The Indian retail industry is one of the fastest growing in the world. Retail industry in India is expected to reach Rs 76.87 lakh crore (US$ 1.1 trillion) by 2020. India is the fifth largest and preferred retail destination globally. The country is among the highest in the world in terms of per capita retail store availability. India’s retail sector is experiencing exponential growth. It accounts for over 10 per cent of the country’s Gross Domestic Product (GDP) and around eight per cent of the employment.
Reasons for the growth
Healthy economic growth, changing demographic profile, increasing disposable income, urbanisation, changing consumer tastes and preferences are some of the factors driving growth in the organised retail market in India.
Organised retail penetration is expected to increase to 18 per cent in 2021 from an estimated 9 per cent in 2017. India is expected to become the world's third-largest consumer economy, reaching Rs 27.95 lakh crore (US$ 400 billion) in consumption by 2025.
Indian retail is thus expected to reach US$ 1400 billion by FY 2024 from US$ 790 billion in FY 2019, growing at a CAGR of 12 percent. India’s retail market is estimated to reach $1.75 tn by 2026, from $0.79 tn in 2018, growing at a CAGR of 9-11%. On the other hand, the Indian e-commerce industry is expected to cross $200 bn mark by 2026.
The E-commerce market in India is also set to grow at a CAGR of 30% for gross merchandise value to reach $200 bn by 2026, and have a market penetration of 12% compared to 2% currently.
Cumulative FDI inflow in retail stood at US$ 2.00 billion between April 2000 to December 2019. India’s retail sector attracted US$ 970 million from various private equity (PE) funds in 2019.
Organised and Unorganised Retail In India
India is largely an unorganized retail market, contributing 88% to the total retail sector in India. The organized retail market is currently valued at $60 bn, while the unorganized market holds the rest. The share of the organized retail market is projected to increase to 22-25% by 2021, thereby reducing the unorganized retail market’s share to 77%. The organized retail market, therefore, has the potential to reach approximately $140-160 bn.