IndiaRetailBiz

GST (Goods & Service Tax)– announced to be implemented from 1st April, 2010– and possible opening of retail to foreign investment (FDI), will ensure multi-fold growth for FMCG sector in the next 10 years.

According to a FICCI-Technopak report, the sector is expected to grow 4-fold from Rs1.25 lakh crore ($25 billion) sales in 2008 to Rs 4.5 lakh crore ($95 billion) by 2018. Even without the implementation of FDI and GST, though unlikely, the sector will continue to grow at 10-12 per cent annually. According to estimates, the turnover in the next 5 years (by 2013) is expected to rise to Rs 2.06 lakh crore ($47 billion) and in the next 10 years (by 2018) it is expected to rise three-fold to Rs 3.55 lakh crore.

While making wide-ranging recommendations to the government, the FMCG companies and the retailers to put their act together, it has urged the government to rapidly implement GST with a view to replace the multiple indirect taxes currently levied on FMCG products.

While, the report has, on the one hand, asked modern retailers to work with FMCG companies to improve fill rates, better capture consumer and shopper needs, and explore co-branding and co-promotion opportunities, on the other, it has advised traditional retailers (Kiranas) to invest in better customer service, product display and store ambience and invest in infrastructure, particularly for products that require controlled environmental conditions.

“Demand from the rural areas would be instrumental in fueling the growth of FMCG companies in India,” said Amit Mitra, FICCI General Secretary, while releasing the report.

Coming heavily on counterfeit products, which account for nearly 5 per cent of all products produced by the industry, the study has urged the government to enforce trade mark and copyright laws so as to protect the rights of the consumers and FMCG companies. These products while impacting tax collections significantly, also pose serious challenges to the sector’s growth, says the report.

The FMCG sector is among the largest employers in India and livelihood of 13 million people associated with it across 8 million Kiranas are directly depended on it, said Mitra while talking about potential of the sector.
Indirectly, 25 million more people employed at wholesalers, distributors, stockists, etc are also affected with well-being of sector.

The FMCG sector is also one of the major contributor to the exchequer as it contributes Rs 31,000 crore ($6.5 billion) though direct and indirect taxes.