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"The spate of new projects and entry of several players place the industry in investment mode. We expect the industry to remain so in the medium term."

New Delhi , Aug. 28

FITCH Ratings' latest report on the Indian retail industry, which highlights industry trends and factors driving retail growth, states that the share of organised retailing is only two per cent of the overall retail market. Currently, the total sales of organised retailers are estimated at Rs 17,500 crore.

The report says that the sector has seen accelerated growth during the last two years, which has been mainly on account of the establishment of international quality formats modified to suit the Indian purchase behaviour; entry of several domestic and international players, development of retail-specific properties, improvement in retail processes and turnaround in operations of some existing retailers.

According to the report, the organised retail industry in India will continue to grow rapidly, especially through increased levels of penetration in larger towns and metros, and also as it begins to spread to smaller cities and B-class towns. Fuelling this growth will be the development of retail-specific properties and malls.

The report estimates that close to 25mn sq. ft. of retail space is being developed and will be available for occupation over the next 36-48 months. Fitch expects organised retail to capture 15-20 per cent market share by 2010. This growth in organised retail is being driven by several social, demographic and macro-economic factors.

The spate of new projects and entry of several players place the industry in investment mode. Fitch expects the industry to remain in investment phase in the medium term. It also expects improved operating and financial efficiencies for retailers. Over the last two years, most of the established companies have revamped their internal processes to cope with their aggressive growth plans.

Highlighting the hurdles the industry faces, the report adds that one of the key impediments for industry growth has been lack of foreign direct investment status to the industry. This has limited capital investments in supply chain infrastructure — a key for development and growth of food retailing. Multiplicity and complexity of taxes, lack of proper infrastructure and relatively high cost of real estate are the other impediments to the growth of retailing. While the industry and the

Government are trying to remove some of these hurdles, a few roadblocks will remain and continue to affect industry growth.

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