What are factors affecting growth of Retail Sector in India?


Factors Affecting Growth of Retail Sector in India :

1.      Increase in per capita income: Per capita Income means how much an individual earns, of the yearly income that is generated in the country through productive activities. India has marked growth in per capita income by 10.5% which shows tremendous increase in GNP (Gross National Product) of the country. Increase in per capita income reflects hike in income of Households which in turn will consume more, thus leading to growth of retail sector. Household prefer to shop from big giants as compare to their Kirana store.

2.      Demographical changes: India is having huge young age working population which is generating huge income and high savings. For any developing country young age group, income, savings are key factors for its growth. Presence of these key factors has helped in attracting big retail giants to India

3.      High standard of living: Standard of living in India has improved. Earlier Shopping in India always had an emotional tag attached to it, along with that people use to have myth that shopping from shopping complexes or Malls is costlier and it suits only to rich class. But now things have .changed, people have changed their misconception and have adopted Mall culture. This shows that standard of living has increased.

4.      Change in consumption pattern: Consumption patterns among various classes have changed over the years. Earlier customers were brand loyal due to which they were allowing new brands to enter the market. But now customers are showing good response to new product entering the market because they have realised that they are paying for quality. This drastic change in customers perception has opened ways for many new entrants.

5.      Availability of low-cost consumer credit: It is rightly said that sales generated on credit are more as compare to cash sales. With the change in credit policies, many new customers have entered the market. Purchasing on credit basis with good credit worthiness gives both seller and buyer flexibility to transact. Earlier due to lack of cash many buyers use to postpone their purchases, but now with modernisation they are carrying it on credit basis as it is cheaper to repay.

6.      Improvements in infrastructure: With many infrastructural changes taking place right from metro rails to Bandra-worli sea link in the country, retail is also expanding its wings. With huge infrastructure spending which has entered the country in form of FDI (Foreign Direct investment), more retail giants have proposed to enter Indian market.

7.      Entry to various sources of financing: An economy gets finance from two routes either in form of FDI (Foreign direct investment) or as FII (Foreign institutional investment). Now both the ways are opened up for retail sector. Previously so as to protect small Kiryana stores route for FDI in retail was difficult but later on when it was found that retailing is generating employment of around 8% in economy FDI route was also simplified.

As per the sources, followings are some of the major investment expected to be made in Indian retail industries:

  • Bharti-Wal-Mart will invest approx. US$2.5 billion by 2015.
  • Reliance Industries Limited is planning to invest US$ 6 billion in the organized retail sector in India by opening 1500 supermarkets and 1000 hypermarkets by 2010-2011.
  • Future Group (Pantaloon Retail) will invest US$260 million by 2008.
  • Metro AG is investing US$400 million over the next three years.
  • Pantaloons is planning to invest US$ 1 billion in order to increase its retail space to 30 million square feet
  • New Delhi-based round-the-clock convenience chain Twenty Four Seven Retail Stores Pvt. Ltd plans to invest US$200 million in the next five years and targeting an emerging segment of night shoppers.


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