ALSO READEconomic Survey recommends huge investment in farm research, warehousing India on track to achieve double-digit growth: Economic Survey Green energy to create Rs 10 lakh crore business in 5 years: Economic Survey BUDGET WISHLIST: Retail firms want a definite timeline for GST rollout 'Global CEOs unsure of an economic revival in 2015'
India remains an attractive long-term retail destination despite the sector facing many challenges in the past few years, says the pre-Budget Economic Survey 2014-15.
Citing, AT Kearney's Global Retail Development Index, the Survey said India's retail trade ranking slipped to 20th in 2014 from 14th in 2013.
Read our full coverage on Union Budget
"...Still India remains an attractive long-term retail destination for several reasons, including its large population," the government document said.
The Survey highlighted that 58.3% of the Indian population was below 30 years. Around 31% of this population living in urban areas with rising disposable income makes one of the key positives for the future of the retail sector.
The Survey said the industry has been up against several challenges in the past few years.
"The sector was affected in 2013 by high consumer price inflation, currency fluctuations, and strict FDI policies," it said.
In order to boost growth in the sector, India had allowed 100% FDI in single-brand retail in 2012 with a requirement of 30% of items sold to be sourced from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors.
In the multi-brand segment, 51% FDI was allowed by the earlier UPA government with conditions that companies entering the segment must source 30% preferably from local small and medium enterprises at the time of start of business.
However, the new NDA government had said that they would not allow FDI in the multi-brand retail.
"We are clear that FDI will not be allowed in multi-brand retail trade in line with the position the BJP had articulated in its manifesto on the basis of which we won the elections," Commerce and Industry Minister Nirmala Sitharaman had said earlier.
Still, the government has not reversed the notification that the UPA government had issued to open up the multi-brand retail sector.
The BJP in its manifesto had said that it will keep FDI out of the key sector of multi-brand retail.
"Barring the multi-brand retail sector, FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialised expertise," the BJP manifesto had said.
Although, the UPA government had allowed FDI in multi-brand retail, only one investment proposal of UK-based Tesco was cleared during its regime.
Noting the changes taking place in the sector, the Economic Survey said, "Migration from traditional stores to modern retail continues, though the latter accounts for only 8% of the total market.