Organised retail vital to avert supply crunch, says Icrier

Strongly favouring the entry of organised retail, the economic think-tank, Icrier, said an absence of organised players would lead to a supply crunch in the retail market. The premier research body mandated to study the impact of organised retail said direct sales to retailers raise farm income by more than 50%. Icrier also suggested framing of competition rules to prevent collusion and predatory pricing.

The report is being officially unveiled on May 26, when it will be submitted to the department of industrial policy and promotion (DIPP).

According to government officials, the Icrier report has concluded that the unorganised retail sector would grow at about 10% yearly, touching about $500 billion in the next four years. Demand will still be higher, creating a demand-supply mismatch. This can be filled by a spurt in organised retail.

Organised retail is now growing at the rate of 45-50%, and this would raise its share in total retail to almost 15%, from more than 3% now.

The report has also suggested a host of policy measures to create a level-playing field between organised and unorganised retail, through active government help, such as cheap and easy credit to improve competitiveness of the unorganised segment.

The report has made a set of recommendations to minimise the erosion of unorganised retail through government participation, citing case studies from South-East Asian countries, and to regulate the rise of possible monopolies in the future.

Icrier said the low access to institutional credit to unorganised retail is alarming and has made suggestions on strengthening their access to institutional credit.

Amongst the unorganised sector, there is a strong desire to continue with the trade; as high as 40% of the respondents want their children to continue the business, the report said.

Contrary to popular perception, intermediaries (middlemen) are not negatively impacted by the organised trade, though fruits & vegetables and apparel intermediaries had felt a little adverse impact in the first few years. Also most intermediaries are optimistic about their business opportunities with retail chains increasing in number.