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Macro economic analysis of retail industry

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Macro economic analysis of retail industry

  1. 1. Macro-Economic Analysis of Retail Sector -Rashi Jain - 20DM267 - Aditi Mittal - 20DM275 - Utkarsh Agarwal - 20DM229 - Saksham Chawla - 20DM256 - Utkarsh Singh - 20DM231 -Harsh Raghubanshi - 20DM259
  2. 2. CONTENTS Impact of Retail on GDP Introduction Impact of Monetary Policy FDI Impact of Fiscal Policy Impact of Inflation Impact of Covid Suggestions Employment Scenario Government Interventions Way forward Types & Statistics
  3. 3. Retail Sector  Involves Direct interface with the customer and the coordination of business activities .  One of the fastest changing and dynamic industries in the world today.  Culmination of many different processes brought together to create sales. How Does Retailing Work?  Rely on a system that supplies them with merchandise to market to consumers.  Retail is highly influenced by consumer behavior, the seasons, economic conditions, geography, and many other factors.  To provide a unique shopping encounter, some retailers offer services All retail companies operate within a “macro environment,” or the sphere of influence outside the company that shapes how companies do business.
  4. 4.  Indian Retail Market is one of the fastest-growing in the world.  Retail industry reached US$ 950 billion in 2018 at CAGR of 13% and is expected to reach US$ 1.1 trillion by 2020  India is the fifth largest and preferred retail destination globally. The country is among the highest in the world in terms of per capita retail store availability.  India is largely an unorganized retail market, contributing 92% to the total retail sector in India.  India ranked 63 in the World Bank’s Doing Business 2020 publication.  India ranked 73 in the United Nations Conference on Trade and Development's Business- to-Consumer (B2C) E-commerce Index 2019.  Online retail sales were forecast to grow 31% y-o-y to reach US$ 32.70 billion in 2018  Revenue of India’s offline retailers, also known as brick and mortar (B&M) retailers, is expected to increase by Rs 10,000–12,000 crore (US$ 1.39–2.77 billion) in FY20.  Expected to become the world’s fastest growing E-commerce market. STATISTICS
  5. 5. IMPACT OF RETAIL ON GDP  Retail is the largest among all industries accounting to 10 per cent of the country GDP .  For India, this share of private consumption stands at 58% of the country’s GDP. Of this 58% share of private consumption in India’s GDP, 48% is contributed by merchandise retail (grocery, jewellery, fashion, electronics, home improvement etc.) and 52% is contributed by services (education, healthcare, wellness, tourism, eating out etc).  On count in absolute terms, traditional retailing should contribute Rs 51.52 lakh crore of retail sales and ‘modern retail’ should account for the rest Rs 7 lakh crore in FY’20.  India’s merchandise retail has an outsized share of food and general (staples, groceries, FMCG, pharmacy etc.) retail that stands at 70% of the total merchandise retail basket, implying Rs 40.95 lakh crore of estimated sales in FY 20. 0 20 40 60 PRIVATE CONSUMPTION Merchandise Retail Services
  6. 6. The corporate tax cut to 22% from 30% will only benefit companies in the organized retail sector. TAXES IMPACT OF FISCAL POLICY CHANGE IN INCOME TAX SLABS- The reduction of income tax in the slabs below 15 lakhs.
  7. 7.  51% FDI in E-Commerce In India is allowed in Multi-Brand Product Retail (Online Presence Not Allowed) under government route  100% FDI allowed in e-commerce (B2B & Marketplace for B2C) under automatic route  100% FDI allowed in Cash & Carry Wholesale Trading under automatic route  100% FDI allowed under Duty-Free Shops under automatic route  100% FDI as per FDI policy on e-commerce allowed in Food Product Retail under automatic route  Recent policy changes allow 100% FDI in e-commerce under the automatic route for single-brand retail trading.  According to the Indian Retail, Trading has received Foreign Direct Investment equity of 2.12 billion US$ during the period April-2000 to March 2020.  Importantly the Indian Retail sector is able to obtain 970 million US$ from different private equity funds in the year 2019. FDI
  8. 8. 42% 4% 3% 75% IMPACT OF MONETARY POLICY REPO RATE 4.25% BANK RATE CRR 18% SLR
