The report prepared by KPMG stressed that government incentives such as increased spending in infrastructure could help the retail sector.
"Falling footfalls and poor conversion ratio has lead to a decline in sales growth to 11 per cent in December 2008 compared to 35 per cent in December 2007," the study said.
According to the report titled 'Indian Retail: Times to Change Lanes', the current slowdown is expected to last for 12-18 months "conditional on government incentives in increasing spends on infrastructure, development initiatives and other activities to stimulate the economy".
"Slowing sales resulting in lower inventory turnover and increasing working capital requirements to fuel growth have resulted in liquidity pressures for many domestic retailers.
Companies have been trying to reduce the inventory and shorten working capital cycles," KPMG India National Industry Director Consumer Markets Ramesh Srinivas said.
The report said that around 70 per cent of the retailers have reported a decline in footfalls or number of visitors and customers in the stores.