INDIAN ECONOMYDevelopment of retailing in India in last 5 years

INTRODUCTION TO INDIAN ECONOMY

RETAIL IN INDIA

HOW THE SECTOR IS DIVIDED COMPARED TO OTHER MARKETS

Source : AT Kearney Global Retail Development Index, 2013 …

INFLATIONARY AND DEFLATIONARY PRESSURE IN INDIAN ECONOMY

Three main reasons for inflationary pressures on the Indian Economy are:

I. Crude Oil

II. Agriculture( Rural Inflation)

III. Inflationary Expectation

CRUDE OIL PRICES EFFECT

Crude-oil prices are expected to remain benign in the coming months for at least three reasons: weaker global demand, increased supplies, and the global monetary and liquidity environment.

The sectors that will have a positive impact due to falling oil prices directly as well as indirectly will be a) automobiles, (b) plastic industries (c) chemicals , (d) paints, (e) footwear etc.

But the retail industry don’t benefit much as the fall in crude prices cant be replicated exactly at the retail level

AGRICULTURE(RURAL INFLATION) EFFECT

India’s inflation will be shaped by pressures from agriculture, foreign and domestic.

a. Food Inflation :The major reason for food inflation is the mismatch of demand and supply of agricultural products

b. Wage Pressure :The most dramatic structural change relates to wage pressures. wage growth has declined to about 3.6 percent from over 20 percent. If these trends continue, rural wage growth can continue to decelerate, further moderating inflationary pressures

INFLATIONARY EXPECTATION EFFECT

Consumer price inflation was at 6.5 percent for 2014-15 . The estimate for 2015-16 for CPI inflation is 5.0-5.5 percent range.

The implication is that the economy will over-perform which would clear the path for further monetary policy easing.

Trends in financial markets suggest that there has been a gradual easing of deposit rates in recent months as yields on 10 year government bonds have been falling consistently during this period. Declining yields could trigger reduction in the lending rates by the banks in the coming months.

SAVINGS AND INVESTMENT IN LAST 2 YEARS

2012-2013

2013-2014

2014-2015

Household 23.6 24 24.4

Private 8.4 8.5 8.6Public 2.0 2.8 3.5Gross Domestic Saving

34 35.3 37.6

CAD -3.5 -3.8 -2.8

SAVINGS TREND (% 0f GDP)

Fall in inflation has led to rise in overall savings Public savings have shown rapid increase while

household & private savings have steady growth

Bank deposits continue to dominate the overall savings while insurance & share markets investments have grown significantly

Higher purchasing power and less household and private savings show increase in expenditure

SAVINGS AND INVESTMENT IN LAST 2 YEARS

Gross Domestic Savings & its Composition

The CURRENT ACCOUNT is the balance of trade between a country and its trading partners, reflecting all payments between countries for goods, services, interest and dividends.

A deficit in the current account shows the country is spending more on foreign trade than it is earning, and that it is borrowing capital from foreign sources to make up the deficit.

WHAT IS CURRENT ACCOUNT DEFICIT ???

Want to buy an Aston Martin and still waiting for it the correct time?

Then you missed it dear as you could have bought that in 2010 when the exchange rate was absolutely low.

EFFECT OF EXCHANGE RATE ON RETAIL

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

20

40

60

80

100

120

INR VS GBP

INR VS GBP

"It all depends.”

• It could equally be pointing to a highly productive, growing economy

• It could reflect perfectly sensible intertemporal trade, perhaps because of a temporary shock or shifting demographics

• Deficits reflect underlying economic trends, which may be desirable or undesirable for a country at a particular point in time.

IS LOW CURRENT ACCOUNT DEFICIT GOOD?

FISCAL AND MONETARY POLICYWHAT IS FISCAL AND MONETARY POLICY ??

Impact on Retail Sector – GST system of taxation Reduction in corporate tax Infrastructural development Increased disposable income

INDIAN RETAIL – THE ROAD AHEAD

The Indian retail market, currently estimated at $540 billion, is project to grow at a compounded annual growth rate of 6 per cent to reach $865 billion by 2023.*

An important contributory factor in growth of India’s retail sector is growing middle class which is expected to increase from 21 million households today to 91 million households in 2030.

Modern retail with a penetration of only 5% is expected to grow about six times from the current 27 billion USD to 220 billion USD, across all categories and segments by 2020.*

*Source : ‘Yes Bank - Assocham’ study