Kumar Rajagopalan, CEO of Retailers Association of India, notes that retailers see clear business opportunities and are hopeful of returning to double-digit growth, in conversation with BW Retail World
In an increasingly competitive and crowded landscape, India’s retail sector is heading into the new year with cautious optimism, balancing improving demand prospects, especially across tier 2 and 3 markets, Kumar Rajagopalan, Chief Executive Officer (CEO) of Retailers Association of India (RAI) stated.
Rajagopalan noted that retailers see clear business opportunities and are hopeful of returning to double-digit growth, but are far more measured than in the past. New-age brands that began as social commerce players have rapidly scaled into ecommerce and physical retail, backed by rising funding, intensifying competition across channels.
“Everybody knows that there is business available, but they also know there is all kinds of competitors out in the market,” he noted, adding that growth expectations will hinge on macro stability, easing global trade pressures and India’s demographic dividend continuing to support consumption.
The RAI CEO highlighted that the top priorities and expectations for 2026 include a unified One Nation, One Retail licence and single-window clearances to cut compliance burdens and support faster store expansion across states. Continued goods and services tax (GST) rationalisation and tax measures that put “more money in people’s hands” to sustain mass-market demand remain crucial.
He emphasised that investment in logistics, broadband, digital payments and open network for digital commerce (ONDC) to help retailers of all sizes adopt technology and reach customers nationwide, will be the key for growth. Advocating for clear, consistent regulations across channels, he called for fair-play guidelines for ecommerce, clarity on marketplace practices and smooth implementation of the new labour codes.
Key Policy Reforms
While recent tax measures have provided some relief, Rajagopalan flagged a few unresolved policy gaps that could meaningfully support consumption if addressed in the year ahead. He reiterated that the jump in GST on garments priced above Rs 2,500 from 12 per cent to 18 per cent has been counterproductive. “Especially for a consumption item like garments, it is not a great thing to happen,” he said, stressing that higher indirect taxes can dampen demand at precisely the wrong time.
On the direct tax front, he described income-tax relief for individuals earning up to Rs 12 lakh as “one of the beautiful things that happened this year,” noting that it has made consumers feel more financially secure. He hopes this approach continues, alongside lower GST on day-to-day essentials to keep discretionary spending alive. He also called for a relook at high GST rates on select critical items, citing mobile phones as a key example. “Mobile phones are needed by everybody for survival now… it should really be brought down,” he said, arguing that lower taxes would align better with India’s Digital India ambitions.
On the global front, the RAI CEO said the impact of the initial phases of United States tariffs is already being felt, even if it is not yet fully visible in headline numbers. “There is a definite dip in the profitability of many exporters and a lot of adjustments are being made,” he noted, adding that several exporters are now reassessing their strategies by looking inward at the Indian market.
With global trade becoming increasingly unpredictable, India’s domestic consumption is emerging as a potential shock absorber, prompting exporters to launch brands locally or pivot toward the home market. At the same time, he added that low entry barriers driven by social commerce, quick commerce, ecommerce and new-age brick-and-mortar formats are intensifying competition, making India both an opportunity and a battleground as exporters and new retail entrants crowd into the ecosystem.
The Year Gone By
After a slow start to the year, India’s retail sector gathered steady momentum as 2025 progressed, with growth improving from around 4 per cent earlier in the year to about 7 per cent by August, before accelerating to roughly 11 per cent during the festive season. According to the RAI CEO, this trajectory signals a clear uptrend in the country’s retail business, supported by macro stability and improving consumer sentiment.
“Inflation was kept under control, the economy has been doing quite well and the GDP growth is looking quite nice,” he noted, adding that these factors have created a more supportive environment for retailers. At the same time, the sector has strengthened its operational capabilities, with omnichannel now firmly embedded across most businesses and quick commerce emerging as a defining trend, demonstrating “how fast commerce can become” and reshaping customer expectations across the market.
Consumption trends through the year largely reflected a continuation of premiumisation, a shift that, as the RAI CEO pointed out, has been in play “right from Covid onwards.” However, 2025 also saw a notable, if selective, revival in value-led buying, especially during the festive period. While value consumption at the bottom of the pyramid remained muted for much of the year, the festive season marked a turning point as government-led measures to stimulate consumption began to show results.
“People did go in and start looking at items and found some value there,” he said, highlighting daily essentials such as food, garments and footwear, where GST-led price reductions at key benchmark levels improved affordability. With inflation remaining relatively benign, lower-income consumers also felt more confident about spending, indicating a broader base of demand returning to the market.
Urban Consumption Recovery
Pushing back against concerns of a prolonged urban slowdown, Rajagopalan said consumption in metros recovered during the festive season after some early-year pressure, while growth in non-metros has gathered clear momentum. “India two, India three, India four is doing quite well. That is really definitely picking up,” he said, noting that rising opportunities in tier two to four towns are encouraging consumers to stay and spend locally. The expansion of modern retail and quick commerce across almost 700 to 800 districts has helped spread organised retail beyond large cities, supporting a more geographically balanced consumption recovery.
He also highlighted a revival in experiential spending, particularly eating out and food delivery, driven by a strong “feel good factor” during festivals and beyond. “People have started going out and eating again… and that is growing quite well,” he said, adding that this trend cuts across metro and non-metro markets alike.
The key concern, however, remains sharply rising real estate costs. “The cost of retail real estate, especially in the top ten cities, has gone up so much that doing decent retail at an affordable price is becoming impossible,” he warned, calling it one of the biggest structural challenges facing retailers.
The Quick Commerce Debate
Countering the argument that quick commerce is eating into brick-and-mortar retail, the RAI CEO argued that faster delivery is simply an outcome of evolving consumer expectations, not a threat that can be wished away. “If you ask customers what they want, they will say they want an item at the speed of thought,” he said, adding that any technology enabling this will inevitably reshape retail. According to him, resisting quick commerce is not a good point, the real question is how smaller retailers can participate rather than be excluded.
He said platforms like ONDC can help neighbourhood stores modernise and compete without mirroring ten-minute delivery models. “If a trusted retailer delivers in 20 minutes, customers will wait,” he said, stressing that capability-building is key. Rising labour costs have made it harder for individual kirana stores to maintain delivery runners, but shared logistics at a street or cluster level could restore competitiveness. “It is not about what the law says, it is about what the customer wants,” he noted.
He highlighted that AI-led tools will fundamentally reset store productivity and customer experience, especially for small and mid-sized retailers looking to compete on efficiency rather than scale. “Work that earlier needed three, four or five people can now be done by just one,” he said.
With richer, real-time data flowing between systems, just-in-time inventory becomes more viable, reducing wastage and lowering perishability losses. “Optimising stock and resources becomes the key capability, and that iss where cost control comes from,” he noted, adding that AI-driven efficiency, rather than pure speed, will define competitiveness in the coming year.
Addressing The Perceptions
The RAI CEO sought to address a common perception head-on, stressing that the association is not just a voice for brick-and-mortar retailers. “We want to create a level playing field and support all forms of retail, online, offline and omnichannel,” he said, noting that RAI was among the early advocates of technology-led enablers that allow traditional retailers to participate in ecommerce as well.
He added that policy reform remains a key focus area, particularly around ease of doing business. Calling for simpler, long-term licensing instead of frequent renewals, he argued that “there is no real purpose served by renewing licences every year or two.” He also flagged concerns around upcoming labour laws, warning that while reform is necessary, it should not tilt the balance to a point where retail businesses become non-profitable.
