View from Delhi: Big leap in retail business likely

After software and telecom, it is now time for a third big leap, this time in retail business. Though big business houses, including Tatas and Goenkas, have taken up retailing as a major activity, there has not been much of an impact on the industry. But with Wal-Mart, the retail giant, eyeing the Indian market, this sector is in for a big push.

To start with, Wal-Mart has plans to source goods worth $7 billion to $10 billion in the next two years for its stores across the globe. It has sent a team to India to work out the modalities.

At the moment, it is interested in spices, linen, garments, home furniture and leather goods, but might also go in for marine products like shrimp and OTC pharma products.
It is already buying a number of goods from India, including kitchen utensils and textiles, to the tune of a billion dollars a year.

The textile quota regime ends in January 2005, after which restrictions on exports from India will cease. Retailers in the US and Europe are expected to step up sourcing from India in a year and this is where big retailers come in.

Wal-Mart is not the only global corporation to have an eye on the Indian market. Several multinationals are using India as a source base. Some, like General Motors and Ford Motor, have set up their own units here and forged tie-ups with smaller Indian manufacturers for sourcing.

Aircraft companies like Boeing are also getting into the act. Boeing International is setting up a wholly-owned subsidiary which will outsource its IT requirements to Indian software outfits, and also sub-contract aircraft components to corporations like Hindustan Aeronautics, a government-owned unit.

In what could be the biggest outsourcing job, ING, a Dutch bank, is planning to shift its back office and IT-related jobs to India in a big way. ING will not be the first bank to do so. Lots of foreign banks, including Standard Chartered, which has a base in India, are already doing so, but ING is expected to be a much bigger operation.

Review

Meanwhile, the finance ministry came out with a mid-term review of the economy on Saturday which puts GDP growth this year at over 7 per cent, a big jump from last year's figure of less than 5 per cent. This is the first time the government has stuck its neck out with such a bold estimate, though there are many people who say that even this could be an underestimation.

Some put it as high as 8 per cent, not exactly a record, but way above the usual average mark. It is not only monsoons that are responsible for this big jump. Cars which sell mainly in cities have also clocked sales of 56,000 in October, compared with 45,000 in the same month last year.

India is heading for a million cars a year mark in a few years. For a country that barely made 100,000 cars a decade ago, this is too good to be true.

Soon there will be Wal-Mart stores all over the place instead of the usual mom-and-pop shops. That is progress for you.

The author is a India-based senior economic adviser