The retail market in India is estimated at about US$ 410 billionand constitutes about 60% of private consumption and about 35% of India's GDP. With Indian GDP expected to grow at 7-8 % in the next coming years, the retailmarket is expected to touch US $860 billion by 2018. In recent years, thissector has witnessed a lot of interest from both domestic and global players,who have committed investments worth US $30 billion, which will lead toincrease in the share of modern retail from the current 4.5% to almost 25% of thetotal retail market by 2018.



The recent slowdown in the economy because of worldwideincrease in the price of crude and inflationary pressures on food/commodities prices has impacted consumer sentiments leading to doubts on the sustainability of the hightrajectory growth of the modern retail. Though the overall market may look alittle sluggish, we believe that modern retail will continue to grow since the longterm fundamentals of the Indian economy are still strong. The key drivers ofIndia's growth like our favourable demographics, increasing consumer incomes& urbanization, rising consumer aspirations still remain; as also do theneed for a better retail environment, modern retails capability to buildeconomies of scale and the growth and availability of malls to provide retail space. Therefore, the fundamentals still support the case for modern retail in India and there is no reason to believe that retailers will not to continue to invest andexpand as planned in the coming years.


One area which will lead to faster growth of modern retailis Building World Class Supplier Base in the country. Most of the currentretailers are facing the problem of getting a quality and reliable supplier fortheir goods.


India has a vast network of Small and Medium Enterprises (SMEs), which can bedeveloped to become large suppliers feeding the vast network of theseretailers. However, these SMEs are facing many problems like lack of awarenessof global trends, limited marketing efforts and lack of capital among others.Considering their operating costs, entrepreneurial skills and availability ofkey raw material in the country, there is an opportunity for Government ofIndia to help them grow and build world class manufacturing hubs similar to China.


 

These enterprises need low capital investment per unit of output generate opportunities for direct and indirect employment can be located in far flung areas, use local natural resources and local skills and meet local needs of a "limited market" for consumer goods and services, nurtures enterprising spirit of the populace, prevent migration from rural areas to urban centers thereby helping tackle social problems of urban slums and social tensions.


Besides, with the increase in population and inability of the agriculture sector to absorb a growing population, all governments, whether of developed or developing countries, have adopted conscious and well articulated policies for promotion of SMEs in view of the need to create self-employment opportunities in this sector. These enterprises already form a significant part of the overall industrial structure of United States, Europe, Japan and the developing world of Asia and Africa. It is estimated that in the United States roughly 80 percent of the new jobs are generated by smaller firms with 100 or fewer employees.


Although Indian SMEs have achieved considerable progress in terms of growth of number of units, gross output, employment generation and exports, yet exports of manufactured goods from India from the small scale sector still constitutes less than 10 percent of the total output of this sector. This is due to the fact that the Indian small entrepreneur hesitates to venture into the export markets due to his inability to undergo risks of international trade. It is in this context that tie-ups among Global Retailers and Indian SMEs in the emerging scenario of the growth of the world economy assume a special significance.


It also needs to be emphasized that the modern sector of the Indian SMEs, which uses latest state-of-the-art technologies, has already developed a niche in establishing sound subcontracting arrangements among large enterprises in India in the automobiles, electrical, electronics, chemicals, pharmaceuticals, software development and other sectors


We are confident that with the growth of modern retail, the supplier base will continue to show impressive growth in the coming years. Also, an easing of FDI rules will definitely bring many international players currently sitting on the fence to India. And, will also promote higher investments by international retailers like Walmart, Tesco & Metro. We also foresee a lot of activity in the back-end sectors from aggregators, logistics and warehousing firms.