Supermarkets, hypermarkets to control inflation: Crisil

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A Crisil report on organised food retailers says that super markets and hypermarkets could be the government's solution to controlling inflation . CNBC-TV18 reports on how efficient super-market mechanics could help India save Rs 1 lakh crore annually.

 

It is possible to get better quality fresh food , at even better prices, in a supermarket. But the future of fresh food retailing hinges on an efficient back-end. And it is here that many big-ticket retailers like Reliance and Bharti-Walmart are betting big bucks.

 

An analysis by Crisil endorses that strategy and says that supply chain and storage effeciencies could help shore up retailer's margins, increase rural income and even cut inflation. But the underlying assumption, to this theory, is that India is following Uncle Sam's footsteps in organised food retailing.

 

Ajay Dwivedi , Director, Crisil Research , said, "We have assumed that the current penetration of organised food retailing is very low, at 1%. We did a potential analysis, that supposed we have a scenario like the US , where penetration of organised food retailing is 80%. We then drew two parallels, to know what it means for the supply chain , for wastage, storage and commission."

 

Given that scenario, the wastage in fresh grocery , which is at a high of 15% of the retail prices today, comes down to 3%. And storage and commission costs come down by 11%. According to Crisil, that alone can result in a saving of, as much as, Rs 1 lakh crore.

 

If the retailer passes one-third of those savings to the consumer as lower prices, it translates into 3.5% cut in spend on food items, lowering food inflation. And if the remaining two-thirds of those savings are passed to the farmer, as higher prices for their produce, farm incomes could grow by more than 37%.

 

Crisil says that, if farmers spend around 80% of that incremental 37% income, India's GDP can shoot up by around 1.7%.

 

Many would consider it an ideal scenario. But India is still many years away from selling 80% of its food items through the organised retail channel. Experts say, the chances are that, farmer incomes may not go up, in line with, Crisil assumptions.

 

If Crisil's research is an indicator of things to come, what is lost as wastage today, could turn to gold tomorrow.