Preamble: Contribution of retail in India’s growth story

Retailing in India is one of the significant pillars of the economy and accounts for approximately 10% of
the country’s GDP. Indian retail market is the fourth largest globally (after the US, China and Japan) and
provides vast direct and indirect employment opportunities, accounting for nearly 8% of the country’s
direct employment. The expansion and growth of the retail sector are likely to offer new benefits to
primary producers and consumers.

The Indian Retail Industry has immense potential as India has the second-largest population with the
rising affluent middle class, rapid urbanisation, young consumer base and rapid growth of the internet.
Driven by these factors, the total Indian retail market is expected to grow from ~USD 790 billion in 2017 to
~USD 1.2 trillion by 2021, at a CAGR of nearly 11 per cent per annum. The retail sector in India is
dominated by small, single owner/mom & pop retail trade (also called unorganized due to lack of scale
and size), constituting nearly 90% of the total retail value, which is in contrast with the developed
countries where the organised retail/chains account for more than 80% of the total retail trade. The
modern or organised retail market in India is expected to double its share in the overall retail market from
current ~9 per cent to nearly 18 per cent by 2021-22, growing at an exponential rate during the period
while the traditional trade is expected to grow at ~6.5 per cent.
Challenges faced by Indian Retail

The high cost of real estate, deep discounting from e-tailers, non-availability of skilled labour in rural
markets are a few challenges that may hinder the growth of the retail industry, some key issues affecting
the sector are listed below:
o Inefficient supply chain management: Since Indian retailing is dominated by the unorganized sector,
there is a lack of an effective and efficient supply chain system. Concentration must be vested on
improving the supply chain management, which in turn would bring down inventory cost, which can
then be passed on to the consumer in the form of low pricing
o Developing competencies at par with multinational retailers: Mom & pop stores are increasingly
fronting competition from foreign brands. These traditional shops are facing difficulty in meeting
international standards and building a competitive edge which would help them sustain against the
rapidly expanding organized retail outlets and provide a domestic fillip to the sector
o Lack of availability of credit: Retail, especially the unorganized segment, is handicapped by a lack of
access to formal credit from commercial banks which in turn hampers the modernization of the sector
and building of the competitive edge
o Limited access and means for technology development: Small scale of operations denies domestic
retailers the means to leverage technology in the way the sector and the consumers need. This lack
restricts the modernisation process and acts an impediment to the economic growth
o Lack of proper infrastructure: There is a lack of proper infrastructure i.e. lack of proper access to
transportation, packaging, distribution processes
o Lack of skilled manpower: The unorganized sector is unable to recruit skilled manpower due to the
lack of implementation of labour laws and social security of the labours in this sector
o Bureaucratic delays and various governmental approvals and clearances involving different ministries
o Absence of single-window mechanism for faster clearances

Recommendations:

 Easier credit facilities through the formal banking sector for rural unorganized stores to develop
their stores
Easier credit facilities must be provided through commercial banking units to the unorganized
sector to increase investment, sustain employment, provide a more trained and skilled workforce
for more personalized customer experience and lower the prices while building a competitive
edge
 Regulations restricting real estate purchases and cumbersome local laws
Extending industry status to the entire real estate sector will help developers to raise funds at
lower rates and, in turn, reduce their project costs - which will help in expanding retail space.
Additionally, the inclusive growth of the real estate sector will help in generating employment
across various sectors which are directly or indirectly connected augmenting the sector
 Lack of infrastructural facilities
Indian retail growth has suffered owing to the lack of investments in physical and digital
infrastructure. Storage and logistics infrastructure, uninterrupted digital penetration and
 connectivity, reefer vehicles and distribution, etc. are in an urgent need of up-gradation. Lack of
infrastructure facilities results in poor customer experience and – inadequate working conditions
for the workers which in turn results in higher cost of production, leading to higher prices in the
sector

