Retail
India ranked first in the Global Retail Development Index 2017.

Retail Industry in India

Latest update: September, 2018

  • India has occupied a remarkable position in global retail rankings; the country has high market potential, low economic risk and moderate political risk
  • India is expected to become the world's third-largest consumer economy, reaching US$ 400 billion in consumption by 2025, according to a study by Boston Consulting Group
  • India is ranked first in the Global Retail Development Index 2017, backed by rising middle class and rapidly growing consumer spending
  • India’s retail market witnessed investments worth US$800 million by Private Equity (PE) firms and wealth funds in 2017.
  • Department of Industrial Policy and Promotion (DIPP) approved three foreign direct investments (FDI), Mountain Trail Food, Kohler India Corporation, and Merlin Entertainments India in the single brand retail sector.

Note: FDI - Foreign Direct Investment
Source: AT Kearney 2017 FDI Confidence Index

Note: FMCG - Fast Moving Consumer Goods
Source: Aranca Research

Last Updated: September, 2018

Introduction

The Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. Total consumption expenditure is expected to reach nearly US$ 3,600 billion by 2020 from US$ 1,824 billion in 2017. It accounts for over 10 per cent of the country’s Gross Domestic Product (GDP) and around 8 per cent of the employment. India is the world’s fifth-largest global destination in the retail space.

Market Size

India’s retail market is expected to increase by 60 per cent to reach US$ 1.1 trillion by 2020, on the back of factors like rising incomes and lifestyle changes by middle class and increased digital connectivity. While the overall retail market is expected to grow at 12 per cent per annum, modern trade would expand twice as fast at 20 per cent per annum and traditional trade at 10 per cent# . In FY17, organised retail market contributed 7 per cent of the total sector and unorganised retail market contributed the rest 93 per cent of the sector.

Online retail is expected to be at par with the physical stores in the next five years and has grown 23 per cent to $17.8 billion in 2017.

India is expected to become the world’s fastest growing e-commerce market, driven by robust investment in the sector and rapid increase in the number of internet users. Various agencies have high expectations about growth of Indian e-commerce markets. Indian e-commerce sales are expected to reach US$ 200 billion! by 2026 from US$ 39 billion in 2017

Luxury market of India is expected to grow to US$ 30 billion by the end of 2018 from US$ 23.8 billion 2017 supported by growing exposure of international brands amongst Indian youth and higher purchasing power of the upper class in tier 2 and 3 cities, according to Assocham.

The size of modern retail in India is expected to reach US$ 11.25 billion in 2019 from US$ 13.51 billion in 2016.

Investment Scenario

The Indian retail trading has received Foreign Direct Investment (FDI) equity inflows totalling US$ 1.42 billion during April 2000–June 2018, according to the Department of Industrial Policies and Promotion (DIPP).

With the rising need for consumer goods in different sectors including consumer electronics and home appliances, many companies have invested in the Indian retail space in the past few months.

  • Google and Paytm Mall to acquire 7-10 per cent stake in Future Retail with investment of Rs 3,500-4,000 crore (US$ 522.08-596.66 million).
  • Investments by private equity firms and wealth firms in Indian retail sector reached US$ 800 million in 2017.
  • India’s retail sector attracted Rs 9.5 billion (US$ 147.40 million) investments in FY18, at a growth rate of 35 per cent year-on-year from Rs 7 billion (US$ 104.34 million) in FY17.

Government Initiatives

The Government of India has taken various initiatives to improve the retail industry in India. Some of them are listed below:

  • The Government of India may change the Foreign Direct Investment (FDI) rules in food processing, in a bid to permit e-commerce companies and foreign retailers to sell Made in India consumer products.
  • Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online retail of goods and services through the automatic route, thereby providing clarity on the existing businesses of e-commerce companies operating in India.

Road Ahead

E-commerce is expanding steadily in the country. Customers have the ever increasing choice of products at the lowest rates. E-commerce is probably creating the biggest revolution in the retail industry, and this trend would continue in the years to come. India's e-commerce industry is forecasted to reach US$ 53 billion by 2018. Retailers should leverage the digital retail channels (e-commerce), which would enable them to spend less money on real estate while reaching out to more customers in tier-2 and tier-3 cities.

Both organised and unorganised retail companies have to work together to ensure better prospects for the overall retail industry, while generating new benefits for their customers.

Nevertheless, the long-term outlook for the industry is positive, supported by rising incomes, favourable demographics, entry of foreign players, and increasing urbanisation.

Exchange Rate Used: INR 1 = US$ 0.0149 as on Q1 FY19.

References: Media Reports, Press Releases, Deloitte report, Department of Industrial Policy and Promotion website, Union Budget 2017–18

Note: !- according to a joint ASSOCHAM-Forrester study paper, # - as per a report titled ‘Retail 2020: Retrospect

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

Retail India

Market size over the past few years (US$ billion)
Retail India

 

Posters

Brand India Pharma

RETAIL INDIA

+ More >

Brand India Pharma

IBEF Publications

IBEF Publication

India Now Magazine


Towards a healthier India - Focus on accessibility, affordability, and quality

English

+ More Publications >

IBEF Publication

IBEF Blog - INDIA ADDA – PERSPECTIVES ON INDIA More

author_logo-ibef1.jpg INDIA'S GOVERNMENT E-MARKETPLACE: MAKING PROCUREMENT SIMPLE!
IBEF, Knowledge Centre

The Government e-Marketplace (GeM) is a national public procurement platform in India that was launched about two years back, in August 2016. Till date, the platform clai...

author_logo-ibef1.jpg Indian Logistics Sector: Shining bright!
IBEF, Knowledge Centre

The Indian logistics sector is on a big growth tide. According to the domestic rating agency ICRA, Indian logistics sector is expected to grow at a rate 8-10 per cent ove...

author_logo-ibef1.jpg India's Franchise Industry: The road so far and way forward!
IBEF, Knowledge Centre

Whether you are in a big metropolitan city or a smaller town, one look around you is bound to reveal bright signage with recognisable names all around. From heading to th...

author_logo-ibef1.jpg India: Strong in Tractor Manufacturing
IBEF, Knowledge Centre

In India, agriculture and its allied sectors are the primary source of livelihood for a large chunk of domestic population. In 2017, the Gross Value Added (GVA) in these...

author_Pragati_Khare1.jpg The role of HR in the Rise of India's Tech Industry!
Pragati Khare, Head HR, COMIO Smartphone

Improvements in human resources (HR) practices and technology are a key reason for the continuous rise of India's technology sector. However, the growth of the tech s...

author_logo-ibef1.jpg Indian BPM Industry: Way forward!
IBEF, Knowledge Centre

Most businesses are dynamic, with processes and objectives that are constantly developing. In order to keep the processes within a business streamlined and efficient as w...

ideas More

Ideas

Smartivity: Making Learning Smarter
Smartivity strives to focus on mind-and-body engagement for children in the era in which most technology-based products are created for entertainment and offer passive engagement and mind-numbing experiences. Their products encourage children to become ‘makers’ instead of ‘consumers’. ...

JOIN IBEF.org

Join IBEF.org now. Enjoy FREE subscriptions downloads, updates and more.

Error

Already a member?
Login / Retrieve Password