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FDI done, what's next for the retail sector in India!

Aparna Dutt Sharma, Chief Executive Officer, IBEF

Dec 10, 2012 16:24

Now that the government at the centre has secured the Parliamentary nod on foreign direct investment (FDI) in multi-brand retail, more international retailers are expected to make their way to the Indian market in the coming years. This has positive spinoffs for various related industries like supply chain management, warehousing et al.

With a market size of US$ 450 billion in 2012, the retail market in India is expected to be US$ 1.3 trillion by 2020.

The retail market in India has grown at a compounded annual growth rate (CAGR) of 5.9 per cent since 1998. But even at such a robust growth rate, the organised retail is just a small fraction of the total retail industry in India. At the end of 2011-12, the share of organised retail stood at 5 per cent share of the total retail market in terms of penetration and the rest 95 per cent is led by unorganised retailers with over 12 million mom-and-pop stores in the country. The share of organised retail is expected to go up to 9 per cent by the end of 2015-16 and 20 per cent by the end of 2020-21.

We can expect the organised retail industry to help streamline infrastructure and give a boost to related industries. The recent FDI reforms in retail sector are expected to create additional nine million jobs by 2021. Apart from bringing quality products at competitive prices, it is expected that most of these foreign retailers will source products locally to remain competitive which will benefit the manufacturing sector. Experts believe that the entry of foreign retailers in the multi-brand and single-brand space will help the industry to become more competitive and at the same time, these retail giants will bring in more global practices in the Indian market.