One important point that the Indian Government has used as a factor necessitating FDI in retail is that companies won’t invest in India’s supply chain if there is no FDI in front end retail. “Though FDI is permitted in cold-chain to the extent of 100%, through the automatic route. In the absence of FDI in front-end retail, investment flows into this sector have been insignificant.” This seems to be a flawed statement.
Why wont a cold storage global major not come and invest in India where there is limited supply chain infrastructure? Where there are some 10,000 mandis and APMC markets. Where the food losses are phenomenal due to lack of cold storage facilities. It’s a land of opportunity for companies providing cold storage infrastructure. With the government as their first customer.
Globally there are dozens of companies that provide cold storage infrastructure to global retailers around the world. ‘They’ bring in their competencies to retailers. ‘They’ can help Indian retailer to become more competitive. They can help cut the super wastages that the Indian food chain sees.
Second issue, “Foreign retail majors have gained decades of experience, technologies and management practices which will ensure supply chain efficiencies.” – GOI
FDI in retail is applicable only to 53 cities out of the 8000 towns that India has. So what happens to retailers in the rest of India? They still need a strong supply chain network, whether FDI in retail comes or not. Its a big opportunity remaining untapped and undervalued.