Budget 2011: Retail Sector Calls for Industry Status Close.

KOLKATA: If organised retail is to grow at its own projected pace, the Union government needs to accord it an industry status first. It needs to also implement the goods and service tax ( GST), simplify taxes and invest on infrastructure development.

These were the key budgetary recommendations of a star-studded panel comprising doyens of the retail sector, who discussed threadbare the topic "Revving up Retail: Opportunities, Challenges and Asks" - a pre-budget panel debate, organised by The Economic Times in Kolkata on Friday.

The discussions, moderated by Dr Prashant Mishra, professor marketing and admissions chairperson at IIM, Calcutta, comprised honchos like Rakesh Biyani, joint managing director, Pantaloon Retail (India) Ltd, Vijay Jain, CEO, Orra, Harkirat Singh, managing director, Woodland, Rudra Kishore Sen, director, operations and business development (East), McDonald's India (North & East), Debashish Mukherjee, partner, AT Kearney and Harshavardhan Neotia, chairman, Ambuja Realty.

Gathered to hear the experts speak was an assortment of the city's top corporate leaders, industrialists and senior executives of the retail and consumer goods space. Challenges Rakesh Biyani flagged off the discussions by saying the biggest segment, fashion and clothing, has been down for the last 6-8 months due to the imposition of 10% excise duty on branded apparel which, along with an increase in input cost, has rocketed end prices by over 20%.

Biyani said that even home and electronics retail was weak due to rise in interest cost. However, food retail is perhaps the only business segment that is witnessing growth. Harkirat Singh said the service tax on rentals has increased product prices. "As a manufacturer-retailer, we have to face multiple taxes like VAT, excise and service tax which are squeezing out margins," he said.

Talking specifically about the jewellery industry, Vijay Jain said that despite it being a $ 45-billion industry, there is no recognition from the government. "Operating costs are high, with just 8-10% gross margins in gold retailing on top of a high gestation period," said Mr Jain.

While organised retailing is indeed going down to the masses, the story has not changed much in terms of the cost of doing business and difficulties in starting a store, said Debashish Mukherjee of A T Kearney. "Policies should make the business incrementally viable," he said.

But one of the biggest challenges which retailers are facing today is real estate. Rentals in the posh high streets of Mumbai and New Delhi account up to 35-50% of sales, said Mr Biyani. Way forward Countering the view, Harshavardhan Neotia said that since availability of land was limited in the heart of city, rentals are bound to be high. "The way to reduce rentals will be to develop infrastructure in smaller cities and outskirts of metroes, so that organised retail can spread there," he said.

Creating a hangout destination in such areas will reduce rentals, since malls are now evolving from a shopping space to a family outing space, Mr Neotia said.

Rudra Kishore Sen of McDonald's India added that now since organised retailing was entering smaller towns which have huge aspiration levels, supply chain issue will become more important.

Source : economictimes.indiatimes.com