100% FDI in single-brand retail to bring in more jobs
With 100% Foreign Direct Investment in single brand retail sector inviting a host of foreign investors into the country, a boon to the job sector is expected. In his budget speech this year, Finance Minister, Arun Jaitley announced 100% FDI (Foreign Direct Investment) through automatic route in the single brand retail sector. With foreign investors lined up to pump in huge money into the sector, it paints a hopeful picture for the job market in India at large.
According to Department of Industrial Policy and Promotion (DIPP), the total FDI in India during April-December 2017 stood at US$ 35.94 billion. Department of Economic Affairs, Ministry of Finance approved two FDI proposals worth Rs 532 crore (US$ 81.4 million).
Industry players are positive about FDI in single-brand retail creating more jobs than ever. Talking to People Matters, Vishwas Shringi, CEO & Founder of fashion jewelry brand Voylla said, “100% FDI in single-brand retail trade is expected to accelerate the growth of the sector. It will provide some fillip to the job scenario in the retail sector which has been a bit sluggish of late. With more investment in organized retail, there is likely to be an upswing in the hiring,”
Voylla is going full throttle and would be hiring across the verticals, starting from floor managers to business development managers to increase their retail footprints. India’s retail market is expected to increase by 60 percent to reach US$ 1.1 trillion by 2020, riding on the back of factors like rising incomes and lifestyle changes adopted by middle class and increased digital connectivity.
“Conditions for investment in this sector, including mandatory local sourcing would clearly result in providing additional job opportunities. In fact, the last budget had announced specific benefits for the MSME sector, which would also work as a catalyst for additional job openings,” said Anil Talreja, Partner, Deloitte India
According to a projection made by National Skill Development Corporation, in 2017 India’s retail sector will need a workforce of around 56 million. The sector will have one of the highest incremental human resource requirements - of 17.35 million till the year 2022.
FDI in retail will lead to many things in the country such as development of infrastructural capabilities, organized retail supply chains, but the most important would be to see increased opportunities and demand for jobs in the area of sales, store operations, merchandising, customer service, supply chain, logistics as these are the job roles that are typically required by the retail industry. TeamLease’s recent report on job creation in the sales domain also shows that just the increased FDI inflows in retail will result in a 350,000 incremental sales job.
Sharing his thought on FDI's impact in the job sector, Mayur Saraswat, Head of Business Development, Teamlease, said, “While it is difficult to make an estimate the exact figure, it will be safe to conclude that single-brand retail will create a sizeable number of jobs – especially in tier-2 and tier-3 markets, where they had limited presence till now,”
The catch: Jobs limited to certain sectors
However, there is a catch here. The job creation will be limited to certain sectors only.
“Whilst, the FDI in single-brand retail that allows international retailers to establish a wholly owned business in India is good the business model of single brand retailing limits its influence to a limited share of India’s total retail basket. Therefore, its direct impact to create jobs is limited,” said Ankur Bisen, Senior Vice President, Management Consulting firm, Technopak Advisors
Bisen’s opinion cannot go unnoticed, because maximum brands who wanted to invest in India have already entered the market. Currently, the retail sector in India is accounted for 8% percent of the total organized jobs. With the announcement of 100 % FDI, this number is expected to go up, but experts feel it’ll be limited.
The sentiment suggests that FDI will create jobs, but these jobs will be more of indirect jobs in various sectors. According to the government’s mandate, the local sourcing for all the retailers has to be 30% and this will lead to the job creation.
For instance, if a foreign brand has to sell their products, the thirty percent sourcing has to be from India. This sourcing will create more demands in different sectors such as textile, leather, automobile, electronics etc. Hence, there will be more jobs in all these sectors and not directly in retail.