 Lack of comprehensive single-brand retail policy to enable sourcing from India for global
operations
FDI norms in Single Brand Retail Policy enables Local sourcing from India for global operations
but it is only limited to 5 years whereas this norm should be extended in perpetuity. Since high-
end quality products have a global manufacturing eco-system wherein different parts are
manufactured in different parts of the world, it is economically unviable for these entities to source
and sell locally in India. Therefore, preventing India from being an attractive investment
destination. This investment potential coupled with an opportunity to be part of the Global Value
Chain could boost our economy.
 Incremental Sourcing Norms for Single Brand Retail
FDI norms for Single Brand Retail follow complicated incremental sourcing criteria for global
operations that are often misused at the cost of the growth of India’s economy.
o For the youth to avail the upcoming opportunities and pursue a promising career in the retail
industry, it is important they equip themselves with the right training as different lines of retail
business require distinct skill-sets.
 Policy level Inputs to make Retail sector vibrant and attractive:

A. Appointment of a nodal officer to facilitate licensing, development and growth of ‘retail enterprises’. A
separate window to be created wherein facility will be made available online for registration and single
window clearance as well as payment of fees and such procedural requirements as defined. All existing
‘retail enterprises’ will also be registered on this site. The nodal officer shall coordinate with all the
departments and ministries of the country and liaise with the relevant licensing authorities, on behalf of the
retailer, so that these licenses may be procured faster and more efficiently as well as have the authority to
provide deemed grant of approval/renewal subject to completion of procedural requirements within 3
months from the date of such deemed approval. The nodal officer shall also look at Laws and Rules which
have outlived their utility and suggest changes within appropriate timelines.
B. Relaxations of rules under the Shops and Establishment Act - regarding working hours, work shifts
and employment of part-time workers and maintenance of records.

i. Retail shops, retail enterprises, warehouses & distribution centres shall be allowed to stay open every day
of the year to cater to the needs of the working class and other class of customers provided the
employees are given compulsory weekly offs on a preferential basis.

ii. Retail enterprises dealing in all goods and commodities shall be allowed to operate between 5 a.m. and 2
a.m. The enterprise can remain open 24/7 for logistics and supply purposes to meet necessary
operational requirements.

iii. For Retail enterprises, a minimum of 10% of the workforce shall comprise of women. Women employees
shall be permitted to work beyond 8.30 p.m., provided necessary precautions are taken for ensuring their
safety during such time and provisions made for dropping them to their respective homes in the event they
work till late in the night (between 8:30 pm and 7 am). The decision shall remain with the respective
female employee as to whether she chooses to work such shifts or not. Every retail unit must declare in
advance the number of such employees and arrangements made therein to the Government.

iv. Retailers can maintain records for attendance and salary and other employee-related records required
under various labour laws either in physical form or in electronic form, and to accept returns in electronic
form will be made in line with the progress of computerization in the Labour Department.

v. Digital/Electronic Record: The provisions of Section 4 of Information Technology Act, 1961 shall be
implemented by the Labour Department to permit digital record, digital compliance, digital reporting and
should also authorise e-mail communication with return acknowledgement.

vi. Retailers will be allowed relaxation under Section 30 of Act to modify the number of leaves under each of
earned, sick, casual and government holidays list, provided the total number of leaves offered per year is
more than those offered under the aforementioned section.

vii. Retailers shall have an option for self-certification and filing of consolidated annual returns under various
Acts administered by the Labour Department as below:

1) The Shops and Establishment Act, 1988

2) The Minimum Wages Act, 1948
3) The Payment of Wages Act, 1936
 4) The Apprentices Act 1961
5) The Contract Labour (Regulation and Abolition) Act, 1970
6) The Child Labour (Prohibition and Regulation) Act, 1986
7) The Payment of Gratuity Act, 1972
8) The Equal Remuneration Act, 1976
9) The Payment of Bonus Act, 1964
10) The Employment Exchanges (Compulsory Notification of Vacancies Act), 1959
11) The Workman’s Compensation Act, 1923
12) Inter-State Migrant Workman (Regulation of Employment & Conditions of Services), Act, 1979
13) The Factories Act, 1948

viii. Restriction on part-timer workers/employees shall be removed, subject to adherence of minimum wages.
Retailers should create as many employment possibilities as possible. The policy should allow employees
the flexibility of working in shifts or duration best suited to their personal needs. The same will ensure
balance in their personal life and work. Proposal to pay part-time employees on a per hour basis of the
minimum wages and provide an exemption to such employees from the applicability of other labour law
compliances and requirements. Out of total manpower, 25% of the manpower should be allowed to hire on
a part-time basis.

