The GRDI report, titled 'The Age of Focus', ranks China in the second place. Despite its slower overall economic growth, the market's size and the continued evolution of retail still make China one of the most attractive markets for retail investment.
"The study is unique in that it not only identifies the markets that are most attractive today, but also those that offer future potential," US-headquartered A T Kearney said in a statement.
On India, the report said the country's retail sector has been growing at an annual rate of 20 per cent. Total sales surpassed the $1 trillion mark last year and the sector is expected to double in size by 2020. "Retail is an integral part of Prime Minister Narendra Modi's development initiatives, Skill India and Make in India, because of its job creation opportunity. Relaxed rules for foreign direct investment (FDI) in key sectors have improved the ease of doing business in India," it said.
"In the past year, the government has allowed 100 per cent foreign ownership in B2B e-commerce businesses and for retailers that sell food products manufactured in India. Government efforts to boost cashless payments (witnessed in the recent nationwide demonetisation exercise) and reform indirect taxation with a nationwide goods and services tax (GST) are also expected to accelerate adoption of modern retail," it added.
Rapid urbanisation and a growing middle class with higher income levels are driving up consumption across the country, the consultancy group said.
India's retail sector has also benefited from the rapid growth in e-commerce. It is projected to grow 30 per cent annually and reach $48 billion by 2020. Retailers have been quick to seize the opportunity with 86 per cent of e-commerce dominated by pure-play online retailers in 2016. The Indian government's effort to boost cashless payments (witnessed in the recent nationwide demonetisation exercise) and reform indirect taxation with a nationwide goods and services tax (GST) are also expected to accelerate adoption of formal retail, it said.
"India's top ranking is a clear vote of confidence in its retail market and vast growth potential," said Debashish Mukherjee, partner with A T Kearney and head of the consumer industries & retail products practice for India.