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Obstacles for investors cbi:///cms/76752
METRO GROUP, Wal-Mart, Tesco, Carrefour – a large number of international retail companies are investing in India's growth potential. For a long time, Indian law imposed tight restrictions on foreign companies, but it is gradually relaxing its grip. In February 2009, the Indian government announced a reform that for the first time would allow foreigners to take an active role in Indian retail companies, albeit as minority stakeholders in a holding company only. But some legal obstacles remain, for instance in the state of Karnataka, where the Agricultural Produce Marketing Act (APMA) restricts the sale of fresh fruit and vegetables to small businesses – a particularly profitable market, given that the majority of Indians are vegetarians. cbi:///cms/76754
Rising costs and complex procedures cbi:///cms/76755
Even after foreign investors have met all the legal requirements, they are often a long way away from opening a store. Two factors in particular frequently prove to be obstacles:
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- Costly undeveloped property: real estate prices are skyrocketing in many Indian states – in some cases by a factor of eight every year.
- Drawn-out approval procedures: on average, opening a store requires more than twice as many administrative steps and approvals as it does in a member state of the Organisation for Economic Co-operation and Development (OECD). Starting up a company takes almost four times as long – 89 days on average.
Logistical challenges cbi:///cms/77250
An efficiently organised supply chain is crucial for the quality of perishable goods. In India, this is frequently undermined by partly underdeveloped infrastructures: roads, airports and seaports are often in poor condition or heavily overburdened. Supply chains are also extremely fragmented, with fresh produce passing through the hands of up to six intermediary traders on their way from farmer to store. In addition, it is often impossible to refrigerate perishables properly in transit. The result of the inconsistently maintained cold chain: 25 to 40 percent of the goods spoil before reaching the retail outlet. And to make matters worse, the supply of drinking water and electricity is also unreliable. This calls for initiative: to a far greater extent than in fully industrialised nations, companies in India must take the task of ensuring a reliable infrastructure into their own hands. cbi:///cms/76763
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