ix. Uniformity in the applicability of Trade License across all states to strengthen compliance. Replace
requirement to obtain store/branch level Trade Licence with a state-level license for establishments having
multiple branches/stores with facility and provisions to add/remove new/closed stores/branches within the
state under the umbrella license granted to the organisation.

x. Current Labour Laws (with exception to PF and ESIC) defines individual establishments (in case of retail
each store) as a Unit of Compliance. For large retailers having multiple stores, the definition raises
compliance challenges with duplication and increased complexity. Proposal to enable employers with
options to choose from Enterprise, Business Division or Establishment to aggregate their compliances.

xi. The Proposed Labour Codes (i.e. Code on Wages, Industrial relations, Social Security and Safety, Health
and working conditions) is certainly a welcome move towards simplification of Labour Law Framework.
However, a step towards the introduction of transparent and replacement of manual paper submissions
with digitization is a much-needed initiative.

Prosecution and Penalty: Protection from prosecution under various labour acts Prior permission from the
head of the department (COL) before filing any prosecution under various labour acts, this can lead for a
reduced number of prosecutions. For the first two defaults, there should be a provision of compounding
and in case of repetition, the prosecution can be done.

C. Inclusion of Food and Grocery Business in Essential Services – Food and Grocery Retailers are
entrusted with the responsibility of delivering certain services to citizens which, if obstructed, affect the
normal life of people. Sometimes occurrences like bandhs/ protests result in the compulsory shutting of
retail establishments. This leads to disruption of product access to citizens on the one hand and huge
wastage of produce on the other hand for retailers and ultimately to the nation.

Food and Grocery Business retail shall be considered as ‘Essential Services’ and included under relevant
Act considering the need of the society at large because of the changed working timings and lifestyle.
D. Relaxation of stocking limit under the Essential Commodities Act. (Esscom) (except those
specifically prohibited by the Indian Govt. from time to time)
As per the direction received from the Ministry of Consumer Affairs, Food and Public Distribution,
Government of India Vide circular no. S-16/02/2015-ECR&E dated 29 th April, 2015 which states:

“The Central Government is of the view that Retailer of Multiple Outlet or Large Departmental Retailers /
Stores may be exempted from the purview of stock holding limits, for the quantity to be stocked for sale
through the multiple outlets and Departmental stores to keep prices of essential commodities under
control. This exemption may apply to all the essential commodities scheduled under the Essential
Commodities Act, 1955. Therefore, it is advised that the Retailer (Multiple Outlet) and Departmental
Retailers may be considered for exemption from stock limits while submitting a proposal to the Central
Government.”

In line with the direction received from the Central Government in the above said circular, the stocking
limits prescribed under various Essential Commodities orders will be removed on a case to case basis
depending on the particular circumstance prevailing at that time.

Dept. of Food and Civil Supplies will review order issued under Essential Commodities Act or will increase
stocking limits specified under these orders. The following points will be considered:

i. The implementation of ESSCOM Orders’ (Essential Commodities) shall be rationalized basis the
experience gained in time.

ii. The permissible stocking limits for which license is required shall be enhanced.

iii. The procedure for getting a license and its renewal shall be reduced and simplified.

