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Volume 4, Number 2, April – June’ 2015

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International Journal of Retailing & Rural Business Perspectives © Pezzottaite Journals. 1551 |P a g e

FDI IN RETAIL: WHAT IT ENTAILS FOR URBAN INDIA?

Dr. Sumana Chatterjee9

ABSTRACT

An important aspect of the current economic scenario in India is the emergence of organized retail. Earlier in Sep 2012, decision of Govt. of India (DIPP Circular No. 1 of 12 issued on 10 Apr 12) to permit 51 % FDI in multi-brand retail trading

(MBRT) racked up unprecedented controversy in political, business, economic and social circles all over the country There has been considerable growth in organized retailing business in recent years and it is poised for much faster growth in the

future. Major industrial houses have entered this area and have announced very ambitious future expansion plans.

Transnational corporations are also seeking to come to India and set up retail chains in collaboration with big Indian companies. However, opinions are divided on the impact of the growth of organized retail in the country. The Indian retail

sector is not only very vast but also varied in its composition. The huge population of the country, the rise of the middle class and its purchasing power and a huge market for foreign investment in India are factors that have invoked the interest of the

foreign investors. However, it becomes imperative to see what this FDI would entail for the retail sector when it is analyzed by keeping the informal economy at the centre of the debate.

KEYWORDS

FDI, Retail, Multi Brand Retail Trading etc.

INTRODUCTION

An important aspect of the current economic scenario in India is the emergence of organized retail. Earlier in Sep 2012, decision

of Govt. of India (DIPP Circular No. 1 of 12 issued on 10 Apr 12) to permit 51 % FDI in multi-brand retail trading (MBRT)

racked up unprecedented controversy in political, business, economic and social circles all over the country There has been considerable growth in organized retailing business in recent years and it is poised for much faster growth in the future. Ma jor

industrial houses have entered this area and have announced very ambitious future expansion plans. Transnational corporations are also seeking to come to India and set up retail chains in collaboration with big Indian companies. However, opinions are

divided on the impact of the growth of organized retail in the country. Concerns have been raised that the growth of organized retailing may have an adverse impact on retailers in the unorganized sector. It has also been argued that growth of organized

retailing will yield efficiencies in the supply chain, enabling better access to markets to producers (including farmers and small

producers) and enabling higher prices, on the one hand and, lower prices to consumers, on the other.

This study is concerned with the impact of economic policies, especially those associated with the liberalization of trade and investment, and the dynamics of macroeconomic change, on employment and labour markets, specifically in the retail trade

sector, in urban India. The aim is to arrive at some understanding of the differentiated impacts on employment and various other socio economic aspects in the urban economy. The Indian retail sector is not only very vast but also varied in its composition. The

huge population of the country, the rise of the middle class and its purchasing power and a huge market for foreign investment in India are factors that have invoked the interest of the foreign investors. However, it becomes imperative to see what this FDI

would entail for the retail sector when it is analyzed by keeping the informal economy at the centre of the debate.

RETAIL IN INDIA: REGULATORY FRAMEWORK

Progress through Years

1997 100% FDI being permitted in cash and carry wholesale trading under the government approval route.

2006 FDI permitted in cash and carry. Wholesale trading comes under the automatic route.

FDI in single brand retail was permitted to the extent of 51%. 2010 DIPP had put up a discussion paper proposing FDI in multi brand retail.

2011 Union Cabinet approves:

51% FDI in multi brand retail,

Increasing the FDI limit in single brand retail to 100%,

Implementation was deferred for evolving a broader consensus.

2012 In January, DIPP notified the decision to allow FDI in single brand retail.

In September, union cabinet approves the FDI limit in Multi Brand Retail of 51%.

9Assistant Professor, Department of Business Economics, Faculty of Technology and Engineering, The M.S. University of India,

Gujarat, India, [email protected]

mailto:[email protected]





Single Brand Retail Trading

Earlier Now

For Single Brand Retailing Trade sector- only 51% FDI permitted-subject to approvals and

conditions such as:

Products should be of Single Brand only

Products should be under the same brand in one

or more countries if sold outside India.

Single Brand products should be branded

during manufacturing,

The foreign investor should be the owner of the

brand.

FDI in single brand retail trading is permitted up to 100% with Govt. approval:

Products to be sold should be of Single Brand only,

30% sourcing is to be done from micro and small industries

(investment in Plant and Machinery not exceeding US $1mm),

This condition will ensure that the SME sector including artisans,

craftsmen, handicrafts and cottage industry gets the benefits of

liberalization.

