«Published Annually Vol. 6, No. 1 ISBN 978-0-979-7593-3-8 CONFERENCE PROCEEDINGS Sawyer School of Business, Suffolk University, Boston, Massachusetts ...»
As personal wealth continues to accumulate at a lightening pace, the ‘financial planning industry’ should mature to meet the demand for the much needed guidance and resources to make sound financial decisions possible. The demand for wealth management services comes not only from the HNWs but also from the upwardly mobile middle class who do not have the specialized knowledge or time to plan for their own financial goals. The upwardly mobile class forms a potential group for provision of specialized wealth management services. Given, the inflation driven growth, there is going to be a huge demand for such services from the Indian middle class population. There is another trend which is going to change the landscape of 25 Weldon, L. (1997). Private banking: A global perspective. Cambridge: Woodhead Publishing Ltd.
26 PwC Global Private Banking and Wealth Management Survey (2011). Retrieved from www.pwc.com/wealth, accessed 31.10.2011 27 Capgemini and Merrill Lynch Global Wealth Management 2011 Asia-Pacific Wealth Report. Retrieved from www.merrilllynch.nl/media/114333.pdf, accessed 31.10.2011.
28 The ‘Bird of Gold’: The Rise of India’s Consumer Market. McKinsey Global Institute (MGI). Retrieved from www.mckinseyquarterly.com, accessed 31.10.2011.
Conference papers © Knowledge Globalization Institute, Pune, India, 2012 Financial Planning industry in India. Indian customer is getting more aware of the financial products and their features and is not as naïve as it used to be few years back.
The private banks in India have already expanded hugely into this area providing wealth management services to the HNW population though the middle class population remains within the ambit of their services. It is this segment that needs to be tapped by the public sector banks along with the HNW population. As pointed out by Uppal (2011) while interest is by far the most important cost as also income of banks, the deregulation of interest rates, has resulted in continuous decrease in interest rates due to the cut-throat competition in the financial market. Interest income of the banks is continuously deteriorating day by day, resulting in lower profitability. It is highly crucial that the banks give more emphasis to fee-based income to offset this reduction in interest income.
Financial planning and Wealth management services is a crucial area which can appreciably contribute to the bank’s fee-based income. While private sector banks have managed to significantly increase their fee based income in the past few years, public sector banks have not managed to register considerable increase in fee-based income. Given this scenario, provision of wealth management services for the growing HNW and upwardly mobile Indian population affords a impressive opportunity for the public sector banks to increase their fee-based income and thereby their competiveness in the Indian financial market.
However, public sector banks have not yet tapped this opportunity by launching wealth management divisions, with the only exception of SBI, who in 2010, have launched the Financial Planning and Wealth Management (FPWM) divisions in select cities across the country. Again while some other public sector banks like Bank of India and Bank of Baroda have providing select third party products through retail divisions, the move to provision of customised wealth management products is an opportunity that needs to be tapped by the public sector banks in the near future.
29 Uppal, R. K. (2011). Fee-Based Activities In Indian Banks. International Journal of Research in IT & Management. Vol1, Issue 1, pp.27-38.
Conference papers © Knowledge Globalization Institute, Pune, India, 2012 Employment Conditions in Organised and Unorganised Retail: Implications for FDI Policy in India
In India, retail is the second largest employer after agriculture, providing employment to over 35 million people. Employment in this sector has witnessed changes after the 1990s with the modernisation of retail. Since retail is labour-intensive, the FDI policy on retail is linked with employment. This paper examines employment conditions in organised and unorganised retail and provides policy recommendations for the Indian government. The paper is based on a survey of around 500 retail employees and employers, using descriptive techniques. The paper found that the quality of employment and future job prospects are better in the organised sector than in the unorganised sector. The focus of the government should, therefore, be on generating quality employment. The policy recommendations, if implemented, can generate employment in the organised sector while minimising the adverse impact on the unorganised sector.
Keywords: Retail, Employment, FDI, Public Policy, International Policy
Globally, retail is one of the largest employers; it provides employment to around 11 per cent of the workforce in the US and the UK. In India, retail is the second largest employer after agriculture, providing employment to over 35 million people (Economic Survey, 2011). However, the share of retail in total employment in India is only around 7 percent, primarily because a large part of retail is still in the traditional or unorganised sector where there is a high incidence of disguised unemployment.
Since the mid-1990s when the Indian economy was liberalised, there has been a shift in retail employment from the unorganised to the organised sector. The Indian retail sector mainly consists of small privately-owned single stores that largely depended on family labour. These are built on the model of entrepreneurship or sole proprietorship and provide self–employment. The need for hired labour is low and, because the labour laws do not apply to the unorganised sector, workers may be paid less than the minimum wage and have long working hours. With liberalisation, Indian corporates and foreign retailers started operating in the retail sector and modern retail evolved. Unlike the unorganised sector, the modern or organised retail has a corporate management with a transparent accounting system. Modern retailers have to abide by the labour laws and employment conditions. The incidence of disguised unemployment is low. The working hours are fixed, so employees work on a rotation basis.
There are other differences between unorganised and organised retail. Unorganised retail generates a larger number of intermediaries in the supply chain (such as wholesalers), while organised retailers can reduce the need for multiple intermediaries by streamlining the supply chain. Further, organised retail generates more employment in allied activities, such as logistics, packaging and inventory.
