The Indian retail industry (estimated size of INR1.2tn and US$24bn) has witnessed a robust growth of 12% over the past five years as rising income levels, favourable demographics and urbanisation trends have helped drive consumption boom.
Organized retail has seen an even sharper increase of 43% over the same period helped by a combination of factors including low penetration levels, rising awareness and aspirations and increasing consumerism. Private final consumption expenditure has been the key driver of economic growth over the last few years. To put this in perspective, in FY08, PFCE was c. US$650bn or c. 62% of the GDP of the country. Out of this, retail contributed c. US$ 410bn or 63% of the PFCE.
The following chart shows Private final consumption expenditure led growth in India now and projections for 2013.
However, even after taking the growth over the last few years into consideration, organized retail penetration continues to be amongst the lowest in the world at an estimated c.7%. We expect the organised retail industry register a steady growth of c.15% over the medium term thus implying a penetration level of c. 12% in 2012 rising to c. 20% by 2020.
Comparison of Indian Organized Retail with World:
Indian organized retail in the total retail market is still well below the levels seen in developed countries (US c. 90%), Japan (c. 85%). The level of penetration of organized retailing in India also compares unfavourably with some of the other developing countries like Poland, Thailand and Vietnam where organized retailing share in overall retail market is over 20%. Thus the opportunity to ride the boom in the next Big Economy of the World.