FDI in Indian retail

Abstract

Retail is one of the biggest industries in the world with total sales exceeding US $ 8 trillion in 2002 1 with 9 retail companies in global fortune 100 list. In India also, the industry is large and is a very attractive market. India is number one in AT Kearney’s 2006 global retail development index.2 India’s GDP is estimated to grow at 8% which would drive retail industry growth. The estimated $ 210 billion retail market constitutes 10% of the GDP and is expected to grow at a CAGR of around 13% for the next five years.2 In India, this sector is highly fragmented with over 12 million outlets with only around 2% of retail sales from organized sector. Only 4% of outlets are larger than 500 sq. ft. whereas in USA there are 0.9 million outlets with more than 13 times of the Indian total retail market size. India has the highest number of outlets per capita in the world but with the lowest per capita retail space (@ 2 sq.ft. per person as compared to 16 sq.ft per person for USA). 3 Developed countries like USA, Western European countries have 70-80 % of retailing as organized retailing as shown in appendix A1. Retail provides significant employment at national level. It generates employment within the sector, as well as in upstream activities such as food processing, distribution and logistics. In developed countries retail has around 10% share in total employment whereas in India, retail has 6-7% share in total employment. Food and grocery constitute the largest segment of retailing and is major proportion of sale of top global retailers. In India also, food and grocery market is large but highly fragmented and is mainly dominated by mom-and-pop (Kirana) stores. The retail Pie is of Rs 930,000 crore (2003-2004) retail market. Food and Grocery retail is the largest portion estimated to be worth a whopping Rs 6,15,000 crore but more than 99 % of this market is dominated by the neighbourhood kirana stores. Clothing, Textiles and Fashion accessories constitute the second largest portion and also the dominating segment as far as organized retailing is concerned with 39% share of the market. In India, there is strong inclination to buy jewellery. This makes jewellery the third largest segment in retailing. Fashion as such constitutes 60% of the organized retail pie.