Organised retail’s share to touch 10 per cent by 2020: Crisil

The impact of relaxation in FDI rules in single-brand retail would be more pronounced in the apparel, luxury goods, home decor, footwear, and electronics segments, says Crisil. And with the government allowing 100 per cent foreign direct investment (FDI) in single-brand retail under the automatic route, the share of organised retail in India is expected to rise to 10 per cent by 2020, up from 7 per cent in 2016-17.

Before this, Crisil had estimated the market share of organized retailers to grow to 9 per cent of the overall industry, by 2020. The impact of relaxation in rules would be more pronounced in the apparel, luxury goods, home decor, footwear, and electronics segments.

Anuj Sethi, Senior Director at Crisil Ratings says the global single-brand retailers facing growth headwinds in their key geographies will now be more than keen to peg tent in India and those already present could step up investments. The previous sourcing norms were a bottleneck to scaling up of operations. At present only up to 49 per cent FDI was allowed through the automatic route and investment above that needed government approval.

The cabinet also eased the local sourcing rules for foreign single-brand retailers; such entities are not required to meet the 30 per cent target for local sourcing by their Indian units for five years if they are already doing so for their global operations. So far, single-brand retailers were required to source locally 30 per cent of the value of goods purchased for their Indian business initially as an average of five years; later they were required to meet the requirement on a yearly basis. The relaxation of rules will remove the entry barriers for foreign single-brand retailers altogether and also help the new companies stabilize their sourcing base.