Bharatiya Retail & Trade Sector: Overview


Over the past few years, the retail and trade sector have fueled the economic growth story of Bharat. Today, the Retail sector accounts for around 22% of the Indian Gross Domestic Product (GDP), while employing almost 8% of the Indian workforce. The retail landscape of India has evolved from fragmented market space to organized retail in forms of plush malls and luxury outlets. The Business Monitor International India Retail report has estimated that by 2015 the total retail sales in India will almost double to 804 Billion USD from 411 Billion USD in 2011. Global consultancy firm, A.T. Kearney has ranked India as the fourth most attractive nation for retail investment among the 30 emerging economies. The retail sector has been earmarked as a potential high-growth sector in other emerging economies as well, such as Africa, East Asia and Latin America. During the past two decades, the Bharatiya economy has grown from 500 Billion USD to over 2 Trillion USD. Also, the per capita income has nearly tripled during this period. One of the major drivers of this growth is the Trade Sector. For instance, Bharat has overtaken Germany, Italy and Bangladesh to emerge as the largest textile exporter in the world. Furthermore, Bharat’s share in the global textile market is continuously on an upswing. To continue this upward swing in the trade sector, a major push towards cutting down the imports and increasing exports is needed. The Government of India is also keen to improve the Bharatiya export sector, which in turn will create more jobs for skilled, semi-skilled and unskilled labor. Since liberalization in 1991, the composition and direction of Bharat’s foreign trade has undergone a substantial change. Bharat’s major exports include – engineering goods, petroleum goods, chemicals and related products, gems & jewels, textiles and electronic goods. While the major imports items are capital goods and other raw materials for various local manufacturing units. Over the years, Bharat’s trade with Asian (including ASEAN) and African countries has grown significantly. Bharat has also become a major player in the global trading system.
Global Retail & Trade Scenario and Opportunities The global economy has always been deeply affected by the retailing sector. One key indicator of any developed market is a high percentage of organized retail as compared to un-organized retail. In developed economies, organized retail comprises of around 75-80% of the entire retail. Whereas, in developing economies such as Bharat organized retail market share is just around 5-6%. Also, retailing is a prominent industry in developed markets. For example, in the United States the retailing industry contributes to almost 31% of its GDP. This trend indicates that retail sector in developed countries is a matured market with little scope for further investments and growth. However, the real potential lies in the emerging economies. These emerging economies can be great opportunity for Hindu businessmen and traders to expand their business. In recent times, a lot has changed in the global trade scenario due to the rise of large developing countries, such as Bharat and China. A major rebalancing in the world trade has taken place in the last decade. And, the numbers favor the emerging economies over the developed countries. The emerging economy’s share in world trade has increased from under 40% to around 50%. This structural shift in the global trade pattern emphasizes the importance of increasing trade with emerging economies. By focusing business expansion and investment in emerging economies, Hindu businessmen can also offset the loss and diversify business risk due to prolonged economic slump in developed markets, such as Europe and America.   Emerging Economies Almost 15 years back, Goldman Sach’s Jim O’Neil first coined the acronym BRIC. According to O’Neil’s research paper, “The World Needs Better Economic BRICs”, published in 2001, the BRIC nations, namely Brazil, Russia, India and China would be the drivers of world economic growth in the next decade. Based on the performance and development in these BRIC nations over the past 15 years, O’Neil’s prediction has turned out to be more than correct. South Africa was the fifth addition to the BRIC nation list. However, today these five countries no longer represent a comprehensive list of emerging economies The Financial Times Stock Exchange (FTSE) has identified 22 emerging economies which are further sub-divided into ‘Advanced’ and ‘Secondary’. Many other agencies, such as Standard & Poor and A.T. Kearney have their own list of Emerging Economies. One of the most popular and recent classification of the emerging economies is done by BBVA Research. The BBVA Research has identified the top Emerging and Growth-leading Economies, commonly known as EAGLES. trade & sectoer Image Source: http://commons.wikimedia.org/wiki/File:Map_of_emerging_markets.JPG   Emerging Economies: How to utilize the business opportunity? For the first time since the Industrial Age, the global economic engine is being fuelled by the emerging nations, such as China, India, Africa and Latin America. Today in the global trade market, the South-South country trade has increased from 7% in 1970 to 20%. Global MNCs such as Unilever and P&G have already started investing heavily in the emerging economies. In-line with this business strategy, P&G