  9. 9. IMPACT OF INFLATION  Consumer Price Index inflation stood at 7.61% in October, the highest since May 2014 compared with 7.27% in September.  The inflation in the vegetable segment was 20.73 per cent in September.  Inflation in food and beverages rose to 10.16% in October from 9.8% a month ago.  Retail Inflation in meat and fish rose 18.7% in October compared with a 17.6% rise in September.  Clothing and footwear inflation stood at 3.17% compared with 2.97% in September.  Health inflation was at 5.22% against 4.9% in the previous month.  Housing inflation stood at 3.27% in October compared with 2.83% in September.  Household goods and services inflation stood at 2.83% against 2.9% in the previous month.
  10. 10. UNEMPLOYMENT SCENARIO  “The retail sector is one of the most impacted sectors by the COVID-19 pandemic. Both essential and non-essential retail has experienced unique effects on their businesses.  As per the Centre for Monitoring Indian Economy (CMIE), the Coronavirus crisis has led to a spike in the country’s unemployment rate to 27.11 percent for the week ended May 3, up from the under 7 percent level before the start of the pandemic in mid-March.  The rate of unemployment was the highest in the urban areas, which constitute the most number of red zones due to the positive cases, at 29.22 percent, as against 26.69 percent for the rural areas.  This sector employs around 8 per cent of the workforce. 29.22 26.69 UNEMPLOYEMENT RATE RURAL URBAN
  11. 11. GOVERNMENT INITIATIVES All shopkeepers, retail traders and self-employed persons are assured of a minimum monthly pension of Rs 3,000/month after attaining the age of 60 years. All of these with GST turnover below Rs 1.5 crore and age between 18-40 years, can enroll themselves for this scheme Launched with a view to assist retailers, the government has floated the unique scheme to encourage entrepreneurs to take collateral-free loans for starting businesses without the fear of defaulting. CREDIT GUARANTEE FUND TRUST Employees can purchase any goods or services with a GST rate of 12 per cent or above to avail the benefit. LTC CASH VOUCHER PENSION SCHEME Revised GST Slab rates and A simplified return format for GST is being introduced from April 2020. CHANGE IN GST SLABS
  12. 12. -- When COVID-19 struck India, the economy was already down with almost all sectors working at very slow pace. The retail sector (is/was) one of the worst effected sectors in India. In the first two months of lockdown, the retail sector had to bear losses of 90,000 crore rupees. --The immediate impact of the outbreak included sudden surges in demand for essential goods and services, a heightening of the healthcare and the financial crisis, reduced employment opportunities, and a steep decline in demand for non-essential goods and services. --This pandemic has changed the consumer behavior. Health concerns have compelled people to live differently, think differently and in many ways buy differently. Consumers are looking at products and brands through a new lens. --Retail stores saw reduced footfall almost throughout the year as many people preferred online shopping as a more hygienic and safer way of shopping rather than physically visiting the shops. IMPACT OF COVID ON RETAIL SECTOR IN INDIA
  13. 13. WAY FORWARD FOR THE INDUSTRY OFFLINE RETAIL INDUSTRY  Indian retailers will need to devise strategies for the “now”, “next” and “beyond”. Need to manage their costs through operational improvement and by valuating the store portfolio. Retailers need to ensure they are available to their target audience for shopping not just through big outlets ONLINE RETAIL INDUSTRY Penetration of Mobile connectivity and internet would increase, more rural population would be exposed to E commerce and thus the user base of E commerce would also increase Expected to surpass the US to become the second largest e-commerce market in the world by 2034. Technology enabled innovations like digital payments, hyper-local logistics and analytics driven customer engagement.
  14. 14.  Establishment of Retailer Cooperatives.  Merger and Buyout of Weak Retailers.  Use of Technology to the greatest Extent Possible.  Setting Up of more and more non retailing stores.  Retailers must find out and satisfy service outputs of the target Customers.  Setting Up of Franchisee Organization. Suggestions

Notas del editor

  • https://thewire.in/business/india-retail-sector-lockdown-fy21
  • https://timesofindia.indiatimes.com/city/gurgaon/haryana-at-the-top-in-rate-of-unemployment-says-cmie-data/articleshow/77987617.cms

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