Multi Brand Retail Trading

Earlier Now

FDI in Multi

Brand Retail Trading was not

allowed.

FDI in Multi brand retail trading is permitted up to 51% subject to approvals and conditions such as:

Outlets to be set up-only in cities with a population of more than 1 million(within a 10 km range),

Minimum investment by the foreign investor-US$100mm and at least 30% of the procurement of

manufactured\processed products shall be sourced from ‘small industries’(investment in Plant and

Machinery not exceeding US $1mm),

Sourcing requirements will be checked together for the first five years- after that on an annual

basis,

Retail trading by means of e-commerce not permissible,

At least 50% of total FDI brought in shall be invested in ‘back-end infrastructure within three

years of the induction of the FDI. EVOLUTION AND STRUCTURE OF THE INDIAN RETAIL MARKET

Sector Profile

The Indian retail industry has experienced high growth over the last decade with a noticeable shift towards organized retailing

formats. The industry is moving towards a modern concept of retailing. The size of India's retail market was estimated at US$ 435 billion in 2010. Of this, US$ 414 billion (95% of the market) was traditional retail and US$ 21 billion (5% of the market) was

organized retail. India's retail market is expected to grow at 7% over the next 10 years, reaching a size of US$ 850 billion by 2020. Traditional retail is expected to grow at 5% and reach a size of US$ 650 billion (76%), while organized retail is expected to grow

at 25% and reach a size of US$ 200 billion by 2020. The US-based global management-consulting firm, A T Kearney, in its Global Retail Development Index (GRDI) 2011, has ranked India as the fourth most attractive nation for retail investment, among

30 emerging markets. (DIPP) Special Features of the Indian Retail Market

The Indian trading sector, as it has developed over centuries, is very different from that of the developed countries. In the

developed countries, products and services normally reach consumers from the manufacturer/producers through two different channels:

via independent retailers (“vertical separation”)

directly from the producer (“vertical integration”)

In India, however, the above two modes of operation are not very common. Small and medium enterprises dominate the Indian retail scene. The trading sector is highly fragmented, with a large number of intermediaries. So also, wholesale trade in India is

marked by the presence of thousands of small commission agents, stockiest and distributors who operate at a strictly local level.

The Indian retail industry is generally divided into two major segments; organized retailing and unorganized retailing:

Organized Retailing - refers to trading activities undertaken by licensed retailers, that is, those who are registered for

sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and the privately owned

large retail businesses.

Unorganized Retailing - refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner

manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.





Organized vs. Unorganized Retail

In the developed economies, organized retail is in the range of 75-80 per cent of total retail, whereas in developing economies, the

unorganized sector dominates the retail business. The share of organized retail varies widely from just one per cent in Pakistan and 4 per cent in India to 36 per cent in Brazil and 55 per cent in Malaysia .Modern retail formats, such as hypermarkets,

superstores, supermarkets, discount and convenience stores are widely present in the developed world, whereas such forms of retail outlets have only just begun to spread to developing countries in recent years. In developing countries, the retailing business

continues to be dominated by family-run neighborhood shops and open markets. Therefore, wholesalers and distributors who carry products from industrial suppliers and agricultural producers to the independent family-owned shops and open markets

remain a critical part of the supply chain in these countries.

Table-1: Share of Organized Retail in Selected Countries, 2006

Sources: Authors Compilation

Global Experience of FDI in Retail

Table-2






Comparative Penetration of Organized Retail

Graph-1


PRESENT SCENARIO

The table below gives the category-wise growth of Indian retail, total as well as the organized sector, in recent years. While total retail sales have grown from Rs. 10,591 billion (US$ 230 billion) in 2003-04 to Rs. 14,574 billion (US$ 322 billion) in 2006-07,

which is at an annual compound growth rate of about 11 per cent, the organized retail sales grew much more at about 20 per cent per annum from Rs. 350 billion (US$ 7.6 billion) in 2003-04 to Rs. 598 billion (US$ 13.2 billion) in 2006-07. As a result, the

share of organized retail in total retail grew, although slowly, from 3.3 per cent in 2003-04 to 4.1 per cent in 2006-07.

