FDI throws a lifeline to India's crumbling supply chain

By RJ Whitehead

- Last updated on GMT

India's supply chain lags far behind that of other countries
India's supply chain lags far behind that of other countries

Related tags: Investment

As the dust settles on Friday’s announcement by the Indian government to finally allow foreign direct investment in multi-brand retail, it is becoming clear that the country’s beleaguered supply chain will be one of the major winners.

The decision to open up the supermarkets sector to foreign chains such as WalMart — part of a  24-hour policy flurry that brought more measures to liberalise the economy than has been seen over the last eight years in government — is being praised by a broad cross section of Indian businesses, from apex bodies to supply analysts.

Retail revolution

According to R.V. Kanoria, president of the weighty Federation of Indian Chambers of Commerce and Industry, the decision will usher in a retail revolution.

There are a number of benefits that will flow from this decision. We will see infusion of new technology across the agriculture value-chain, as well as improvement in the back-end infrastructure​,” he said.

There will be a multiplier effect in terms of employment generation and domestic manufacturers will benefit as they integrate with the supply chains of global retail majors. Consumers will have a wider choice and get better deals​.”

Greater investment

There has been a significant lack of investment into the logistics of the retail chain, leading to inefficient market mechanisms. And the lack of a proper storage infrastructure has been one of the most alarming of these infrastructure gaps. 

The technology being used in Indian retail is largely obsolete and does not meet international standards, resulting in poor efficiency on the supply side and average consumer experience on the demand side,” said Pankaj Renjhen, managing director of Jones Lang LaSalle’s retail think tank. “

FDI will be a powerful catalyst to the required growth in the retail industry and, in the long-term, will prove beneficial to all the major stakeholders. There will be investment in storage and transportation infrastructure, technology and supply chain operations​.”

Over the coming week, FoodNavigator-Asia will be compiling more reaction to this significant move by the Indian government. We appreciate your input, so please do let us know your thoughts on the issue in the comments below.

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1 comment

Good news for Farmers also

Posted by G.Ramakrishnan,

Supply chain improvement would also result in benefits to farm sector, post harvest storage requirements & prices can be lower

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