has planned to set-up 19 of its 20 new factories in different emerging market countries. Bharatiya businessmen can make use of this lucrative opportunity and get an early-mover advantage by establishing businesses in these emerging economies. Hindus can have an edge while establishing business in these emerging market countries, because of similar economic structure and similarity in cultures with many of these nations, such as south-east Asian countries like Vietnam, Indonesia and Cambodia. Also, China is often perceived as an aggressive country, while Hindus are considered welcoming and warm. Such an outlook towards Bharatiyas can help Hindu businessmen to get easier entry in these emerging economies. A few things to keep in mind while investing in these markets are: • Have a long-term vision: There was a time when Latin America and Africa were considered dangerous and high-debt economies. Today, Europe falls in to that category. The trick of this trade lies in the having a long-term business plan. • High risk and high return: Today, most of the emerging market countries are highly unstructured and unorganized. However, due to these reasons the investment cost is low and expected returns are high. Think about India before the early liberalization period. The market was unstructured, but people who invested in India during the period of uncertainty are riding high on the Indian growth wave today.   Emerging Economies: Future Outlook It is estimated that in the next 30 years, one in every five children will live in Africa. The continent is also expected to have the largest working-age population in the world. Brazil will have the best demographic profile with a large, young and educated population with abundant natural resources and high percentage of Internet penetration. The opportunities in each of these emerging market countries are immense. Each market has to offer something or the other to its investors. For example, the following image depicts the percentage of “highly engaged” online users around the world. The digital engagement of users in emerging economies is higher as compared to developed countries. Such countries with high digital engagement have high potential for e-commerce trade. trade setor 1 Image source: http://sparksheet.com/emerging-markets-leap-into-mobile/ To summarize, the emerging economies are in a transitional phase. Urbanization, availability of labor and increasing purchasing power are bound to result in some big advantages for the companies establishing business in these markets. Hindu businessmen have a brilliant opportunity to seize this global business trend and lead the next phase of global and Bharatiya economic development. – By Khushboo Singh References: https://www.dnb.co.in/IndianRetailIndustry/overview.asp http://www.ibef.org/industry/indian-retail-industry-analysis-presentation http://www.ibef.org/economy/trade-and-external-sector http://www.archive.india.gov.in/sectors/commerce/index.php?id=2 http://www.economywatch.com/business-and-economy/indian-retail-contribution.html http://www.slideshare.net/WazirAdvisors/texcon-2014-theme-paper-13-oct14 http://www.bloomberg.com/slideshow/2013-01-30/the-top-20-emerging-markets.html#slide8 http://www.pwc.com/us/en/view/issue-15/succeed-emerging-markets.jhtml http://www.thehindubusinessline.com/opinion/columns/c-p-chandrasekhar/emerging-countries-in-world-trade/article4235614.ece http://smallbusiness.chron.com/advantages-doing-business-emerging-market-22717.html http://www.stanlib.com/EconomicFocus/Pages/Shareofworldtradesplit.aspx https://www.bbvaresearch.com/wp-content/uploads/migrados/120215_BBVAEAGLES_Annual_Report_tcm348-288784.pdf

East Africa – Gateway of Opportunities


East of Africa can be a gateway to huge investment opportunities. This region comprises mainly of EA
  • Kenya
  • Tanzania
  • Uganda
  • Ethiopia
All these countries provide varied business opportunities ranging from agriculture to industrial sector. But business comes at a risk which an entrepreneur has to overcome to grow and expand. This region also faces certain challenges in form of weak civil laws, poor infrastructure, political instability and a harsh climate. Bilateral trade already exists between Bharat and East Africa but the past decade has seen a burst of activity and initiatives - many of them private sector led - that have injected renewed vitality into Bharat and East Africa's historical bond. Bharat has also launched DFTP( duty free trade preference) scheme under which duty free access is provided to exports from LDC’s( least developed countries) African countries. There has been overall growth in bilateral trade between East Africa & Bharat, as can be seen in the table below -
 S. No. Trade 2013-14 (in USD million) 2014-15 (in USD million) Growth
1 EXPORT 9,975.47 10,950.00 9.8%
2 IMPORT 1,034.02 1,343.00 30%
Kenya                                                                                                                                                                   Kenya seated in the centre of East Africa, surrounded by Ethiopia to the North, Uganda on the West, Tanzania on the South and having a coastline along the Indian ocean, provides an amiable business environment. Service sector and agriculture are the main economic drivers of the Kenyan economy. Top 5 items of import & export to Kenya (from Bharat) -
 Import Export
Inorganic chemicals Mineral fuels