Food and grocery constitutes the bulk of Indian retailing and its share was about two thirds in 2003-04 gradually falling to about

60 per cent in 2006-07). The next in importance is clothing and footwear, the share of which has been about 7 per cent in 2003-04 and rose to 9 per cent in 2006-07 followed by furniture, furnishing, appliances and services,

Table-3: Growth India Retail - Total vs. Organized

2003-04 2004-05 2005-06 2006-07 CAGR 2004-07 (%) India Retail (Rs. bn)

1. Food & grocery 7,028 7,064 7,418 8,680 7.3

2. Beverages 212 309 373 518 34.7

3. Clothing & footwear 777 993 1,036 1,356 20.4

4. Furniture, furnishing, appliances and services 512 656 746 986 24.4

5. Non-institutional healthcare 950 972 1,022 1,159 6.9

6. Sports goods, entertainment, equipment & books 212 272 308 395 23.0

7. Personal care 371 433 465 617 18.5

8. Jewellery, watches, etc. 530 610 655 863 17.7

Total Retail 10,591 11,308 12,023 14,574 11.2 Organized Retail (Rs. bn)

1. Food & grocery 39 44 50 61 16.5

2. Beverages 11 12 13 16 14.7

3. Clothing & footwear 168 189 212 251 14.3

4. Furniture, furnishing, appliances & services 67 75 85 101 14.8

5. Non-institutional healthcare 14 16 19 24 20.0

6. Sports goods, entertainment, equipment & books 25 33 44 63 37.0

7. Personal care 11 15 22 33 46.9

8. Jewellery, watches, etc. 18 24 33 49 40.5

Total Organized Retail 350 408 479 598 19.5

Share of Organized Retail in Total Retail (%) 3.3 3.6 4.0 4.1






Table-4: India Retail - Share of Categories (percent)

2003-04 2004-05 2005-06 2006-07

1. Food & grocery 66.4 62.5 61.7 59.6

2. Beverages 2.0 2.7 3.1 3.6

3. Clothing & footwear 7.3 8.8 8.6 9.3

4. Furniture, furnishing, appliances & services 4.8 5.8 6.2 6.8

5. Non-institutional healthcare 9.0 8.6 8.5 8.0

6. Sports goods, entertainment, equipment & books 2.0 2.4 2.6 2.7

7. Personal care 3.5 3.8 3.9 4.2

8. Jewellery, watches, etc. 5.0 5.4 5.4 5.9

Total Retail 100.0 100.0 100.0 100.0


While the overall share of organized retailing remains low, its share in certain categories is relatively high and in certain other categories quite low. Thus, for clothing and footwear, the share is already in the range of 19-22 per cent, for the category of sports

goods, entertainment, equipment and books the share is 12-16 per cent, and for furniture, furnishing, appliances and services, the

share is 10-13 per cent (Table 2.6). In contrast, the share of organized sector in the largest category of food and grocery retailing, although growing, remains just below one per cent.

Table-5: Share of Organized Sector in Total Retail by Category (%)

2003-04 2004-05 2005-06 2006-07

1. Food & grocery 0.5 0.6 0.7 0.7

2. Beverages 5.0 3.8 3.6 3.1

3. Clothing & footwear 21.6 19.0 20.4 18.5

4. Furniture, furnishing, appliances & services 13.0 11.4 11.3 10.2

5. Non-institutional healthcare 1.5 1.7 1.9 2.1

6. Sports goods, entertainment, equipment & books 11.6 12.1 14.4 16.0

7. Personal care 2.8 3.5 4.7 5.4

8. Jewellery, watches, etc. 3.3 4.0 5.1 5.6

Total Retail 3.3 3.6 4.0 4.1

Sources: Authors Compilation Spatial Distribution of FDI in India

Graph-2


States in favour of FDI in MBR Andhra Pradesh, Assam, Delhi, Haryana, J&K, Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman and Diu, and Dadra Nagar Haveli.

http://4.bp.blogspot.com/-wIniZu_HkQA/URtbgjiJ1uI/AAAAAAAABIk/LySvXGSEgoU/s1600/Indian+Retail+FDI.JPG





Until a couple of years ago, the Indian organized retail market was dominated either by the apparel brands or regional retail chains. However, the scenario has changed dramatically. The sector has attracted not only the large Indian corporates but als o

received the attention of large global players. As per Technopak Advisers Pvt. Ltd. estimates, investments amounting to

approximately US$ 35 billion are being planned for the next five years or so. Of this, about 70 per cent is expected to come from top seven players including Reliance Industries, Aditya Birla Group, Bharti-Wal-Mart, Future Group and others. In addition, it is

estimated that about 40 per cent of the total investments will be contributed by foreign players including Wal-Mart, Metro, Auchan, Tesco and many others, signifying the importance that the international community is attaching to the Indian retail

opportunity. In short, India is attempting to do in 10 years what took 25–30 years in other major markets in the world and shall bypass many stages of “evolution” of modern retail. India is likely to see the emergence of several “innovative” India-specific

retail business models and retail formats during the coming years.

