Dark clouds of slowdown have started hurting the retail sector forcing Indian Ratings, a Fitch Group company, to maintain a negative outlook on the Indian retail sector for 2013.
This is driven by waning consumption owing to rising inflation and other macroeconomic factors.
"While the overall revenues look positive till now, there are palpating signs of a slowdown," said Deep N Mukherjee, director, corporates, India Ratings & Research. "There is a continuous weakness in consumer spending, marginal real wage growth and a weak macroeconomic environment."
Meanwhile, the opening up of the foreign direct investment (FDI) in the multi-brand retail will receive another setback.
Most foreign retailers who have been keen on making investments in India will now wait for not just 2014-elections but a positive economic environment.
"FDI-based equity infusion is a theoretical possibility. Most Indian companies are cash rich and there is a possibility that equity from domestic investors may drive deleveraging of existing players," said Mukherjee.
According to India Ratings, the trend in private final consumption expenditure (PFCE) is even more worrisome.
PFCE was at an eight-year low at 3.7% at end-Q213. India Ratings does not expect a meaningful improvement in PFCE in 2013.