Indian retail to touch Rs 37 lakh crores by 2020

That the Indian retail sector is poised for big times is a well known fact, now a new study has confirmed this one more time. According to a survey conducted by business consultancy Technopak Advisors, the country’s retail market is expected to touch 620

billion euros (around Rs 37 lakh crores) by 2020 at a compounded annual growth rate (CAGR) of more than 25 per cent. Strong underlying economic growth, population expansion, the increasing wealth of individuals and the rapid construction of organized retail infrastructure are key factors behind the forecast.

The India Retail Report 2010 by Technopak reiterates that the retail sector in India is undergoing a major transformation. And what has triggered this growth is the entry of global players and expansion by major Indian retailers. Joint ventures, tie ups franchise agreements et al have together had an impact on the sector. No wonder, in the latest global retail development index (GRDI), India was ranked as the most attractive nation for retail investment among 30 emerging markets, by US-based global management consulting firm AT Kearney.

In fact, many recent studies have brought forth India’s retail growth story. The Q210 BMI India Retail Report that was released a few months ago too had forecasted that total retail sales will grow from an estimated US$427 billion in 2009 to US$755billion by 2014. The BMI study had said the growth in the overall retail market will be driven, in large part, by the explosion in the organized retail market. This means the Western concept of chain outlets, department stores, supermarkets, etc. According to Investment Commission of India (ICI) data, this segment accounted for $12.10 billion of sales in 2006, 4.6 per cent of the total retail segment. BMI forecasts that organized retail sales will reach $99.09 billion by 2014, 13.1 per cent of the total.

On similar lines a just released study by The Nielsen Company says the fast moving consumer goods market in rural India is tipped to touch $100 billion (around Rs 45,735 crores) by 2025 on the back of ‘unrelenting’ demand driven by rising income levels. According to Nielsen, rural India accounts for more than half of sales in some of the largest FMCG categories.  At present, rural consumers spend about $9 billion per annum on FMCG items and product categories such as instant noodles, deodorant and fabric, with the pace of consumption growing much faster than urban areas, as per the findings.

The past few years, numerous top international retailers have marked their presence in the Indian market. For example, Trent, the retail arm of Tata Group, sells high-end clothing brands like Zara and Sisley. They also run a 50:50 JV with UK’s biggest retailer Tesco, which operates cash-and-carry stores in Mumbai, Delhi and Bangalore, and supplies merchandise to Trent’s hypermarket chain Star Bazaar. Wal-Mart operates a cash-and-carry JV with Bharti Enterprises, while Italian luxury fashion brand Dolce & Gabbana operates a 51:49 single brand retailing venture with real estate major DLF. Similarly, Marks and Spencer the UK retail chain ventured into India with a partnership with Reliance Retail. And looking at the growth forecasted by the latest Technopak study, many more such partnerships are expected to push the segment further.