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FDI in Retail in India: Will it help in Logistics?

FDI in Retail in India: Will it help in Logistics?

The retail industry in India is flourishing at a great pace over the last few years. Indian retail is ranked as the fifth largest on the globe. It is contributing to 5% of the GDP of the nation. India consists of several investment destinations among the 30 emerging markets. FDI in India between April 2000 to April 2010 to single-brand retailing settled at $195 billion. Several measures on the potential growth of the retail industry are available in the market. As per the BMI India Retail Report, the total retail sales is anticipated to grow from $353 billion in 2010 to $ 543 billion by 2014 with the organised retail counting for 5% sale.

According to the estimation, organised retail is anticipated to raise its share by 5 % in 2008 ranging from 14%-18% in the total retail market. With the incline towards the FDI was expected to flourish by mid-2011 and the top retailers transforming retailing destinations whereas in the organised sector it is anticipated to observe robust growth in the next decade. The retail industry is an efficient driver for the infrastructure sector mainly enhancing reliability and efficiency in logistics and supply chain.

The following merits are catching attention such as:

  • The rural market is estimated to dominate the retail sector landscape by 2012 with a total market share above 50%. The speedy growth of the organized retail sector and the requirement to reach out to the wide untapped rural market will make it necessary to have a massive capacity of rural infrastructure. The progress of the strong supply chain and logistic network.
  • The retail business is expanding in pan-India, which makes it necessary to have a huge supply chain not just for continuous supply but also to become efficiency-driven. The national highway shapes an insufficient 2% of the total road in the country but bears 50% of the load. 80% of the roads are adversely affected by the commercial vehicular movement. The inadequacy and inefficiency of logistics are obvious.
  • The international benchmark recommends the cost of logistics for a retail chain as a percent of the cost of goods sold to 4% to 5%. According to the report, the cost of the supply chain as a share of COGS is 3 to 5 times higher.

FDI in multi-brand retail is anticipated to come with the conditions like a mandatory contribution to the back end infrastructure investment. Modern retail which rationalizes the link among markets, manufacturers and consumers provide splendid growth and investment opportunities in India.

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