The retail market in India is estimated at about US$ 410 billion and 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 retail market is expected to touch US $860 billion by 2018. In recent years, this sector has witnessed a lot of interest from both domestic and global players, who have committed investments worth US $30 billion, which will lead to increase in the share of modern retail from the current 4.5% to almost 25% of the total retail market by 2018.
The recent slowdown in the economy because of worldwide increase in the price of crude and inflationary pressures on food/commodities prices has impacted consumer sentiments leading to doubts on the sustainability of the high trajectory growth of the modern retail. Though the overall market may look a little sluggish, we believe that modern retail will continue to grow since the long term fundamentals of the Indian economy are still strong. The key drivers of India's growth like our favourable demographics, increasing consumer incomes & urbanization, rising consumer aspirations still remain; as also do the need for a better retail environment, modern retails capability to build economies 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 and expand as planned in the coming years.
One area which will lead to faster growth of modern retail is Building World Class Supplier Base in the country. Most of the current retailers are facing the problem of getting a quality and reliable supplier for their goods.
India has a vast network of Small and Medium Enterprises (SMEs), which can be developed to become large suppliers feeding the vast network of these retailers. However, these SMEs are facing many problems like lack of awareness of global trends, limited marketing efforts and lack of capital among others. Considering their operating costs, entrepreneurial skills and availability of key raw material in the country, there is an opportunity for Government of India to help them grow and build world class manufacturing hubs similar to China.