The Neighbouring Shopowner Needs Protection

Even though unorganised retail is reeling under the pressure of organised retail sector, it needs a strong protection. A code of conduct is necessary for the organised sector so that unorganised retail sector does not get affected. This is the recommendation given by a committee which has submitted its report to the government over the issue.

The findings and recommendations of the report furnished by the Indian Council for Research on International Economic Relations (ICRIER) and the follow-up action by the Government were tabled in the Rajya Sabha, the lower house of Parliament of India. The report was tabled by Shri Ashwani Kumar, Minister of State for Industry, in a written reply in the Rajya Sabha today

Main Findings

In its assesment of the impact on unorganized retailers, the report states that unorganized retailers in the vicinity of organized retailers experienced a decline in their volume of business and profit in the initial years after the entry of large organized retailers. But this adverse impact on sales and profit weakens over time. The report also claims that there was no evidence of a decline in overall employment in the unorganized sector as a result of the entry of organized retailers. It negates ‘some decline in employment’ in the North and West regions saying that it ‘also weakens over time.’

The committee seems not to have been amused by these facts, which it itself has given:

• The rate of closure of unorganized retail shops in gross terms is found to be 4.2 per cent per annum.
• The rate of closure on account of competition from organized retail is at 1.7 per cent per annum.
• Small retailers have been extending more credit to attract and retain customers.
• Only 12 per cent of unorganized retailers have access to institutional credit and 37 per cent felt the need for better access to commercial bank credit.
• The unorganized retail sector is expected to grow at about 10 per cent per annum with sales rising from US$ 309 billion in 2006-07 to US$ 496 billion in 2011-12. At the same time, organized retail which now constitutes a small four per cent of total retail sector is likely to grow at a much faster pace of 45-50 per cent per annum and quadruple its share in total retail trade to 16 per cent by 2011-12.
  

The full report is available here.