Riding high on Reforms...."RETAIL" could be the Next Big Wave of Prosperity!!

As per PWC, the Indian Retail Industry is pegged at US$ 500 billion and is expected to reach US$ 1.3 trillion by 2020. In addition, the organised retail is expected to reach 25 per cent by 2020. At present the organized retail market is almost US$ 35 billion. There are estimates that India’s organised retail market could attract US$ 15 billion in the next three years.

It has been a remarkable week by any standard of imagination. German court ratification of ESM, QE-3, Diesel price hike, reining subsidies in LPG cylinder and finally the much awaited reforms of FDI in Retail, Aviation, Power Exchange, Broadcasting and Disinvestment in four PSUs being given a green signal by the Cabinet committee. Nothing can be better than this for the business sentiment to improve gradually from here on and also for the bulls to be high with optimism.

We consistently have been maintaining our positive stance for this month and our Monthly newsletter putting up the tagline “Optimism lies ahead” at a time when all the print and electronic media was projecting a dooms day because of the Coal scam and its ugly revelations and repercussions to the economy. Now on the hindsight it looks to be a remarkable couple of weeks were sentiment has swung from extreme pessimism to utmost optimism.

Now, with the government biting the bullet and fast-tracking reforms and project implementation process, there are serious political opposition which the current UPA-2 regime may have to face. Already the TMC has started shouting foul and staunchly opposing the FDI in retail and aviation without understanding the long-term positive implication for FDI in these sectors and specifically RETAIL. We have lived with one era of outsourcing reforms in the IT space and eye-witnessed the prosperity. Now the next big reform undoubtedly is going to be the Retail space and right now we are very short-sighted to even imagine the wave of FDI and employment generation and other ancillary businesses flourishing and thereby aiding to the growth and prosperity of the country. As per PWC, the Indian retail industry is pegged at US$ 500 billion and is expected to reach US$ 1.3 trillion by 2020. In addition, the organised retail is expected to reach 25 per cent by 2020. At present the organized retail market is almost US$ 35 billion. There are estimates that India’s organised retail market could attract US$ 15 billion in the next three years. It’s going to be “BIG” and may even underpin the seeds of next bull wave in the country which can be witnessed in this decade.

But, in the interim, the political shouting from the opposition will become even louder and shriller. We think Congress party is very clear with political fallout of these reforms decision. Various implications can be drawn with a one day big bang announcements are 

I.> Congress party might have signaled that they are even ready for pre-polling if their allies don’t agree to these hard decisions and withdraws their support 

II.> Whole of the coal scam has been quite articulately erased from the mind of the people or atleast the intensity of the issue has been lightened considerably 

III.> Government has started image building/makeover for next elections 

IV.> Come October, rating agencies would downgrade India’s rating to junk if the reform process is not accelerated and it would be extremely difficult thereafter to spark the economy for higher growth and we may enter into a pessimistic loop 

V.> These are cabinet approvals before it goes to the standing committee and passed as a binding law in both house of the parliament in the next session. Already 97 bills are pending to be passed in the parliament.