Share of Investments by City

Of the US$ 35 billion investment being planned over next 5-7 years, almost all the investment (i.e. 93 percent) is slated for the

urban market. Though the investment is expected to be across the spectrum of all types of cities, a large proportion (more than 60 per cent) is slated for the top 25 cities falling in category A-type or above . AAA cities will include the markets of NCR Delhi,

Mumbai, and Kolkata, while AA cities will include the metros including Bangalore, Chennai, Hyderabad, Pune, and Ahmedabad. A typical A-class city will include cities like Surat, Nagpur, Indore, Vadodara, etc., while B+ cities will be represented by Nashik,

Rajkot, Agra, Jallandhar, etc. Kota, Bhubaneswar, Bilaspur will be a B-class cities, while Sonepat, Alwar, Tumkur, etc., will

categorized as C-type and D- type cities. Investment Estimates by City Category (%)

Graph-3


Even if growth is more conservative than estimated, the spillover effects of this rapid expansion could be felt by many other sectors of the economy. A report published by Knight Frank India in May 2010 looks at the question of land and available retail

space. It estimates that, during 2010-12, around 55 million square feet of retail space will be ready in the major cities like Mumbai, the national capital region (NCR), Bengaluru, Kolkata, Chennai, Hyderabad and Pune. Furthermore, between 2010 and

2012, the organized retail real estate stock is expected to grow from the existing 41 million square feet to 95 million square feet.4 Arguably, this could drive up real estate prices, with consequent knock-on effects.

FDI IN RETAIL: WHAT IT ENTAILS FOR URBAN INDIA

Determination of exact employment generation through FDI in retail faces following problems:

(a) Employment in a particular sector depends on its size in monetary terms. Size of modern retail as projected had no real basis to work it out. It was extrapolation of some numbers, which became reference points. (Harminder Sahni, 2012).

Therefore, approximation in the data is high.

(b) Estimates of FDI in Indian retail made by various authors vary very significantly.

(c) There is no established model, which the retailers could adopt. Cash and Carry, hub and spoke, small stores less than

10,000 sq. feet or hypermarkets more than 50,000 sq. feet or a mix of all these options or any other option may be adopted. Consequently, the quantity of employment generated will also vary.

(d) Govt. policies and regulations (labor laws), public opposition, resistance of domestic retailers, state govt. policies may

affect hiring and hiring policies. Extent of automation and use of technology will affect total hiring. Compensation

patterns and other HR policies of foreign retailers will affect attractiveness of retail sector.





(e) Organized retail chains will primarily be available in towns with more than one million populations only. Seeing the geographical spread, socio-economic, internal security environment and regional and rural urban diversity of India, one

model will not be suited to the entire country. Following points are important:

i. Failure of domestic organized retail chains proves that rural India is not yet ready for organized retail. DCM

Shriram Consolidated ran 300 ‘Hariyali Kisan Bazars’ in 8 states and at its peak the business fetched Rs. 800 crores a year. Each store catered to 15000 farmers and their families. The company shut all stores less 30 (only those,

which sell fuel). Triveni Engineering shut ‘Khushali Bazar’ after suffering a loss of Rs. 19 crore in 5 years. Godrej Agrovet sold 70% of its Aadhar Rural retail business to retail king Kishore Biyani’s Future Group.

ii. Establishment of retail chains in inaccessible far-flung areas of North and North East region of the country and

disturbed ‘red corridor’ areas where 18 percent of population of India lives will not be possible in near future.

(f) Latest happenings have indicated that foreign retailers are not showing keen interest in investing in retail in India due to the reasons of govt. policies and lack of consensus of many state governments and UTs. Retail giants like Wal-Mart and

Tesco will take more time to invest in India (TNN, 2013).

Despite the constraints as brought out above, generation of employment from FDI in retail can be worked out from a) the size of likely investments b) the size of infrastructure which can be created by this investment and c) employment patterns of retail chains

already operating in India.

Loss of employment due to displacement and elimination of local shops (unorganized retail) by super/hypermarkets through FDI

is perceived to be one of the most undesirable and unwanted effect of FDI in retail. Very few studies have been carried out on this subject in India. However, a number of studies have been carried out abroad to determine the effects of organized retail chains on

unorganized retail stores and employment. Positive Effects

Adverse effect of organized detail on unorganized retail weakens over time. There was no evidence of decline in overall

employment in unorganized sector due to organized sector. In a study by Indian Council of Research in International

Economic Relation (ICRIER) rate of closing of unorganized retail shops was found to be 4.2 percent per year and rate of closure because of competition from organized retail was found to be still lower at 1.7% per annum.).

