Investment Opportunity in Retail Sector in India
Table of Contents:-
Over the years, Indian Retail Sector has provided huge opportunity to foreign investors for making investment and earns profits.
The Indian economy has become the 5th largest global destination in the field of retails. In the year 2019, India ranked 2nd in the Global Retail Development Index (GRDI).
The retail sector is the largest industry that accounts more than 10% share in the GDP of India. In the Fiscal Year 2019-20 an estimated, 700 Billion USD revenue was generated in this field. About 10% of working population in India is employed in this sector.
The data says that the current value of organized retail market in India is approx. 60 Billion USD. The rest is held by the unorganized retail market that contributes about 88% in the total revenue generated in the Indian Retail Sector.
Foreign Direct Investment (FDI) in Retail Sector in India:
The FDI policies in India, allows 100% investments through the automatic route in India in the field of Single Brand Retail Trading (SBRT). In case of the Multi Brand Retail Trading (MBRT) up to 51% FDI is allowed under the Government Approval Route.
This sector has been attracting huge investments in the past few decades due to increasing population and hike in the demand in consumer goods such as electronics, utilities, automobile, home appliances etc. In the year 2019, 970 Million USD in total was invested from the Private Equity Funds in the sector. In last 20 years, the retail sector brought a total inflow of 3.35 Billion USD approximately in India.
Why to invest in Indian Retail sector?
India has emerged as one of those countries where foreign investors are showing interest to setup business in India specifically in the retail sector due to the following reasons-
- With second largest population in the world, India has a vast consumer base from the middle class i.e. approximately 600 Million people that have good capacity and purchasing power.
- The policies formulated for Foreign Direct Investment are very supportive and the sourcing from the Government makes it even much easier.
- Also, the banks and financial organizations provide the potential buyers a good credit support making it easier to enjoy more retail products.
Areas to invest in the Indian Retail sector:
These are the areas of the retail sector where one can invest in India-
- E-Commerce: It provides more choices to the customers at very cheap prices.
- Sourcing: India has become one of the fastest emerging bases for sourcing.
- Supply chain infrastructure
- Fast Moving Consumer Goods market (FMCG)
How to choose right entity registration in India for making investment
Foreign companies/investors can make investment in Indian retail sector in form of following entites:
- In the form of subsidiary company registration in India– Here, Indian company can become wholly owned subsidiary or normal subsidiary company
- In the form of Joint Ventures. Here they can opt for either private limited company registration or public limited company registration.
- In the form of branch office registration in India
- In the form of Liaison office registration in India.
Future of the Retail Sector in India:
By the year 2025, India is expected to become the 3rd largest consumer economy across the world. It is assumed that the consumption in rural per capita would increase by 4.3 times compared to 3.5 times of the urban areas by the year 2030.
This would provide better opportunities for increasing FDI in retail sector in India. Also, the consumption expenditure is said to increase thrice to reach 4 Trillion USD. The data from the Government shows that the revenue from the sector is estimated to increase from 800 Billion USD in the year 2017 to 1.75 Trillion USD by the year 2026.
The revenue from e-commerce retail market is estimated to increase to a whopping 200 Billion USD by 2026 from 30 Billion USD in the year 2019.
Thus, it may be inferred from above, that Indian Retail Sector provides huge opportunity to foreign companies and foreign investors for making investment. Further, with the government of India’s initiative of ease of doing business and other schemes have really provided conducive atmosphere to foreign players to set up business in India and bring FDI in India.