Jun 16, 2007

Organised food retailing can increase rural income, cut inflation

At an estimated Rs 12.8 trillion in 2006, India's retailing sector makes up close to forty per cent of the country's GDP. Of this, food and grocery (F&G) items account for a significant 74 per cent of total retail sales across both, the organised and unorganised sectors. Only 1% of the food items retailed in India flow through the organised retail channel.

Organised food retailing can increase rural incomes, reduce inflation and increase rural spending power, which would then boost the gross domestic product (GDP) growth rate. A CRISIL Research report on the retail food industry says the total avoidable supply chain costs in the Food & Grocery (F&G) vertical, which accounts for 74 per cent of total retail sales in the Indian organised and unorganised sector, are about Rs 1,00,000 crore. About 57 per cent is due to avoidable wastage and 43 per cent due to avoidable storage and commissions costs.

The F&G vertical comprises fresh fruits and vegetables, milk and milk products, fast moving consumer goods and food grains (staples). Within this, staples and unprocessed fruits and vegetables account for 50 per cent of food retail, amounting to Rs 4,70,000 crore, the CRISIL Research paper says. The distribution costs increase due to the presence of several layers in the supply chain and, coupled with the movement of goods across different states or regions, lead to high wastage — caused by inadequate transportation and cold storage facilities.