Providing good growth potential for global retailers amid the economic slowdown, India has emerged as the most alluring market for investment in the retail sector, surpassing the likes of China, Russia and the United Arab Emirates.
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, India is followed by Russia (2), China (3), United Arab Emirates (4) and Saudi Arabia (5).
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 that India has become the most attractive destination for retail investment for the fourth time in five years.
"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," the report said.
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.
The report 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 the Indian Council of Research in International Economic Relations submitted to the Indian government last year said the nation's Indian retail market was estimated to be of $322 billion in 2007 and is expected to reach a figure of $590 billion by 2011-12.
Meanwhile, other nations in the top 10 are Vietnam, Chile, Brazil, Slovenia and Malaysia.
The report said that 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.
"Countries throughout Asia are well positioned for an early recovery from the economic crisis as domestic demand is holding up well, GDP growth continues and trillions of dollars of sovereign reserves are providing governments and state banks with tools for action," AT Kearney partner and co-leader of the study Michael Moriarty said.
"Asian countries continue to transform their economies with domestic consumption as a primary focus -- a trend that should favor continued growth in retail over the long-term," Moriarty added.