The Hindu Business Line : `Growing working population to fuel modern retailing in India'

A spending splurge has been boosted by increasing incomes, growing exposure to overseas markets, and readier availability of credit from banks and other financial institutions.

Chennai , Aug. 22

Rapid urbanisation and a growing working population will fuel modern retailing in India, says PricewaterhouseCoopers (PwC). "Contributing 13 per cent of the GDP and with a market size of $210 billion, the Indian retail sector is growing at a healthy pace of 5 per cent a year," it says in its recently released Asia-Pacific M&A Bulletin.

Trade growth

Though, A.T. Kearney's Global Retail Development Index 2006 ranks India as the most attractive market for investments in the retail sector, the share of the organised sector in retail trade is currently just 3 per cent. If that share reaches 9-10 per cent by 2010, as is expected, it will offer a sizable opportunity for new competitors, PwC says.

The country is home to the youngest population in the world, in which 50 per cent are under the age of 25 and 85 per cent under 50. This growing working population is providing real `fire power' to the demand for lifestyle products and services.

Purchasing power

"According to a World Bank survey, India ranks fourth in terms of purchasing power parity, next only to the US, China and Japan, and signs are that it may now already be passing Japan," says the bulletin.

Indian shoppers, after generations of shopping at outdoor markets and tiny stores, have embraced new market formats such as the Western-style malls that have emerged throughout the country.

A spending splurge has been boosted by increasing incomes, growing exposure to overseas markets, and readier availability of credit from banks and other financial institutions, says the bulletin.

"We believe the interest being expressed in the country from many top global retail companies should be mutually beneficial for both retailer and the local economy. Our interactions with potential investors indicates that the lack of speed from the Government is not dampening investors' desire to research and position themselves to access the market when the environment is right," says PwC.

MNCs plan expansion

The German giant Metro, which at present has two cash and carry distribution centres in Bangalore, plans to expand into 12 more cities in the next three to five years. Wal-Mart, Tesco and Carrefour have also expressed interest in expanding to India in the near future, says the bulletin.

In the last couple of years, the Government has been taking small but significant steps to slowly open up the retail sector to foreign investment.

According to the bulletin, the last 18 months have seen a significant amount of deals and alliances in the retail sector. In a bid to expand into new formats and offer a wider range of product categories, retailers actively scouted for joint venture opportunities and acquisitions.