India’s Retail Market Expected to Double by 2020

By Julian Thumm | 06 Sep 2016

India’s retail market is set to double to around US$1.2 trillion by 2020, with e-commerce growing by 31 percent, according to a new Ficci-PwC report.

India’s retail market is expected to double to around US$1.2 trillion by 2020, growing by 12 percent, according to report from Indian retail industry group Ficci and consulting group PricewaterhouseCoopers.

The average household income in India is set to triple by 2020, driving consumer spending, retail growth, and leading to the emergence of a range of new consumer segments.

Unsurprisingly, the report singled out e-commerce as a major growth segment, with online retail GMV expected to reach US$125 billion by 2020, growing by 31 percent over the period.

The report highlighted a number of factors driving growth in India’s retail sector including:

  • The increased access to and use of smartphones
  • Growing health and environmental consciousness
  • Technological innovation and infrastructure improvements
  • Proliferation of new products and sales channels

As infrastructure and technology continue to improve, consumer purchase patterns are changing, with Indian shoppers increasingly buying through mobile. Purchase categories are also expanding beyond the traditional e-commerce favourites of electronics and fashion to include food and groceries.

Service and convenience expectations are also evolving, with Indian shoppers expecting trouble-free service and a better online user experience, according to the report.

Social networks in India are also expanding and increasing their power as retail guides and influences.

“India is in a strong position in the world where a growing consumption capacity, demographic shape and lifestyle changes will propel double-digit growth for consumer business over the next decade,” said Anurag Mathur, Partner and Leader – Consumer & Retail, PwC India. “However, the Indian consumers selective participation in global consumption trends and concerns coupled with local infrastructure challenges will require a unique response from companies to win and leapfrog on the growth cycle.

“India has come a long way in regulating its policies and promoting ease of doing business, and has huge potential for growth in the sector. As per the report, the Government is actioning policy reforms by liberalising foreign investment norms and creating a single window clearance policy to facilitate business in the country. But there is a need for further investment under the Make in India campaign for India to compete with the developed nations of the world and make a mark in the sector.”

As infrastructure continues to develop and consumer affluence grows, India is poised to become the next big growth market for e-commerce, and savvy investors are already taking note.

“Globally, investors are looking at India not only for its market size but as a destination with significant long-term potential,” said Akash Gupt, Partner & Leader – Regulatory Services, PwC India.

“The evolving regulatory framework and the dynamism of the Government have opened new avenues and have twofold benefits on fulfilling objectives of make in India, and of increasing consumption demand in the country.”

Despite the market size and growth, India remains a challenging market for foreign investors. While the government is relaxing foreign investment regulation and working to improve the country’s ease of doing business, there remain a host of complex regulations in place.

That said, the country passed its new GST in August, which is aimed at simplifying the country’s Byzantine taxation system by harmonising the country’s state and central government revenue-raising mechanisms.

 

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