Modi Govt Paves Way For Retail Industry’s ‘Acche Din’

The following is the report by Anuj Puri, Chairman & Country Head, JLL India

In a major announcement that promises to revolutionise India’s retail industry and improve ‘ease of doing business’, the Modi Government has cleared the Model Shops and Establishments (Regulation of Employment and Conditions of Services) Act 2015. This will allow all public amusement establishments with at least 10 employees – such as restaurants, local markets, shopping malls and movie theatres – to operate 24×7.

This Act will have to be implemented by states. Once they have implemented it, offline retailers operating in those states will stand to benefit hugely as the Act brings them on a level-playing field with online retailers (who operate round the clock). This would also intensify competition between physical and virtual players but benefit consumers and the labour work force.

In the mature economies, students and unskilled/ semi-skilled labour benefit from employment in retail. The same trend is being observed in India and it is only bound to increase as women have now been allowed to work 24×7. Companies will be mandated to facilitate women with safe transportation services and other related facilities such as crèches during night schedules.

Already, Maharashtra and Andhra Pradesh unveiled their new retail trade policies, modelled along the lines of this Act, in early-2016. Late last year, media reports highlighted industry expectations of more states following Maharashtra’s footsteps in thrashing out state-level retail policies. States such as Telangana, Rajasthan and a dozen others are expected to announce their respective policies this year.

The retail sector accounts for about 15 per cent of the country’s GDP and this is expected to increase further with round the clock operations. Already, the government had announced reforms to loosen restrictions on inbound investments in retail a few days ago. Single-brand retailers like Swedish furniture giant, IKEA, and smartphone manufacturer, Apple, stand to benefit. JLL had first announced late last year that 2016 could see single-brand retail stores opening up.

These announcements – coupled with high private equity inflows into the retail real estate – look very promising.  ‘Acche Din’ now seem close at hand for Indian retail and the retail real estate industry.