Comments
The Centre’s recent relaxations in FDI in single-brand retail will boost organised retail’s market share by 300 basis points in three years, according to research by credit ratings agency Crisil.
In a report, Crisil said it expects the market share of organised retail in India to rise to about 10 per cent by fiscal 2020, compared with 7 per cent last fiscal. This will be supported by the government’s decision to permit 100 per cent FDI in single-brand retail under the automatic route from 49 per cent earlier, relaxation in sourcing norms, and healthy growth prospects for organised retail. Before the change in rules, the agency’s forecast for the share of organised retail was 9 per cent by FY20, based on healthy revenue growth of about 18 per cent of organised brick and mortar (B&M) retailers.
Apparel, luxury goods, home decor, footwear and the electronics segments are those most likely to benefit from the new rules, and are expected to ratchet up about 45 per cent of India’s organised retail revenues, said Crisil. “Global single-brand retailers facing growth headwinds in their key geographies will now be more than keen to peg tent in India,” said Anuj Sethi, Senior Director, Crisil Ratings. “And those already present could step up investments. The previous sourcing norms were a bottleneck to scaling-up of operations.”
While FDI approval under the automatic route will lower the time to commence business, the relaxation of 30 per cent local sourcing norms for the first five years by allowing inclusion of incremental sourcing for global operations will provide sufficient time for new entrants to set up and stabilise their sourcing base. This will also make the operating environment that much more competitive for domestic B&M retailers, the agency added.
The credit quality of retailers has been on the rise. Crisil, which rates 93 organised retailers, said their credit quality has been improving as reflected in the credit ratio (upgrades to downgrades) of over 1 time for the past four years.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.