Apparel Retailing in India Opportunities for Foreign Firms

							 PRESENTATION

      ON

DEVELOPMENT OF
  SMEs IN INDIA

      &

RETAIL INDUSTRY
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CONTRIBUTION OF SMEs TO THE ECONOMY -



   REGIONAL DEVELOPMENT

   COMPLEMENTARY ROLE TO SUPPORT THE LARGE
    SECTOR

   BASIS FOR INNOVATIONS AND ADAPTATIONS

   EMPLOYMENT GENERATION

   DIRECT MULTIPLIER EFFECT OF THE
    PERFORMANCE ON THE GROWTH OF THE NATIONAL
    ECONOMY
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PREDOMINANT ROLE OF SMEs IN THE ECONOMY
DUE TO –




   ITS NUMBER

   VARIETY

   INVOLVEMENT IN ALL ASPECTS OF THE ECONOMY




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       INDIAN DEFINITION OF SMALL SCALE INDUSTRY (SSI)




   INVESTMENT IN PLANT AND MACHINERY DOES NOT
    EXCEED Rs. 10 MILLION (US$1-Rs.49) –

    WHETHER HELD ON OWNERSHIP/LEASE/HIRE PURCHASE




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     THE THIRD ALL-INDIA CENSUS OF SMALL SCALE
             INDUSTRIES (AUGUST 2004)



   Size – approx.10.52 million units compared to 80,000 units in
    the late 1940s
   Total employment contribution – 24.93 million with a per unit
    contribution of 2.37
   Export contribution – Rs.14,199 crores
   Number of exporting units – 50,606
   Contribution to GDP – 7%
   Approx. 7,500 different products produced by SSIs in India
   Out of 878 items reserved for the sector, only 672 are actually
    produced by SSIs
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      Based on products, SMEs in India can be broadly
            classified into the following groups:

   Food products                        Paper products and Printing

   Chemicals and chemical products      Transport equipment and parts

   Basic metal industry                 Leather and leather products

                                         Miscellaneous manufacturing industries
   Electrical machinery and parts
                                         Other services and products
   Rubber and plastic products
                                         Beverages, tobacco / tobacco products
   Machinery and parts excluding
    electrical goods                     Repair services

   Hosiery and garments                 Cotton textiles

                                         Wool, silk and synthetic fibre textiles
   Wood products
                                         Jute, hemp and mesta textiles
   Nonmetallic mineral products
                                         Other services
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 Contributions of Indian SSIs to total exports by sector
 (%)

Product                        SSI share in total
                               exports
Sporting goods                 100

Ready-made garments            90

Woollen garments, knitwear     35

Processed foods                65

Marine Products                29

Leather products               80

Plastic products               45

Cosmetics, basic chemicals &   55
   pharmaceuticals
Engineering goods              30                          7
     Indian Government’s development strategy




   Protective discrimination e.g. reservation, priority-sector lending

   Integration between large and small e.g. subcontracting,
    ancillarization and vendor development

   Institutional support through a network of testing centres, tool
    rooms, entrepreneurship development institutes

   The setting up of a separate Ministry of Small Scale Industries in
    1999 marked a major step towards providing a policy platform for
    the SME sector.
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CHALLENGES FACED BY SME SECTOR IN INDIA
• The term “economic globalization” implies an evolving
  pattern of cross-border enterprise activities. It implies a
  change, broadly on the following lines :

      Pre-Globalisation           Post-Globalisation

      Local/National Investment Collaborations

      Single-firm activity        Strategic alliances
      Manufacturing for self-     Outsourcing-
      identified market           local/international
      Local market                World market
      Rigid production system     Flexible production
                                  system
      Limited economic interest   Focus on growth
      Protective policies         Survival of the fittest       9
NEED FOR NEW APPROACH
New policy for development of SMEs in regional setting by
encouraging Foreign Direct Investment
Innovative bottom-up development policies endowing
individuals, firms and territories with factors to place their
skills, products or services in the global competitive market
Encouraging Private-public partnerships which will generate
employment and stimulate economic activity
Modernizing the export-oriented clusters for enhancing global
competitiveness
Consortia approach for enhancing exports from SMEs
Fostering linkages between Indian SME clusters and similar
product cluster overseas for mutual benefit
Organizing product specific trade fairs with international
participation
Concentrate on developing and promoting service sector

