India top retail destination for investors, says study

India has been ranked as the most attractive nation for retail investment among 30 emerging markets by US-based global management consulting firm A T Kearney.

According to the entity’s Global Retail Development Index (GRDI), India is followed by Russia (2), China (3), United Arab Emirates (4) and Saudi Arabia (5).

Improved ranking

India was placed at the second spot last year. Similarly, the other four countries in the top five have improved their ranking, with the United Arab Emirates jumping 16 places from previous year’s 20th rank. Noting that “larger, resilient developing countries sit atop the 2009 GRDI as they are most likely to lead the economic recovery,” the report said India has become the most attractive destination for retail investment for the fourth time in five years.

Delay expansion plans

“In India, slower retail sales are causing Indian retailers to delay expansion plans and restructure their operations. But this has opened the window of opportunity for global retailers and many, including Wal-Mart, Carrefour and Tesco, are continuing expansion plans as Indian consumers grow increasingly affluent, brand-conscience and familiar with global retail formats,” the report said.

“Low inflation and rent reductions of up to 40 per cent in Tier-2 and -3 cities also help make India the most attractive retail investment destination in the 2009 GRDI,” it added.
The ranking is based on various factors including economic and political risk, retail market attractiveness, retail saturation levels, and the difference between gross domestic product growth and retail growth.

Emerging markets

It pointed out that unlike most developed markets, GDP in emerging markets is expected to continue to grow, albeit at a slower rate, and populations in many countries are younger, increasingly urban and showing a growing interest in modern retail formats. A report by Indian Council of Research in International Economic Relations submitted last year said the nation’s Indian retail market was estimated to be of US$322 billion in 2007 and is expected to reach a figure of US$590 billion by 2011-12. It said emerging markets continue to represent attractive investment opportunities for global retailers and the economic downturn has made entry to many of these markets more critical and relevant.