The retail sector in India, ranked ninth largest in the world, has witnessed the entry of large domestic and international firms in retail projects. To supplement the country’s Foreign Direct Investment (FDI) reserves, Government of India (GOI) has partially opened up this sector to foreign entities for establishment of retail trade operations of ‘Single Brand’ products with FDI upto 51% and prior approval of GOI.
With the advent of new technology, additional warehouse capacity and reliable movement of goods across India, the growth of this dynamic sector over the next three years is estimated at US$ 427 billion.
The success of this diverse sector is primarily dependent on achieving efficiency in logistics and supply chain management. With state-of-the-art technology, logistics companies, an essential link between the various modes of transport viz. roads, railways, air, sea, and inland waterways, are seen to provide enhanced market access to meet the growing consumer demands of the emerging affluent middle class.
While 60% of goods are primarily moved by road by the private sector, rail, a GOI undertaking, accounts for the residual 40%. Though airfreight traffic and traffic of sea-borne cargo are not presently significant, there is tremendous potential for these modes of transport, with competitive logistics management.
To facilitate speedy transport and reconcile the disproportionate growth of traffic in goods, vehicles and road access, the US$ 12.1 billion National Highways Development Project was implemented with expressways connecting all State capitals and metros with major ports, thus augmenting the market access for agro-based products to reach distant markets and providing increased opportunities to logistics players in the cold storage and reefer cargo business.
From being mere points of shipping cargo, ports are now seen as indispensable links in the country’s overall infrastructure development. Major Ports have initiated phased privatisation with a view to develop modern ports. With 100% FDI permissible in port projects, container handling ports and terminals are increasing and Port Authorities are entering into joint ventures with private players, foreign ports and companies.
Though coastal shipping offers an advantage as an environmental friendly, energy efficient and cheaper mode of transport, relieving pressure on the overstretched rail and road transport systems, its development has been encumbered by high operational cost structures and lack of sea logistics support.
Accounting for 9-10% of India’s GDP, the retail sector remains one of the least developed sectors. With Indian corporates, the public sector and foreign players focussed on the logistics industry, this industry is rapidly evolving which has resulted in increased trade and exports and global competitiveness.
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