iv. Currently, under ESSCOM, licenses have to be applied commodity-wise, and these changes frequently
requiring trade to update itself on Gazette Notifications. Also, commodity limits are mentioned zone-wise
(population-based town/city/zone classification), and category-wise (wholesale / retail / processing, etc.)
making implementation complex and unfriendly. The procedures shall be rationalized and simplified.
v. The stocking limits in godowns in rural areas shall be higher as space for godowns in urban areas is costly
/ not viable.
vi. Greater storage limits for retail chain stores based on monthly sales considering that these stores have
high footfall requiring greater storage limits provided that they are on the First-In-First-Out (FIFO)
Inventory valuation method.
E. Pragmatic Implementation of Packaged Commodity Regulations

i. Label declarations of pre-packaged commodities: Most of the SKUs (stock-keeping units) /

commodities stocked and sold by retailers are in pre-packaged form, which needs to be compliant with the
label declarations, provisions of the Legal Metrology Act, 2009 and the Legal Metrology (Packaged
Commodities) Rules, 2011. Thus, all pre-packaged commodities should have certain declarations as
specified by the Act & Rules.
 ii. Since retailers are not involved with the labelling of goods at any stage, it is not economically feasible for
the retailers to ensure compliance with the rules for each product. The primary responsibility should vest
with the entity engaged in labelling and packaging the products.

F. Ease of conversion of land & exemption of conversion charges: Since Retail trade is a non-polluting
industry, zoning regulations to be relaxed for the conversion of industrial land to retail and payment of
conversion charges to be exempted or reimbursed. This will apply to leased land and building premises as
well; provided the lease is valid for a minimum period of 25 years. The exemption will also include a
waiver of processing fee for providing NoC to concerned departments, HMDA or Gram Panchayat.

G. Distribution centres to be recognized as an ‘Industry’ - Giving industry status will help warehousing
become eligible for all support and incentives as applicable to other industries. Such a step would provide
support in accessing the financial system. Warehouses and distribution centres used by retailers are
locations that aid industry and commerce. They also provide employment opportunities. These
establishments need to be promoted to develop a robust and efficient logistic set up. Such a set up would
help reduce wastage. Recognition of this activity is an essential backbone of retail and consumption in the
state.

With the entry of many conglomerates into the organized retail sector, the Indian warehousing landscape
is getting redefined from the conventional concept of ‘godown’ - a mere four-wall-and-shed – to modern
setups that facilitate better stock movement and reduction in product wastage, especially food. This is
achieved with high levels of automation, multi-rack and palletization, infrastructure, etc. However, the
prerequisite is the availability of facilitating space. Such space is not easy to come by as the only option
available today is to set up such warehouses as commercial properties which attract high property rates,
taxes and levies. This cannot be tackled unless setting up of distribution centre is seen on the same lines
as setting up of an industry.

The Government will allow organized retailers to set up their warehouses on rural land as agricultural
production contributes to a significant portion of the merchandise sold in retail stores. The Government will
look at a policy encouraging setting up of world-class Warehouses on PPP basis.

H. Retail Incentives –
a. 100% reimbursement of Stamp duty and transfer duty paid by the enterprise on purchase / lease of
land / building meant for mega retail project.
b. Fixed power cost reimbursement @ Rs.1.00 per unit for a period of 5 years from the date of
commencement of operations.
c. 50% Reimbursement of the cost involved in skill up-gradation and training the local manpower
limited to Rs.2000 per person.
d. 25% subsidy on specific sustainable measures limited to Rs.5.00 Lakhs.
e. Mega retailers to be adequately incentivised to develop and redevelop local shopping complexes.
Retail co-creation or retail clusters can be developed across spaces commonly frequented by
consumers like railway stations, bus terminals, etc. Government to work hand in hand with mega-
retailers to facilitate the process while providing incentives, which would be decided on a case to
case basis.
f. The Government will also extend tailor-made benefits to Mega Retail Projects to suit particular
investment requirements on case to case basis taking into account the gestation period, locational
aspects, technology automation, project’s importance to the country’s economic growth and its ability
to generate large scale employment for people or revenues for the country.
 I. According the Industry Status

a. According Retail, the “industry” status would provide the sector with support in accessing the
financial system leading to more investment in the sector and also allow the critical sector to be
eligible for all support and incentives as applicable to other industries.

Conclusion