India jumps up global retail investment charts

India jumps up global retail investment charts

A spike in GDP growth, improved ease of doing business environment, and better clarity regarding foreign direct investment (FDI) regulations are among the key factors behind India being named as the second most attractive destination for retail investments in the world. In a clear indication that the Narendra Modi led government's reforms agenda is bearing fruit, India jumped 13 positions from 2015 to be ranked second, after China, in A.T. Kearney's Global Retail Development Index (GRDI) for 2016. India's retail sector has expanded at a compound annual growth rate of 8.8 per cent between 2013 and 2015, with annual sales crossing the $1 trillion mark. India has also become the world's fastest growing economy. That coupled with a large population base and the easing of FDI regulations in the sector has made it an even more attractive market, the global management consulting firm reports. India's retail sector has also benefited from the rapid growth in e-commerce. India is the world's second largest internet market and the increasing internet and smartphone penetration is contributing to the expansion of e-commerce. As Indian consumers become more comfortable with shopping online, venture capital and private equity firms have boosted investment in the sector providing further momentum. Debashish Mukherjee, a partner with A.T. Kearney and co-head of the Consumer Industries & Retail Products Practice for India and Southeast Asia, said: “India's strong ranking reflects foreigner retailers' increased optimism in its retail market and its vast growth potential. India has relaxed several key FDI regulations in single-brand retail and this has paved the way for multinational firms to enter the market. Additionally, we expect to see e-commerce to propel India's growth and make it a more attractive proposition. “However, there are some challenges as well. India remains a challenging and complex market for foreign retailers, where understanding dynamics at the state level is important. Meanwhile, infrastructure bottlenecks including labour laws, complex regulations, high labour attrition rates, and limited high-quality retail space remain areas of concerns for retailers,” he added. In the past year, several foreign retailers have entered India. In fashion, Aeropostale, The Gap and The Children's Place entered in partnerships with Arvind Lifestyles Brands. Topshop and Topman entered via e-commerce through Jabong.com, while H&M became the first international fashion retailer to enter alone after the government approved 100 per cent FDI in single-brand retail.

Other sectors also saw multiple entrants including sports (Sonae, under the Sport Zone banner), restaurants (Wendy's, Jamie's Italian, Jamie's Pizzeria, Barcelos, and Carl's Jr.), and convenience stores (UAE-based Fmart). And among existing international retailers, Marks & Spencer, Burger King, Dunkin' Donuts, Starbucks, and Nando's undertook significant expansion programs. In terms of formats, the cash-and-carry model is still thriving and seen as profitable. Existing players, Walmart and Metro, plan to expand their store bases, targeting 70 and 50 stores, respectively by 2020. The GRDI ranks the top 30 developing countries for retail investment worldwide. The Index analyses 25 macroeconomic and retail-specific variables to help retailers devise successful global strategies to identify emerging market investment opportunities. The study is unique in that it not only identifies the markets that are most attractive today, but also those that offer future potential. The 2016 GRDI marks the 15th annual edition of the report. During the past 15 years, developing markets have seen tremendous growth both in terms of population, which has grown 21 percent to 6.2 billion, and in terms of retail sales, which have increased 350 percent in developing countries and now represent more than half of total global retail sales.

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