Organized retail can tap increased volumes, which will translate in to more jobs in manufacturing industry provided

manufacturing is carried out in India only (Mathur, 2005).

Another view propagates that MBR stores cater for high-end segment of market therefore ‘Kirana’ stores are not much

affected and they cannot be eliminated.

There seems to be no evidence suggesting that foreign supermarkets are going to displace ‘Kirana’ in India. Lack of appropriate and adequate space in majority of Indian household to dump large quantity of goods, lack of refrigeration

facilities at homes, non-availability of transport to go long distances to purchase in bulk and personalized services,

which ‘Kirana’ provides, will ensure that local ‘Kirana’ stores survive (Devashish Mitra, 2013). Therefore, the loss of employment is not likely to be alarming.

Negative Effects

Wal-Mart has international operation equivalent to Rs. 21 lac 10 thousand crores and it employs only 15 lac workers. Indian retail

which amounts to Rs. 10 lac 38 thousand crores (12% of GDP) employs approximately 2.898 crore people (Census, 2001) (3.3 %

of Indian Population).Since, the Indian retail sector employs significantly higher number of people as compared to international retailers; it means that opening of organized retail chains will eliminate significant number of jobs. Growth of organized retail hits

manufacturing jobs as well. In USA when structured retail was replacing unorganized retail between1979 to 2010, 7.7 million (30 %) jobs were lost as the retailers imported from the cheapest sources. If the manufacturing sector reforms are not done, India will

suffer similar losses with the growth of retail chains importing goods from cheapest sources. It is true that big chains like Wal-Mart, Carrefour, Sainsbury, Tesco, Marks and Spenser etc., will procure goods from the cheapest sources outside India (only 30 %

domestic sourcing is required). Indians will carry out only selling part. Therefore, combined loss of retail and manufacturing sector jobs will be suffered.

Contribution of the Services Sector to India’s GDP

In 2009-10, services, industries and agriculture respectively accounted for 57.3%, 25.7% and 16.9% of India’s GDP.6 Nevertheless, the share of services is lower than that of developed countries ( the United Kingdom (UK, 78.4%) and the United

States (US, 78.2%)), but higher than that of China (41.8%) (Economic Survey of India 2011-12).





Contribution of Services Sub-Sectors to India’s GDP

Table-6: Decadal Average of the Year on Year Share of Services Sub-sectors in Total Services Sector and GDP (in %)

Items 1950/51-

1959/60 1960/61-

1969/70 1970/71-

1979/80 1980/81-

1989/90 1990/91-

2000/01 2000/01-2009/10

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Serv

ices

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are in

GD

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Sh

are in

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are in

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are in

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are in

GD

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are in

Serv

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are in

GD

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Sh

are in

Serv

ices

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are in

GD

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are in

Serv

ices

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GD

P

Community, social & personal

services 35.0 10.4 35.0 11.4 35.1 12.6 33.2 13.4 30.3 13.9 26.1 14.0

Public administration & defense 9.5 2.8 12.3 3.9 14.3 5.1 15.2 6.1 13.6 6.2 11.2 6.0

Other services 26.3 7.8 23.2 7.6 21.0 7.5 18.0 7.3 16.7 7.6 14.9 8.0

Financing, insurance, real estate &

business services 25.2 7.5 21.2 7.0 20.3 7.3 22.0 8.9 26.2 12.0 27.3 14.7

Banking & insurance 4.0 1.2 4.8 1.5 5.9 2.1 7.6 3.1 10.7 4.9 12.0 6.5

Real estate, ownership of dwellings & business services

20.5 6.1 16.2 5.4 14.3 5.1 14.5 5.8 15.5 7.1 15.3 8.2

Trade, hotels & restaurant 28.5 8.5 30.7 10.0 30.2 10.8 29.3 11.8 28.5 13.0 29.4 15.8

Trade 26.5 7.9 28.4 9.3 28.0 10.0 27.3 11.0 26.2 12.0 26.7 14.3

Hotels & restaurants 2.0 0.6 2.2 0.7 2.1 0.8 2.0 0.8 2.2 1.0 2.6 1.4

Transport, storage & communication 11.3 3.4 13.1 4.3 14.5 5.2 15.5 6.2 15.0 6.9 17.3 9.3

Railways 4.7 1.4 4.9 1.6 4.5 1.6 3.9 1.6 2.9 1.3 2.1 1.1

Transport by other means 5.9 1.7 7.1 2.3 8.3 3.0 9.5 3.8 9.6 4.4 9.8 5.3

Storage 0.3 0.1 0.2 0.1 0.3 0.1 0.3 0.1 0.2 0.1 0.1 0.1

Communication 1.0 0.3 1.3 0.4 1.6 0.6 1.7 0.7 2.3 1.0 5.3 2.8


In the 1950s and 1960s, transport, storage and communication services and trade, hotels and restaurant services grew faster t han the overall services sector growth in India. In the 1970s and 1980s, financing and business services started growing at a fas ter rate.

