India Tops GRDI List In 2017

India Tops GRDI List In 2017

Key Highlights:

-India pushed China out of first rank to top the charts of developing countries for retail investment.

-India scored 71.1 on A.T. Kearney's GRDI list whereas China scored 70.4.

-The growing middle class and GDP growth has pushed India to the top of the list

India has topped the charts of developing countries for retail investment by consulting firm A.T. Kearney in its Global Retail Development Index (GRDI).

"A.T. Kearney's Global Retail Development Index names India as the top developing country for retail investment. India's strong GDP growth and growing middle class coupled with a more favourable regulatory environment over the past few years have played significant roles in attaining this ranking," the report said.

India topped the list with a score of 71.1 on A.T. Kearney's GRDI list. There has been a rapid growth in urbanisation and a paradigm shift in the rural-urban divide. "The retailers, especially in the organised segment are therefore targeting the 'middle class' populace by ensuring the availability of varied products at various price ranges to match the needs of a 'common man," analysts from Care Ratings said in a report dated June 2.

The country's GDP is estimated to grow 7.1% in FY18 as per the estimates of an HSBC report. The government's decision to relax FDI regulations in key areas of the retail sector has provided further boost to its growth. The government has allowed 100% foreign ownership in business-to-business e-commerce businesses and for retailers that sell food products.

"The government is taking steps to eliminate the federal and state rules that curtail retail development, and new regulations are being developed to attract investment and increase consumption," said Debashish Mukherjee, partner with A.T. Kearney.

India's retail sector is projected to grow 30% annually and touch US$ 48 billion by 2020. The report highlighted Indian retail has benefited from the rapid growth in e-commerce. Retailers have been quick to seize the opportunity with 86% of e-commerce dominated by pure-play online retailers in 2016.

"Understanding the size and complexity of India's retail market, especially the dynamics at the state level, as well as the nuances across the nation (with a population of 1.33 billion) is vital if retailers are to succeed," Himanshu Bajaj, partner with Consumer Industries & Retail Products Practice at A.T. Kearney India, added.

H&M opened 15 stores within two years of entering India while German sports goods makers Puma and Adidas are looking for government approval to operate fully owned retail stores and online portals.

IKEA, the world's largest furniture retailer, plans to invest US$ 1.56 billion to set up 25 stores across India. Amazon and Walmart have aggressive rollout plans, with Walmart aiming to open 50 cash-and-carry stores in the next 4-5 years. Saks Fifth Avenue is in talks with local partners to open two stores.

Reebok India has sought government's nod to set up single brand retail stores in the country. The company has submitted its proposal to the Department of Industrial Policy and Promotion (DIPP). Next to India, China ranked second with a score of 70.4 as retail market investment flourished in the country. The country was pushed out of the number one position on market maturity.

"Despite its slower overall economic growth, the market's size and the continued evolution of retail still makes China one of the most attractive markets for retail investment," the report added. The report has also taken into account mobile shopping which retailers are now seeing as a viable option to expand business.

"Mobile shopping is challenging the ways retailers think about global expansion, as well as about their role in the value chain," said Mike Moriarty, an A.T. Kearney partner and co-author of the study. He further added, "We are expecting more retailers to use mobile as part of their future expansions plans." The GRDI ranked the top 30 developing countries for retail investment worldwide. After India and China, Malaysia, Turkey and United Arab Emirates followed with scores of 60.9, 59.8 and 59.4 respectively.