Jul. 2 – India’s retail market has been ranked as the 14th most attractive destination for global investment according to A. T. Kearney’s Global Retail Development Index. India fell nine spots this year from fifth place, and was previously ranked as the number one location for retailers according to the index in 2009.
The Global Retail Development Index measures 200 developing nations on business risk, market attractiveness and market saturation to rank the top 30 most attractive emerging markets for global retail. This year, Brazil, Chile, Uruguay and China topped the list as the most desired destinations for retail expansion.
India’s downgrade from fifth to fourteenth place marks the first time in a decade that India hasn’t occupied a spot in the top five on the Global Retail Development Index.
Global retail brands looking to enter the Indian market have cited several hurdles they must first overcome, including high real estate and operating costs, intense price competition and irregular sales growth.
“While nobody can ignore India, it’s not easy to get their business models [to] translate into profits, even after many years,” said Debashish Mukherjee, partner at A.T. Kearney.
Despite the challenges posed by expanding retail business into India, many global retailers still see the opportunity to thrive in the country. Brookes Brothers, Marks & Spencer, Armani and Starbucks have all made entry into India’s retail market, with big names such as Uniqlo and H&M currently working on their entry strategies.
The Global Retail Development Index report also sites several reasons to remain positive about India’s retail prospects, including a population of young, brand-conscious consumers and double-digit retail growth trends.
India currently allows 100 percent foreign direct investment into single-brand retail and 51 percent FDI into multi-brand retail. Last month, however, Indian officials proposed an increase in the FDI cap for multi-brand retail from 51 percent to 74 percent in the hopes of increasing investment into India’s retail market.
“The objective of the policy is to encourage investments, job creation and benefit consumers,” said Minister of Commerce Anand Sharma.
The Indian retail industry grew 10.6 percent between 2010-2012 to US$500 billion, and it is expected to reach US$1.3 trillion by 2020.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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