In fact, in the 1980s, financing and business services surpassed the growth of services such as transport, storage and communication and trade, hotels and restaurant. In the decade of 2000-2010, transport, storage and communication services are

the fastest growing services sub-sector, followed by financing and business services. Both the sub-sectors have grown faster than the overall services sector growth

Trends in Employment in the Retailing Sector

Table-7: Share of Retail Trade in Total Employment, 1999-2005 (percentages)

Current Weekly Current Daily Status

Status Status

1999–2000 2004–2005 1999–2000 2004–2005

Rural Males 5.4 6.7 5.7 7.0

Rural Females 1.7 2.3 1.9 2.5

Urban Males 23.4 19.3 20.8 19.8

Urban Females 17.6 9.3 11.8 9.4


Table-8: Growth rates of retail trade employment between 1999–2000 and 2004–2005 by Current Weekly Status and Current Daily Status (compound annual percentage rate)

Current Weekly Status Current Daily Status

Rural males 6.44 6.08

Rural females 9.54 8.36

Urban males -0.31 2.68

Urban females -6.6 1.57






Table-9: Growth Rates of Retail Trade Employment by Usual Status (Compound Annual Percentage Rate)

Usual Principal Status Usual Principal + Subsidiary

Status

1993–94 to 1999–2000 1993–94 to 1999–2000

1999–2000 to 2004–05 1999–2000 to 2004–05

Rural males 3.66 5.48 2.95 5.55

Rural females -1.54 7.77 -2.3 7.95

Urban males 7.45 1.24 7.37 1.24

Urban females 8.74 -1.18 10.7 -3.22


Table-10: Growth Rates of Usual Status Retail Trade Employment in

Major States, 1999–2000 to 2004–05 (compound annual percentage rates)

Principal Status

Rural Rural Urban Urban

Males Females Males Females

Andhra Pradesh 7.21 11.98 -0.49 6.82

Assam 7.35 9.60 2.82 20.29

Bihar 10.95 3.49 4.72 -10.28

Gujarat 14.65 0.40 0.33 -11.19

Karnataka 2.97 14.43 -3.52 -7.10

Kerala -1.28 32.37 -7.21 -5.36

Madhya Pradesh 10.28 5.26 -1.34 -9.09

Maharashtra 5.89 13.69 1.48 -5.85

Orissa 9.53 5.22 -0.61 -3.12

Punjab 4.40 -5.99 6.31 -18.05

Rajasthan 1.01 13.13 4.25 -4.67

Tamil Nadu 0.67 7.20 -0.74 4.78

Uttar Pradesh 4.06 3.03 0.03 6.55

W Bengal 2.48 5.72 1.36 -8.11


Table-11: Principal and Subsidiary Status

Rural Rural Urban Urban

Males Females Males Females

Andhra Pradesh 10.01 16.29 0.69 5.92

Assam 10.40 8.77 3.63 11.31

Bihar 14.02 4.73 5.51 -10.86

Gujarat 17.95 4.04 1.15 -11.45

Karnataka 5.49 5.10 -1.39 -11.93

Kerala 1.01 41.49 -6.33 -13.06

Madhya Pradesh 11.57 9.36 1.50 -7.03

Maharashtra 9.96 18.06 4.23 -4.15

Orissa 14.12 3.60 1.40 -4.38

Punjab 4.93 11.48 5.74 -24.86

Rajasthan 1.84 12.59 4.43 -6.27

Tamil Nadu 4.75 11.20 0.80 4.91

Uttar Pradesh 6.70 7.01 0.75 8.18

W Bengal 4.54 8.65 2.16 -5.76


The potential for retail sector to serve as a refuge sector for those unable to find employment elsewhere has come down, especially in the urban areas. In urban areas, retail trade accounted for nearly one-quarter of male workers and close to one-fifth of female

workers by weekly status at the turn of the decade. By daily status, the proportions were smaller but still significant. Among

others, the two categories of activity that are used by the NSSO are CWS and CDS. However, for all categories of workers (CWS





and CDS), both for male and female categories (as well as urban persons) the share of workers in retail trade actually fell during the period under consideration, and the fall was sharper for CWS than for CDS.

