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FDI in retail: Only 4 per cent is organised, says CII

CII said in a report that the share of the organised sector in India's retail industry was "abysmal" when compared to other developing countries like China, Thailand, Malaysia and Indonesia.

IANS | November 30, 2011 | Updated 18:37 IST

The share of the organised sector in India's $400-billion retail industry is miniscule - at about 4 per cent - leaving scope for growth and foreign equity investment, according to an industry report on Wednesday.

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The Confederation of Indian Industry (CII) said in a report that the share of the organised sector in India's retail industry was "abysmal" when compared to other developing countries like China, Thailand, Malaysia and Indonesia.

Organised sector accounted for just four per cent of India's retail market, while it was 20 per cent in China, 30 per cent in Indonesia, 40 per cent in Thailand and 55 per cent in Malaysia, as per 2006-07 data.

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The share of organised sector has further increased in these countries in the subsequent years.

CII said the infusion of equity capital by foreign investors will boost organised retail industry in the country without having any adverse impact on the unorganised segment.

It said the FDI will have a positive impact on the economy and benefit all major stakeholders, including farmers, small and medium enterprise producers, workers, employees and consumers.

The cabinet last week gave the green signal to allow up to 51 per cent FDI in multi-brand retail and raised the limit in single-brand retail from 51 to 100 per cent.

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This has created a political storm in the country leading to logjam in Parliament, which could not run at all for the first seven days of the 21-day winter session.

However, industry forums have welcomed the move.

"Though the move has generated a lot of speculation from all sections, it must be noted that as countries develop, the share of organised retail vis-a-vis the total retail business in the country greatly increases," CII said in its report.

Global retailers in wait-and-watch mode

CII also brushed aside job loss fears.

"A lot is being said about the displacement of small producers and small scale industries with the coming of FDI. However, studies suggest otherwise," it said.

In 1990s, with dereservation of small scale industries (SSIs), even though there was speculation of their decline, the employment generated by registered SSIs grew at four per cent in the first decade of the post-liberalisation era (1993-1994 to 2003-2004), and accelerated to 19 per cent in the five year period between 2003-2004 to 2008-2009.

"Organised retail similarly holds great potential to generate employment for a large section of the population directly as well as indirectly in several sectors," it said.

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