Friday, May 11, 2012: 09:03:44 AM

Retail Poll Feature

Interest rates hurting retailers

Tough economic weather impacting consumption, according to latest survey by Retailing360

Almost every industry today is reeling under the impact of the high interest rate regime. The retail sector is no exception and in fact it is one of the worst affected sectors. Not only does the sector face the heat from the consumer regarding the high inflation rate but also has to sustain its margins in this highly competitive market while interest rates soar.

 
The impact on production is evident from the dip in the IIP and consumption patterns are also showing a gradual change. According to a recent survey by Retailing360, respondents felt that the high interest rate regime is hurting retail consumption in India.
 
Not only are organised players affected with the bank interest rates increasing, small sized retailers also find credit too costly in the present market. According to Rakshpal Abrol, consumer activist and president of Bharatiya Udhami Avam Upbhokta Sangh, “One cannot blame the retailer for the rise in prices. Instead it is the duty of the government to protect the smaller retailers against the hike in interest rates. Larger players have higher margins and can get away by passing a part of the burden to consumers but if the smaller players try to do that they will make a loss or lose out on whatever little margin they have.”
 
Positive approach
 
The scenario is not that great for the larger players as well. Retail giants like Reliance Retail has witnessed losses in some of their formats and many other players have seen a slowdown in the market. However, in the FY12 annual report RIL stayed positive about its retail business and said that its sales growth is strong in spite of the tough economic conditions. The company has also added new stores and its results have been stronger than its competitors, according to the report.
 
It is evident that the tough economic scenario has played a spoilsport for the retail industry at several levels and it is likely that recovery will take a long time considering the present stance of RBI.
 
Tias Chakraborty
 

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