This means that workers whose involvement in retail trade was relatively stable has increased, showing a positive trend in growth. However, this is perfectly compatible with a phenomenon where relatively unstable workers (occasional retailers) involved in

retail trade actually reduced. Thus, the CWS category of workers in retail trade shows a negative trend in growth. This is prec isely because of the intolerance shown towards hawkers and petty retailers in the urban areas, by various sections of the urban

population such as municipal authorities and resident welfare associations.

In urban India, the story conforms to the evidence based on current weekly and daily status definitions of work. In the more recent

period, there has been a sharp deceleration in the growth of Usual Status employment in the retail sector for urban males, and absolute decline for urban females. This is true for both principal status and principal plus subsidiary status activities. Therefore, it

is evident that retail employment has become more difficult to ensure as a usual activity in urban India, even though other forms of employment have not grown adequately.

This is a very important result in the context of the recent features of urban labour markets that have already been outlined: the

overall decline in prospects of paid employment, the decline in average wages of those employed especially as casual workers and the emergence of self-employment as a major means of ensuring livelihoods of workers who are unable to find paid work. Petty

retail trade has traditionally been a refuge employment sector for such workers – both male and female. However, the decline in

their share, and in the case of urban females, the absolute decline in such employment as usual work, even in a subsidiary capacity, suggests that there are forces at work which make it increasingly difficult for individuals to engage in petty reta il trade,

and made it less viable as an option to fall back on in the absence of other productive employment opportunities.

two factors that must be noted in this regard are the deregulation that has permitted the entry of large corporate entities in the retail sector, providing competition to small vendors because of their ability to take advantage of economies of scale; and urban laws

and policies of various types, including zoning restrictions and rules that constrain the ability of small traders and hawkers to function freely.

Currently, there is still no national level policy with respect to rules for large retailing, and different states have implemented very different, and rapidly changing, policies for organized retailing. In the very recent past, the growth of organized retailing has

become a bone of political contention, with the proposed policy for allowing foreign corporate retailers into the country being vehemently opposed by the left and some other political parties. There have been major and occasionally violent protests by s mall

shopkeepers as well as farmers and other local agents, against the entry of large corporations in retail food trade, in particular.

The trends in employment in retail trade in the period between 1999–2000 and 2004–05 in the major shows that Kerala stands out

as a state in which there has been a sharp fall in usual employment in retail trade as the principal activity, with the number of most categories of workers (except rural females) coming down in this sector. In most other states, however, there was some increase in

such employment in the rural areas (sometimes quite rapid in the case of rural females), but a more mixed and generally downward trend in such employment in urban areas. In addition to Kerala, Karnataka, Madhya Pradesh and Orissa experienced

absolute declines in such employment for both men and women in urban areas. In Andhra Pradesh and Tamil Nadu the employment of urban males in retail trade fell. It should be noted that these are states in which there has been significant entry of

large corporations into retail trade. In Bihar, Gujarat, Punjab, Rajasthan and West Bengal, female urban employment in this sector fell, in several cases quite sharply. In Gujarat and Uttar Pradesh, the growth in usual male employment in urban retail trade was

very low, even as female employment in this sector fell. This is similar to the trends observed at the all-India level: people

desperate to find employment could enter into retail trade in the rural areas but could not do so to the same extent, and sometimes even to declining extent, in the urban areas. It can be seen from in all states, there has been more rapid growth in retail trade as a

subsidiary activity than as a principal activity.

Of the total employment in the retail trade, only a tiny proportion is in the organized sector and of this an even more minuscule proportion is in public employment. It is evident that total organized sector employment in retail trade is not only very small but

has also been falling significantly since then. This is despite the fact noted earlier that the share of the organized sector in NDP in

retail trade has been increasing very rapidly over this period. Clearly, organized retailers have shifted to more labour-saving techniques. As the share of organized retailers increases further, this is likely to intensify and will no doubt worsen the

employment problem.

Employment in organized retail and wholesale trade showed a slight upsurge from 1993–94 to 2003–04, from 4.6 lakhs in 1993–94 to 5.3 lakhs in 2003–04. While the public sector employment was almost stagnant, there was marginal increase in employment

in the private sector, which was mainly responsible for whatever increase that was visible over the period.

