FDI in retail: Unnoticed facts are larger than debated issues While there has been a lot of media

coverage on the hot debate on the benefits and pitfalls of allowing 51% FDI in multi-brand retail, several important issues have not been properly highlighted either by the Government or by those opposing the move. A leading retail consultant the Bangalore-based Asipac - has come out with a white paper covering some of the important issues related to FDI in retail. The white paper touches upon issues like the impact on direct and indirect tax revenues for the exchequer, a realistic estimate of the foreign investment India can expect and the number of kirana .shops that will actually be affected. The white paper highlights some of the less known facts like: 1. By 2015, Urban India will have 423 million people and will need 635 million sq.ft. of space for food retail (includes pharma, beauty & FMCG), compared to 511 million sq.ft. Today (total space occupied by modern trade and neighbourhood kiranas). 2. Assuming that the organized sector (including existing players) captures7.5% market share in 4 years, we will have 47.63 million sq.ft. Of hypermarkets, supermarkets and pharmacies by 2015, compared to 15.3 millon sq.ft. today.Even if foreign retailers capture 50% of this and have 23.82 million sq.ft., at average ownership of 1200 sq.ft.per kirana owner, this will only affect 19,850 businessmen and not crores of businessmen, as has been hyped. 3. Theres much more to retail than just food & grocery. 423 million urban Indians will need 3680 million sq.ft.of spaces for non-food retailing. Assuming 20% market share, the organized sector is estimated to have 736 million sq.ft. of non-food retail space. 4. Thus, organized retail will have a maximum of 783.63 million sq.ft. (47.63 + 736.00). 5. At one direct job for every 180 sq.ft.of retail space, 4.354 million

people will be employed across the 783.63 million sq.ft. of space occupied by organized retail. With 1.5 indirect jobs (in supply chain and logistics) per direct job, it adds up to a total of 10.89 million jobs. 6. A vast majority of the employees will be primary school drop-outs. Organized retailers will give those benefits such as PF, ESI and insurance, and hone their skills through training &development. What does the kirana do to increase Indias Human Development Index? So, FDI = HDI. 7. Why would any political party want to favour 19,850 small businessmen over 10.89 million youth who dont have many other other job opportunities? 8. At estimated sales of Rs.2000 per sq.ft. per month in 2015, the 783.63 million sq.ft.of organized retail space will generate revenues of Rs. 18.807 trillion p.a. and taxable profits of Rs.564 billion (assumed at only 3% of revenues). 9. This translates to Rs.2.594 trillion in GST collections (@ 16% GST) and Rs.174.28 billion in corporate income tax. The government is losing minimum 50% of this potential tax revenue because half of the business of the unorganized retail trade is probably escaping the tax net. 10. Organized sector will have 780,000 managers earning average taxable salary of Rs.1 million p.a. This will generate at least Rs.195 billion of additional personal income tax collections. 11. The total Rs.1576 billion in additional tax collections (Rs.1294 billion in GST [50% of total] + Rs.87 billion in corporate income tax [50% of total] + Rs.195 billion in personal income tax) translates to an increase of more than 11% in the tax collection of the centre and states, wiping out the revenue deficit and making India a revenue surplus economy. 12. Of the 783.63 million sq.ft. of organized retail space, about 103.9 million sq.ft. already exists so we are talking about 680 million sq.ft. to be added anew. This will need infrastructure investments of Rs.4.76 trillion (at an average Rs.7000 per sq.ft. at 2012-2015 costs, for building

construction, interiors and shop fit-ins) and Rs.1.904 trillion in inventories (@ Rs.2800 per sq.ft.), or a total investment of Rs.6.664 trillion ($128 billion). 13. If 50% of this is foreign investment (by foreign retailers as well as financial investors), we are talking about FDI of $64billion in four years, or $16 billion p.a., 80% increase over the actual inflows of fiscal 2010-11. This will help the Rupee to bounce back. 14. Most importantly, about $180 billion will get converted from the black market economy to the accountable economy, and we may need a much smaller Lokpal authority