Carbonate compounds Pharmaceuticals
Edible vegetables, roots and tubers Nuclear reactors, boilers and machinery
Dried leguminous veg. shelled w/n skinned/split Vehicles other than Railways
Coffee, Tea, Mate and Spices Electrical Machinery and Equipments
  Agriculture                                                                                                                                                         Agriculture provides largest employment but is largely inefficient. Among agri goods, Kenya exports high value cash crops comprising tea, coffee and horticulture products. All of these also form import items of Bharat. And as level of income and purchasing power of Bharatiyas will rise in future, demand for cash crops, especially fruits & nuts will further increase. Hence agriculture and related activities provide ample opportunity for investment due to the high growth potential.  This could be in the form of owning or leasing tea farms or agriculture fields, and practicing commercial farming. There is abundant availability of cheap workforce but they need to be trained in modern ways of farming. By using a mix of improved seeds, better manure, and trained workforce the per hectare yield can be increased manifold. Good scope also exists for practicing organic farming. By forging partnership with the Kenyan farming community, better ways of organic farming can be evolved. Service sector Just like Bharat, Kenya’s growth is also led by the service sector. The last decade has seen a huge expansion in tourism, education, and telecommunication - mainly led by private investment. Bharat has presented a remarkable model of evolving a service sector economy and has become the back office of the entire world. Similar opportunities exist in Kenya, provided some gaps can be closed. The transport sector is weak and fails to provide last mile connectivity. Huge investment is required in roads , railways and other means of mass transport. Kenya has high literacy level of 85% making it a good market for telecom companies. With more development, there will be a demand of better digital connectivity which can be met by Bharatiya manufacturers only if we act fast to get first mover advantage. Other equipment like optical fibers, routers, set top boxes, cheap mobiles etc could be exported from Bharat. Industrial sector                                                                                                                                                                               Industrial activity is concentrated around the three largest urban centres - Nairobi, Mombasa and Kisumu. It is dominated by food-processing industries such as grain milling, beer production, and sugarcane crushing. Another key industry is fabrication of consumer goods, e.g. vehicles from kits. There is a vibrant and fast growing cement production industry, and also an oil refinery that processes imported crude petroleum into petroleum products, mainly for the domestic market. The food processing industry (FPI) provides a good investment avenue for Bharatiyas as we have low cost and efficient expertise in FPI. Mega food parks or agriculture processing zones can be envisaged on a mega scale. Refineries can be set up for meeting domestic market demand as well for exporting refined oil to other neighboring African countries. In addition, a substantial and expanding informal sector commonly referred to as Jua Kali engages in small-scale manufacturing of household goods, motor-vehicle parts, and farm implements .Here also Bharat can get involved either by directly investing in small scale industries or through joint ventures with Kenyan partners, or directly exporting to Kenya. Again, time is of the essence as China is also eyeing the same market. Energy Sector Bharat can also help in meeting energy needs of Kenya. Kenya is mainly dependent on hydro-power and is looking to expand its energy sector. Scope exists in renewable energy like solar and wind power,   although they require a large one-time investment but are easy to harness, operate and maintain. Investment in renewable sources of energy will also be in line with the Kenyan African 2030 vision of low carbon, climate resilient development pathway. Health Sector Kenya is a resource rich country, but fares very badly on basic health indicators. Preventable diseases like malaria, AIDS, pneumonia, diarrhea and malnutrition are the biggest burden, major child-killers, and responsible for much morbidity. Besides this, life expectancy is low while infant and maternal mortality rate is high. Kenya can be a huge market for Bharat’s traditional healthcare systems like Ayurveda and Yoga. Kenya is also naturally blessed with fertile land for medicinal plants farming. Bharat’s Ayurvedic firms can see Kenya as a new and untapped market for Ayurvedic products, and in long run can also produce Ayurvedic  products in Kenya for export to other African nations. Conclusion                                                                         The Kenyan Government has undertaken many initiatives, like favorable tax measures including the removal of duty on capital equipment and other raw materials, to create an investor friendly business environment. It is one of the emerging economies of East Africa, and a gateway to the entire region. Active trade and investment will bridge the gap among people and lead to better ties in others spheres as well. - By Kriti Agrawal