India's Retail Growth: Challenges and Future Prospects

The Retailers Association of India reported 7% growth during the festive season of 2023, slightly below the anticipated 10%. Despite challenges such as inflation and competition, sectors like food and grocery showed strong growth. India's e-commerce and retail outlook remains promising with substantial future projections.

During the festive period from October 7 to December 1, the Retailers Association of India (RAI) noted a 7% increase in the retail sector. While this growth indicates a positive trend, it falls short of the expected 10%, reflecting broader challenges faced by the retail industry.

Kumar Rajagopalan, CEO of RAI, commented on the findings, stating that the moderate 7% growth highlights subdued consumption throughout the year. Retailers are actively enhancing their efforts through promotional campaigns and encouraging festive sales. Rajagopalan predicts 2025 will be tougher, with rising operational costs necessitating continuous growth to maintain profitability. Inflation, competitive pressures, and limited spending, particularly from the lower middle-class, persist as major obstacles.

Regionally, West India leads with 8% growth, while other areas like North, South, and East India each showed a 7% increase. Despite existing challenges, strong performance was observed in categories such as food and grocery at 14%, quick-service restaurants at 10%, and jewelry at 9%.

Kearney Research, cited by the India Brand Equity Foundation (IBEF), projects India's retail industry to grow at a steady 9% annual rate, increasing from USD 779 billion in 2019 to surpass USD 1.8 trillion by 2030. The nation's direct selling market is also set to value USD 7.77 billion by 2025.

India ranks third globally in e-retail shoppers, behind only China and the US. Projections suggest emerging logistics companies will enable 2.5 billion Direct-to-Consumer (D2C) deliveries by 2030, and online used car transactions are expected to grow nine-fold. Industry analysis shows an impressive 36.8% rise in e-commerce order volumes year-on-year.

The growing trend of consumers leaning towards online shopping underscores the development of India's e-commerce sector. India's retail market ranks as the fourth largest globally, contributing over 10% to the GDP.

The online shopper base in India is anticipated to grow from over 150 million in 2020 to about 500 million by 2030. The digital economy is forecasted to reach USD 800 billion by 2030, with the e-commerce market expecting a gross merchandise value of USD 350 billion. Crisil predicts a strong 14-15% growth in organized food and grocery retailers' top-line in FY25.

(With inputs from agencies.)