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.
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.
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.
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