thus clearing any potential issues in land ownership and legality. The governments should also undertake detailed city planning exercises, with adequate commercial space allocation. Currently, Indian cities lag behind in allocating dedicated space for commercial and retail activities. For example, in Delhi the future master-plan keeps aside only 16 per cent of planned space for commercial purposes, as compared to over 20 per cent in markets like the UK and Hong Kong. Thus the government would be taking a step in the right direction and provide an incentive to retailers to set up shop by allocating a substantial portion of city space for retail purpose. Undertake taxation reforms The state governments should implement a uniform VAT policy, and deploy resources to increase collection efficiency. Also, octroi and entry tax should be abolished across all states.

State level policies should be amended to simplify retail operations set-up and supply chain practices. They should rationalize license requirements from the existing 37-45 licenses to moderate levels, reduce con- tact points and permit license reuse; this will help faster start-up of retail operations and release blocked capital. They should also amend the APMC act and adopt the model act suggested by the Centre; this will improve agricultural product pricing by allowing efficient market driven practices. The Government urgently needs to recognize the fact that players in the industry leading the country's economic transformation are plagued with different tax structures across various states, which restricts them from being competitive in their own country. Simplification of tax structure and implementation of a uniform VAT policy will not only help the retail players achieve higher levels of competitiveness, but will also have the government at state and central levels experience a nextlevel growth and transformation that will lead India into a 'Developed Nations' league. Improve logistics and utilities infrastructure The state governments should consider the public-private partnership model for road and rail infrastructure, including construction and maintenance, thus sharing the responsibility of improving logistics and infrastructure with the private sector. They should also increase power generation capacity and transmission capability in their respective states, thus creating a conducive environment for businesses to flourish. Another area of focus should be towards modernizing airports and improving their freight handling capability. Other infrastructure improvement avenues such as promoting rain water harvesting and developing plans for efficient water utilization should also be explored. Infrastructure in India is a far cry from what one of the world's fastest growing economies should ideally have. And with the pace at which the retail industry in India is growing, infrastructure issues are bound to pose a significant challenge to growth prospects. The state governments have no option but to make sincere efforts towards improving the logistics and utilities infrastructure. State governments' role will be extremely critical to support growth over the next few years. Develop IT infrastructure Developing IT infrastructure in their respective states should be another area of priority for the state governments. This would entail increasing internet penetration and reducing access costs; developing a model similar to the telecom sector. The state governments should also promote real time linkages throughout the retail supply chain to minimize wastages and support faster decision-making. It will not only ensure a much greater degree of effectiveness and efficiency in processes, but will also take the advantages and benefits of the retail boom to the interiors of India. While the industry plays its part of achieving higher levels of growth and competitiveness, Governments should make it accessible and available to the masses - the impact will be positive and twofold - firstly, an increase in the standard of living of the rural population, and secondly, the retail industry will become even more competitive when it has a broader market space.

Initiatives for select state- Maharashtra