I'm heading for the India Economic Summit in Delhi early next week. They asked me to blog the summit ahead of time, and here's what I came up with. I think a revolution is coming in Indian retail and agriculture.
One of the things I’m looking forward to at the India Economic Summit is finding out more about what’s going on in the retail market. India has an incredibly inefficient retail supply chain now that contributes to the poor performance of its agricultural economy, which, I believe, is actually shrinking. Right now, most retailing is handled by small independent shops, and there are as many as eight layers of middlemen between farmer and consumer. That, and poor logistics, contribute the fact that about 40% of India’s fresh produce rots before it can be sold. Plans by a bunch of the Indian industrial conglomerates could bring a revolution to retailing—and to agriculture.
Reliance Industries, for instance, earlier this year created a new company, Reliance Retail Ltd., which will sell food, apparel, shoes, home improvement products, electronics, and even farm implements. The company plans on creating a new supply chain around its retail initiative that will cut out middlemen and bring food to market more rapidly. It recently opened 11 stores in Hyderabad and plans to have stores in nearly 800 cities by 2011.
I had a quick conversation on Friday with Mukesh Ambani, chairman of Reliance Industries. He told me: “Our objective is to make sure the Indian farmer is connected to the urban consumer and ultimately to the global consumer. We’re trying to leapfrog many generations to put in the latest distribution system from the farmer to the consumer.”
Ultimately, Ambani thinks he can do with Indian agriculture what the Indian tech companies have done to the global tech services industry—undercut the market with lower costs and lower prices.
That’s going to be one incredible act to follow. Indian tech exports went from about zero 15 years ago to $25 billion annually today. If Ambani and the other new Indian retail pioneers can do as well, it will do a lot to bridge the huge gap between the country’s sizable middle class and the huge mass of poor people.