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Indian Retail Industry Analysis

February, 2018

The Indian retail industry is one of the fastest growing in the world. Retail industry in India is expected to grow to US$ 1,100 trillion by 2020 from US$ 672 billion in 2017.

India is the fifth largest preferred retail destination globally. The country is among the highest in the world in terms of per capita retail store availability. India’s retail sector is experiencing exponential growth, with retail development taking place not just in major cities and metros, but also in Tier-II and Tier-III cities. Healthy economic growth, changing demographic profile, increasing disposable incomes, urbanisation, changing consumer tastes and preferences are the other factors driving growth in the organised retail market in India.

India’s population is taking to online retail in a big way. The online retail market is expected to grow from US$ 17.8 billion to US$ 60 billion between 2017 and 2020. It is forecasted to grow at a CAGR of over 30 per cent from 2016 to 2021, on the back of shift from traditional retail to online channels by millennials. Organised retail penetration is expected to increase from 7 per cent in FY 2016-17 to 10 per cent in 2020.

Increasing participation from foreign and private players has given a boost to Indian retail industry. India’s price competitiveness attracts large retail players to use it as a sourcing base. Global retailers such as Walmart, GAP, Tesco and JC Penney are increasing their sourcing from India and are moving from third-party buying offices to establishing their own wholly-owned/wholly-managed sourcing and buying offices.

The Government of India has introduced reforms to attract Foreign Direct Investment (FDI) in retail industry. The government has approved 51 per cent FDI in multi-brand retail and 100 per cent in single brand retail under the automatic route which is expected to give a boost to ease of doing business and Make in India, and plans to allow 100 per cent FDI in e-commerce. India will become a favourable market for fashion retailers on the back of a large young adult consumer base, increasing disposable incomes and relaxed FDI norms.

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