The expansion of modern retail in India is likely to slow in the coming year, as retailers prioritise profitability over opening new stores, new research has suggested.

While the Indian food retail market remains in its infancy, it has witnessed some significant and swift changes in recent years. There has been an influx of international retailers, including Metro Group and Wal-Mart, into the country, while major domestic players have followed rapid expansion strategies.

The food retail industry in India has seen fluctuations in its growth rate over the past four years, with the growth rate reaching its peak of 10.1% in 2007, when it generated revenues of US$202.6bn.

However, all this could change in the face of the global economic downturn, new research from KPMG India has suggested.

“Given the industry’s changing landscape and emerging challenges, the focus of industry players too is changing; with a strong emphasis on profitable growth in the current scenario,” KPMG said in its latest report, Indian Retail: Time to change lanes.

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“Retail companies are increasingly focusing on strengthening their existing operations and assessing opportunities for growth through consolidation, while continuing to innovate,” KPMG said.

As the credit markets dry up, cutting costs will continue to replace expansion as the Indian retail sector’s top priority, KPMG predicts.

Retailers are therefore likely to focus on renegotiating rental agreements, store rationalisation, working capital management, regionalisation, cost optimisation and manpower resizing in the coming 12 months.