Covid-19 delays revenue growth of Indian retail sector: Report

India’s merchandise retail sector, which was initially expected to cross $1 trillion in revenues by FY23, is now estimated to touch the same in FY25 due to the pandemic-induced slump in the economy, according to a report by Technopak Advisors.

Analysts at the firm anticipate business to remain tepid for the remainder of the financial year (FY) and a marginal revival can be hoped to achieve only in FY22. Indian retail that has been growing on the back of a rise in discretionary spending is expected to report a contraction in FY21. The contraction can range from 25%-40% from the base of FY20.

Essential categories like food and other need-based segments are also estimated to face a period of no growth to marginal decline primarily due to both supply-side disruption and demand-side stress linked to income, analysts at Technopak said in the report. The period of FY21 to FY22 has been labelled as the period of “zero-sum for Indian retail.”

Merchandise retail led by discretionary purchases is estimated to clock revenues of nearly $850 billion in FY20. “The normalisation of economic activities is closely tied up to the flattening curve of the Covid-19 infections and successful implementation of vaccine discovery and its timely inoculation at a mass scale,” analysts said.

The economy may witness resumption of economic activities at pre-Covid levels beginning FY23. Modern retail’s share in total retail is expected to touch 18% by 2025 from about 12% in FY20 helped by the growth of e-commerce. E-tail whose share in total retail stood at 4.3% in FY20 is estimated to contribute close to 7.6% by 2025. Covid-19 boosted online spends as consumers restricted movements and shifted to online platforms to shop for essentials.

“Omni-channel or digital activation by retail majors in discretionary retail categories like fashion, home, jewellery was a non-focus area in the pre-Covid era. Going forward, this is expected to change with most retailers expected to accelerate their digital transformation going forward,” analysts said.

Additionally, the retail sector is estimated to add 9.2 million fresh jobs over the next five years taking the total employment to 45.5 million in FY25. Of the total 9.2 million new jobs, modern retail entities will accommodate nearly 2.6 million jobs. Traditional Retail will add 5.69 million new jobs which will be in the form of independent retail business entrepreneurs and shop assistance executives. The sector and allied industries currently employ 36.3 million people, making it the second-highest employment provider after agriculture.