India’s retail industry has entered a phase where scale, technology, and consumption are converging to shape a new growth story. In 2025, with GDP growth of around 8%, India will remain the fastest-growing major economy in the world and is on track to become the third-largest economy by 2030. This macro strength is clearly reflected in private consumption, which remains the largest driver of retail growth.
Let us understand this evolving outlook for the Indian retail industry.
What’s Happening?
According to a joint report by BCG and the Indian Association of Retailers, India’s retail market was approximately Rs 35–40 trillion in 2015. It has grown to Rs 90–95 trillion in 2025 and is expected to cross Rs 210–215 trillion by 2035. This suggests that within a decade, the market could more than double in size.
A significant part of India’s economic growth is being driven by consumption. Between 2015 and 2025, India’s consumption CAGR stood at 10.6%, the highest among the top five global economies. Between 2025 and 2035, consumption growth is projected to remain strong at 7.7%.
At the same time, consumption patterns are evolving. Total consumption was around Rs 80 trillion in 2015, which increased to Rs 220 trillion in 2025 and is estimated to reach Rs 600 trillion by 2035. The share of staples and necessities stood at 45% in 2015 and may decline to 37% by 2035. Meanwhile, discretionary and services segments are expanding rapidly. During 2015–25, discretionary consumption grew at 12.3% and services at 11%. For 2025–35, both segments are expected to grow at around 10–11% CAGR.
Organised Retail: Growth, Challenges and Shifts
Organised retail has historically outperformed underlying category growth. However, in recent years, this advantage has narrowed, particularly in offline retail. Between 2019 and 2025, the gap between organised retail growth and overall market growth reduced in several years, highlighting the need for reinvention.
Online players have maintained their edge through innovation and scale, while offline retail has faced challenges such as micromarket saturation and pricing pressures.
Even so, offline retail remains structurally cash-generative. Between FY20 and FY25, cash generation among offline retailers increased by more than 50%. Meanwhile, online retailers reduced cash burn by up to 80% during FY20–25, and many companies have moved closer to break-even. This indicates that alongside scale, operating efficiency across the market is also improving.
AI and Agentic Commerce
The report suggests that the next decade of retail will be driven by AI. Around 42% of urban US consumers have already used GenAI tools, and 46% trust AI-driven product recommendations more than suggestions from friends. AI-driven traffic to retail websites has increased 47 times.
India’s history of internet adoption shows that once technology becomes accessible and affordable, adoption accelerates rapidly. A similar trend may unfold in GenAI and agentic commerce.
AI-led functional transformation can unlock 40–60% efficiency gains, whereas traditional, use-case-based interventions typically deliver only 10–15% improvement.
In merchandising, the use of GenAI can enable 20–40% faster design cycles, 40% time savings, and up to 100–300 basis points of profit upside.
What Does This Mean for Investors?
For investors, India’s Rs 210–215 trillion retail opportunity represents a significant structural theme. Affluent and aspiring consumers are expected to contribute more than 55% of incremental consumption growth. With increasing urbanisation, over 30% of growth is likely to come from Tier 2–4 cities. Most importantly, Gen Z consumer spending is estimated to reach Rs 180 trillion by 2035.
In addition, the quick commerce segment is expanding rapidly and is expected to reach Rs 3–4 trillion by 2030. Companies that align their strategies with these structural trends could position themselves for sustainable, profitable growth over the long term.
What’s Next?
Retail leaders believe the opportunity is substantial, but the strategy of being ‘everything for everyone’ is unlikely to succeed. Clear ‘where-to-play’ choices, deep integration of technology, and an AI-first mindset will shape the future.
The report outlines five key imperatives: clear positioning, online-first premium journeys, AI-driven agent experiences, rebuilding talent and governance frameworks, and embedding AI across the shopper journey.
India’s retail market is no longer just a growth story; it is a transformation story. The Rs 210 trillion milestone by 2035 will not be achieved by demand alone, but through strategic clarity, technology adoption, and operating model shifts. Companies that become AI-ready, focused, and efficient today are likely to benefit the most from the next wave of consumption growth.
*The article is for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
