According to a study topped by China, India has jumped 13 positions to rank second from last year among 30 developing countries this year on ease of doing business.
According to 2016 Global Retail Development Index (GRDI), which ranks top 30 developing countries for retail investment worldwide, a pick-up in GDP growth and better clarity regarding FDI regulations have helped India achieve the second ranking.
"India's strong ranking reflects foreigner retailers' increased optimism in its retail market and its vast growth potential," said Debashish Mukherjee, a partner with A T Kearney and co-head of the Consumer Industries and Retail Products Practice for India and Southeast Asia.
"India has relaxed several key Foreign Direct Investment (FDI) regulations in single-brand retail and this has paved the way for multinational firms to enter the market," Mukherjee said.
India has also become the world's fastest growing economy.
That coupled with a large population base and the easing of FDI regulations in the sector has made it an even more attractive market, it said in the ranking.
"We expect to see e-commerce to propel India's growth and make it a more attractive proposition. However, there are some challenges as well. India remains a challenging and complex market for foreign retailers, where understanding dynamics at the state level is important," Mukherjee said.
"Infrastructure bottlenecks including labour laws, complex regulations, high labour attrition rates, and limited high-quality retail space remain areas of concerns for retailers," he said.
India is the world's second largest internet market and the increasing internet and smartphone penetration is contributing to the expansion of e-commerce.
The GRDI analyses 25 macroeconomic and retail-specific variables to help retailers devise successful global strategies to identify emerging market investment opportunities.
The study is unique in that it not only identifies the markets that are most attractive today but also those that offer future potential.