The major empirical conclusion with regard to the recent period is that there was some increase in such employment

(predominantly in the form of self-employment in the unorganized sector), but in the urban areas there was lower employment growth in the retail sector compared to the rural areas. In general, such employment for urban females came down sharply in





many states, and declined somewhat even for urban males in some states. This was mainly due to declines in private employment in both organized and unorganized sectors, for the levels of public employment in organized retail declined slightly, but this was

too small a proportion of overall employment to have much impact. Such statistics are a bland description of a harsher actual

process, whereby the conditions of petty retail trade are becoming much more precarious for a variety of reasons, and are making it difficult for many small vendors, and especially women, to engage in such activities. Indeed, the category of those who are self-

employed in retail trade is possibly a relevant aggregate category for our purposes, since many of them would be actual or potential hawkers.

Across all the states, some features stand out. First, the increase in number of self-employed (and therefore small) retailers was

generally much higher in rural areas of the major states than in urban areas. Second, the changes in self -employment in retail

largely reflected the changes in aggregate retail employment that were described in. The number of rural females engaging in this activity increased in all the states, and for rural males in every major state except Rajasthan. However, especially where organized

retail has made more inroads, urban land, and other policies play adverse roles, the picture was significantly different. Among urban males, self-employed in retail trade grew at much slower rate than their rural counterpart did in the majority of the states. In

Kerala and Karnataka, two states in which organized retail has expanded significantly over the past decade the number of self-employed retailers declined quite substantially, for both males and females. For urban females, self-employment in retail trade

actually declined in most major states, with the exception of only four states – Assam, Andhra Pradesh, Tamil Nadu and Uttar Pradesh.

It should be noted that these patterns of retail self-employment occurred during a period when aggregate GDP was growing at more than 7 per cent per annum, and the share of retail trade in GDP was increasing. This suggests that retail self-employment and

hawking became more difficult and precarious activities in much of urban India despite the increases in aggregate economic growth. This leads naturally to a discussion of the problems commonly faced by the hawkers in India, which may provide some

insights as to what factors determined these trends. CONCLUSIONS

While growth of employment in the organized sector is very important, widespread improvement in the quality of employment

cannot be achieved without at the same time raising the productivity in informal sector enterprises. In the case of urban informal sector increase in the access and provision of inputs and credit and policy initiatives to forge links between informal enterprises

and larger organizations operating in wider, national and international markets need to be ensured to achieve improvement in their productivity.

Urban planning in India is generally accepted to be in a bit of a mess. Most metropolitan cities in India prepared Master Plans in

the 1960s. These were based on demographic projections and decisions about containing future population; allocation of this

population to various zones depending on existing density level, infrastructure capacity and future density levels; land-use zoning to achieve the desired allocation of population and activities in various zones as projected; and large scale acquisition of land with

a view to ensuring planned development (Tiwari 2000). However, since these Master Plans were completely divorced from resource assessment, did not involve the community and had no procedure for creating consensus on potentially divisive issues ,

most urban growth actually ended up taking place outside the formal urban planning system.

Co-ordination between the planned (“formal”) and informal (“informal”) segments remains weak at best. Subsequent revisions of Master Plans have often made things worse rather than better. “Despite efforts at promoting mixed land use planning, the presence

and growth of ‘unauthorized settlements’ and pavement dwelling defies the Master Plans. Nearly 40–65 per cent of the population

of our mega cities lives in substandard living areas: in notified slum areas and slum rehabilitation colonies with minimal supply of drinking water, sewage disposal and electricity. Migrant workers at places not earmarked for residential units have set up a large

number of dwelling units. Even the Master Plan does not envision a living area for workers earning low wages in city-based industries. Many factories and small-scale production units work entirely outside the gamut of the law. The government agencies

themselves admit failure and helplessness in enforcing the current minimum wages, which are usually not adequate to cover housing costs. Therefore, a large section of the population with low incomes ends up in sub-standard housing on public land

owned by various government agencies (Tiwari, 2000).

It is in this context that urban planning and policies that affect hawkers need to be assessed. It has been noted earlier that retail

trade in India has been a very employment-intensive sector, led by the dominance of petty self-employed trader. This has provided work for millions and allowed consumers to benefit from close access. In 2001, India had the highest shop density in the world,

with 11 outlets for every 1,000 people (Singhal, 2006). Therefore, the bulk of the retail sector in India has a very small scale of operation, with very limited access to capital, labour and real estate. They are small family-run outlets, of low-cost-and-size

format, rarely eligible for tax, operating at subsistence level. The high density restricts their scope of expansion, and thereby of upgrading. This also means that, except in the case of severely segmented markets, this sector stands little chance of competing

against large retailing corporations operating with economies of scale.





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