Retail Industry in India: A Perspective

retail industry of indiaIndian economy, with one of the handsome economic growth rate in the world, is also witnessing boom in India’s retail industry. Although the recent recession slowed down the growth for some time, it still has great prospects. To show the extent of its scope consider this – penetration of organized retail in US is more than 85% where as in India it is just about more than 8%.

The Indian retail industry is divided into unorganized sector and the organized sector. Organized sector consists of the retail shops which are registered, licensed (where applicable) and pay sales and income taxes. It also consists of big malls which provide a jubilant shopping experience with all the glitz and glamour. Unorganized sector typically consists of small grocery stores, more popularly known as kirana stores, hand cart vendors, street vendors, door-to-door direct sales vendors, bargain shops etc.

Though in urban parts of the country, there are many retail shops and malls, a big chunk of contribution towards GDP from the entire retail industry still predominantly comes from the unorganized sector. Almost 93% of retail is manned by unorganized sector. Efforts are to bring the contribution to 9-10% by organized sector. The retail industry also happens to be the largest source of employment after agriculture.

The penetration of organized retail will happen much faster in the coming decade, even in tier 2 and tier 3 cities, because of the changing demographics of our population and a healthy rate of economic growth. With good underlying economic growth, increase in disposable income, increased awareness due to penetration of broadband and mobile devices with internet accessibility, the demand for consumer goods will rise. With better systems and processes in place, all this is bound to assist in increasing the penetration of the organized retail sector in India. According to report by McKinsey & Co., the organized retail market in India is expected to grow to 14-18% by 2015 of the total retail market in India from 8% in 2008. Its value is estimated to be around US$450 billion by 2015.

The BMI India Retail Report for the first quarter of 2011 forecasts that the total retail sales will grow to US$ 674.37 billion by 2014, from US$ 392.63 billion in 2011. The growing wealth with the middle-class in India, the population size and the big percentage of population being in 30s, makes immense possibilities for entrepreneurial growth in the retail sector. Some of the fastest growing segments of this industry are food & beverages, electronics and apparels. The consumer electronics segment is expected to grow at about 55% between 2011-2014, with most of the growth driven by demand for TVs, mobile devices and laptops and desktops. With changing lifestyles and habits, food segment is also expected to double to US$ 150 billion by 2025.


Mridula VelagapudiAbout Mridula: Mridula is a freelance writer. She writes on Entrepreneurship and has worked for a start-up in the past. To know more check out her profile at LinkedIn/Mridula Velagapudi

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