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India's retail sector may need 'ventilator support'
If the banking and govt sector don’t help, it will become larger problem, says industry body RAI
New Delhi: As no economic package has been announced so far and restrictions for shops and retail stores still exist in most states across the country, Retailers Association of India's (RAI) CEO Kumar Rajagopalan feels that the condition of the retail sector is becoming untenable now and, will soon require 'ventilator support'.
Rajagopalan said that in the absence of government support and further regulatory relieffrom the Reserve Bank of India (RBI) there will be a large number of non-performing assets (NPA) in the retail sector, which may go up to Rs 75,000 crore. "If the banking sector and the government does not come and help now, the retail sector will become an NPA, then they will have to handle a very different problem, which would be a much larger problem. NPAs could be as much as Rs 75,000 crore from retail," he said. He said that if the retail sector is supported with a package, it would have a positive ripple effect on the manufacturing sector and the supply chain.
"I think slowly the retail industry is going to have the need for a ventilator. If retail is safe then obviously the supply chain of manufacturers, all of them gets saved, because the money comes from retail to the manufacturers. It's one industry that has the maximum amount of multiplier effect," Rajagopalan said. He said that in case a package is not provided 20-25 per cent of the retail sector will be out of business, which would include a large number of medium scale players.
Among other measures and reliefs, the industry body had urged the government to provide wage subsidy of up to 50 per cent on salaries up to Rs 25,000 and moratorium of 6 to 9 months for repayment of loans. It has also asked for 25 per cent additional working capital credit line to pay salaries and wages, along with reduction in GST for the retail sector.
Rajagopalan observed that retail is not a high margin business and retailers don't sit on large cash reserves like other industries. On the sales volume for the organised retail sector, he said: "Retail will be achieving about 60 per cent of what it was supposed to achieve this (fiscal) year, a 40per cent dip."
