India with its population of one billion plus, next only to that of China, has emerged as a fabulous market for industrially processed goods including food for many advanced countries including the US. No wonder these rich nations, with their own markets shrinking due to demographic changes, are eying the Indian retail market for expanding their business portfolios including exports of their products. That Government of India is reluctant to allow majority participation by foreign players in the retail sector is an issue that comes up for discussion every time a dignitary from these countries visit India. The impending visit of American President to this country is also an occasion when this issue is likely to crop up.
"Ahead of US President Barack Obama's trip, a major US trade association suggested action in three key areas, including opening of India's retail industry to foreign direct investment to help India usher in an "Ever-Green Revolution". The US-India Business Council (USIBC), representing 300 top US companies doing business with India, has also suggested lowering US and Indian tariff and non-tariff barriers for agricultural commodities and adoption US best practices in water utilisation and crop management. Asking India to open its retail industry to foreign direct investment, the group says: "Doing so would bring efficiency, infrastructure, technology and know-how to Indian farmers, food processors, food service providers and other suppliers." "The direct connection between farmers and markets will minimise costs to consumers and reduce pressures on food prices as wasteful intermediaries are removed from the supply chain," it argues suggesting big multinational retailers have the expertise India needs in reforming its farm-to-market processes."No sector of the Indian economy is more important to the people of India than agriculture," says the trade group, which is organising an executive summit in Mumbai Nov 6 featuring a speech by Obama. Noting that the US was instrumental in bringing about the Green Revolution in India in the 1960s, where high-yielding seeds and fertilisers helped India achieve self-sufficiency in food, USIBC now sees scope for an "Ever-Green Revolution." Adoption of US best practices in water utilisation and crop management could propel India further to promote greater food security by addressing problems that lead 40 percent of the country's food harvest to spoil before reaching market, it said. Asking the US and India to agree to back up their joint agriculture dialogue with both resources and solid deliverables, USIBC suggests lowering US and Indian tariff and non-tariff barriers which are affecting trade in fresh fruits and vegetables, poultry, pistachios, dairy products, and horticultural products. It also sought reduced customs duties on items such as processing equipment, restaurant equipment, and related goods saying, "reductions in tariffs on processed goods will allow businesses to test product markets so as to properly invest in manufacturing and production facilities in the future, as well."
To some extent it is true that by allowing US investment in retail business, both the consumers and the farmers are likely to be benefited. Of course this can happen only if those entering India bring with them their rich experience in resource generation and management for a sound supply chain and material handling and management of good including perishable foods. Similarly India can learn a lot from US experience in water management, especially cutting down drastically wastage of water significantly if the American proposal for collaboration is pursued further. Whether or how far processed foods from the US, even if the import tariff is reduced, could compete with domestic products is a Grey area because the comparative cost of US made products is invariably high, in many cases costlier by a factor or 2 or 3 times. But cheaper imports of restaurant equipment and food processing machinery may bring in benefits for the domestic food industry by way of more efficiency and improved quality.
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