Fitch maintains negative outlook on India’s retail

The ongoing slowdown in the West has started impacting

the Indian retail sector forcing ratings to go down. Fitch Group in its India Ratings predicts the retail sector will maintain a negative outlook for 2013. The result is driven by slow consumption owing to rising inflation and other macroeconomic factors.

“While the overall revenues look positive till now, there are palpating signs of a slowdown,” said Deep N Mukherjee, Director Corporate, India Ratings & Research. “There is a continuous weakness in consumer spending, marginal real wage growth and a weak macroeconomic environment.”

Meanwhile, the opening up of the FDI in multi-brand retail will receive another setback. Most foreign retailers who were keen on making investments in India will now wait for not just 2014-elections but a positive economic environment. “FDI-based equity infusion is a theoretical possibility. Most Indian companies are cash rich and there is a possibility that equity from domestic investors may drive deleveraging of existing players,” said Mukherjee.

According to India Ratings, the trend in private final consumption expenditure (PFCE) is even more worrisome. PFCE was at an eight-year low at 3.7 percent at end-Q213. India Ratings does not expect a meaningful improvement in PFCE in 2013.