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       RETAIL INDUSTRY IN INDIA
Some countries include retailing in its definition of SMEs alongwith
manufacturing and services
Indian retailing – largest industry – 14% of GDP
   Second largest source of employment next to agriculture
   Organized retailing accounts for just 3% of the total retail market;
    projected to grow at 25-30 per cent a year
   Annual growth rate of 8.5% and amounting to Rs. 200 billion in 2003-04
   Untapped segment amounts to a whopping Rs. 9,800 billion
    (approx.$222 billion)
   India‟s estimated total retail market to be around $202.6 billion which is
    expected to grow at a compounded 30% over the next five years
Government unlikely to announce any decision on allowing FDI in retail.
Revised safeguards for ensuring “livelihood protection” to „mom & pop‟ stores
are yet to be finalized
FDI regime would provide opportunity for joint ventures, ease financial
crunch, bring in technical know-how and best management practices




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      ALL INDIA ASSOCIATION OF INDUSTRIES
     Building bridges of prosperity through Industry


•   Serving industry since 1956

•   India‟s premier business networking organisation and a centre for
    excellence for international trade

•   Membership - open to all sectors of the industry including agriculture,
    service, entertainment, finance and also to professionals

•   Representation -
    - AIAI has representations on various national and regional
    governmental bodies and financial institutions to address the issues of
    its members.

•   Agreements for co-operation
    The All India Association of Industries (AIAI) has signed agreements for
    co-operation with 70 international Trade Promotion Organizations and
    Chambers of Commerce across the globe to promote bilateral trade,
    exchange of trade-related information, trade delegations, joint ventures
    and technology transfers

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                    OVERSEAS MEMBERSHIP
               of All India Association of Industries
•   Our Overseas Membership scheme allows non-Indian based companies with no
    Indian registered office to :
     – Make new contacts by being part of one of India’s biggest business organisations
     – Use AIAI’s Members’ Lounge as your base and meeting place and enjoy a range of
       member benefits when visiting India. Located in the heart of the business capital, the
       Members’ lounge offers a space from where you can work, connect your laptop, use the
       internet or invite your Indian clients for meetings. Refreshments available.
     – Raise your company profile by association with the recognised and respected AIAI
       brand
     – Receive the AIAI Newsletter
     – AIAI’s team can help you identify organisations in India which can help you with your
       business
     – Make new business contacts and gain information by participating in AIAI’s programme
       of networking events and seminars
•   How much does it cost ?
     – Our Overseas Membership costs US$ 225/- per annum. Payment must be made on-line
       by credit card
•   Terms and conditions
     – Only non-Indian companies with no office in India may apply for overseas membership
     – AIAI reserves the right to refuse an application from any overseas company at our
       discretion
     – AIAI reserves the right to revoke membership at any point without refund
     – AIAI is not responsible for the conduct or actions of its members
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       ECONOMIC INDICATORS (2004-2005)

   Population                                1 billion+

   GDP (in $ billion)                        520

   GDP growth rate (%)                       7.0

   Foreign Exchange Reserves (US$ billion)   143.5

   Inflation (%)                             4.0

   Agriculture (% of GDP)                    22

   Industry (% of GDP)                       28

   Services, etc. (% of GDP)                 48


   Source : Tata Services

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                MARKET OPPORTUNITIES



   Women‟s wear - 37.5% of the clothing market – US$3.93bn
   Women‟s western wear - $ 157 million
   Organized apparel retailing – to grow 5 times over next 5
    years
   Fire fighting equipment estimated at about $34-40 million
   E-commerce –
       PC penetration – 14 million users (March 2005)
       E-commerce activity in 2004 – US$ 350 million (NASSCOM)
       B2C E-commerce to grow to $489 million by end of 2006




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                   INDIA          OFFERS

   Good command on English language
   Large, well-trained, low-cost workforce
   Very good pool of engineers, accountants, technicians
   Well developed R & D Infrastructure
   Well established legal system/courts
   Mature, nation-wide distribution system
   Foreign Investment regulations that provide freedom of entry,
    investment, location, choice of technology for import & export
   Current account convertibility, capital account convertibility
    for foreign investors
   Investment & tax incentives for exports




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Why you can’t ignore India

   A bridge between East and West
   Vast market: a fast-growing consumer market
   Growing economy: from agriculture to industry and now to
    services, the Indian economy is acquiring depth and maturity
   Legal System: Well laid out legal procedures & systems
   Systems in place : India is one of those rare third world
    countries where democratic systems are all in place, and though
    it takes some time, the rule of law prevails
   Market-friendly approach : Successive governments from across
    the political spectrum have committed themselves to a market-
    friendly economic approach


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