Retail modernisation has led to a change in employment in India, but its impact is not clear. Modernisation could lead to job losses in the unorganised sector if the small mom-and-pop stores cannot compete with corporate retailers; at the same time, it could generate more employment in each outlet as shop sizes increase and employees are used on a rotational basis. It is difficult to prove either argument without adequate data. For the organised sector, data are available; official sources show that the share of
Conference papers © Knowledge Globalization Institute, Pune, India, 2012
wholesale and retail trade in employment increased from 2.3 per cent in 1993-94 to 8.3 per cent in 2007-08 (NSSO, 2010).
However, there is no official data for the unorganised sector, which constitutes around 95 per cent of the total retail sector (AT Kearney, 2010). Since the Indian economy is on a high growth trajectory, both organised and unorganised retail are growing with no evidence of job losses in the unorganised sector.
The impact of modernisation on employment depends on factors such as speed of modernisation, corporate and government policies, the competitiveness of small retailers, and consumer preference for the two types of outlets. Organised retail offers some advantages for employees. It follows labour laws and other regulations that offer greater job security. If, in addition, it offers higher pay, benefits such as bonuses, and better working conditions such as holidays, the quality of employment is likely to improve.
However, the organised retail may require different skills than the unorganised sector, making it difficult for employees to switch from one sector to the other.
In India, retail is one of the few sectors that has restrictions on foreign direct investment (FDI). In fact, when the Indian economy was liberalising, the government banned foreign investments in retail in 1997, primarily to protect employment in the unorganised sector. Since then, the government has partially liberalised FDI in single-brand retail subject to certain conditions, but FDI is still not permitted in multi-brand retail. In July 2010 the government released a discussion paper on “Foreign Direct Investment in MultiBrand Retail Trading” (DIPP (2010) for discussion on whether FDI should be allowed in multi-brand retail and, if so, what the conditions should be. One condition proposed was that jobs in the organised sector should be reserved for rural youth. While this proposal aimed to create employment for rural youth, it has been criticised since organised retail is largely located in urban areas of India and this may lead to rural-urban migration. The discussion paper failed to address issues of quality of employment, future job prospects and skill development in retail, all of which are crucial in a country that has a large working population.
This paper compares employment conditions and job prospects in the organised and unorganised sectors in India. The objectives of this study are (a) to evaluate the employment-generating potential of the organised and unorganised sectors, (b) to compare the quality of employment in the two sectors, and (c) to evaluate future prospects of employees in organised and unorganised retail outlets. The findings of this paper may provide meaningful policy suggestions for the Indian government.
Hazra (1991) pointed out that the economic growth of countries has coincided with a shift in occupational structure from the informal to the formal sector, while UNCTAD (1994) has shown that FDI plays an important role in this shift. Jenkins (2006) pointed out that the impact of FDI on employment depends on the kind of investment and the nature of the sector where the investment is directed; if the investment is in labour-intensive sectors, employment generation by FDI is higher. The quality of employment is determined by the behaviour of individual firms with respect to wages, working conditions and training programmes; employment quality in the formal sector is better than in the informal sector. Papola (2006) has shown that unlike the organised sector, the unorganised sector is characterised by poor working conditions and lack of social security. He suggested that policies should promote organised sector employment.
Examining the employment impact of large retailers, Basker (2005) found that Wal-Mart creates approximately 100 jobs in a year, but by eliminating intermediaries there is a loss of around 40-60 jobs. Overall, the net employment effect is positive. The author also found that Wal-Mart employees work for fewer hours in a week, which creates opportunities for part-time employment.
Reardon and Gulati (2008) have shown that employment in the organised retail sector has better pay and working conditions primarily due to the adherence to labour laws. They also found that the organised retail sector requires higher skills and education than the unorganised sector. They argue that the number of unorganised retailers may not decline with the growth of the organised sector.
Most studies on retail in India are either survey-based or perception-based. Survey-based studies like that of Mukherjee and Patel (2005) show that since both the unorganised and organised retail sectors are growing, there is no clear evidence of job losses in the unorganised sector. Joseph and Soundararajan (2009) found that the adverse effects of retail modernisation, if any, wear off with time. Perception-based studies (Guruswamy et al., 2005; Sarma, 2005; Singh, 2010) have shown that organised retail may have a negative impact on the unorganised sector because of malpractices due to buying power, employment loss in the value chain and price competition. This can be countered by slowing the pace of modernisation.
Conference papers © Knowledge Globalization Institute, Pune, India, 2012
Different authorities in India regulate retail employment. The country has a quasi-federal governance structure and employment is jointly regulated by the central and state governments. At the centre, it is regulated by the Ministry of Labour and Employment, but the state governments also have labour-specific regulations. The retail sector is under state government legislation and, therefore, retail employment comes under state jurisdiction. The Shops and Establishment Act of different states contains laws on the working conditions for employees. Various Labour Acts of the central and state governments such as the Minimum Wages Act, 1948 and the Employees State Insurance Act are applicable, but only to employees in the organised retail sector.
India has a large population in the working age group (15-59 years) and the proportion of this group in the total population is likely to increase from approximately 58 per cent in 2001 to more than 64 per cent by 2021 (Ministry of Labour and Employment, 2010).
Providing employment opportunities to this group has always been a key concern of the central and state governments, but recently employment quality has received significant attention. The Indian Ministry of Labour and Employment has laid down objectives to accelerate employment growth in the organised sector and improve the quality of jobs in the unorganised sector.