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India’s Supply Chain

The country is working its way up the supply chain ladder

30Jun

India’s economic growth over the last thirty years has consistently ranked among the highest in the world. In 2015-16, the country’s GDP rose 7.56%, up from 7.24% in 2014-15. The country has changed immeasurably over the last half century, with a youthful population and more affordable technology driving a steady improvement in quality of life.

This growth has also had a tremendous impact on the supply chain. According to an AT Kearney report, by 2025, the booming population and increased urbanization will see a rise in the number of so-called ‘mega cities’ from 4 to 18, changing the nature of demand in the country entirely. This should also bring improvements to education levels, which will bring more skilled professionals into the workforce. There has also been a dramatic rise in investment in the country’s infrastructure, which has already born fruit, with better rail networks, roads, and ports likely to make transport in the country far better.

India’s supply chain has already improved markedly in recent years. In the World Bank’s biennial measure of international supply chain efficiency, called Logistics Performance Index, India has gone from 54 in 2014 to 35 in 2016. They are now ahead of comparatively advanced economies such as Portugal and New Zealand, and its international supply chain efficiency was at 75% of the country that topped the list, Germany.

Arvind Mahajan, partner and national head (energy, infrastructure and government) at KPMG India cites better infrastructure as the driving force behind this improvement, but also argues that programs such as Make in India have made a big difference. While investment has had a huge impact, over the coming years it is the room for growth in technology that will see the country’s supply chain improve.

One of the primary driving factors will be the increase in internet penetration and mobile. India’s internet penetration level is currently just 11%, less than 185 million people. Mobile penetration is also at just 73%. Both of these are vital for connecting small manufacturers with new supply chain partners, and their growth will greatly enhance their ability to do business together. Radio Frequency Identification Devices (RFID) should also dramatically fall in price, with a 90% drop in their current $1 cost anticipated over the next decade. Not only will these bring practical improvements, they will also cause a dramatic increase in the amount of data collected, which they will be able to use to understand their customers and bring improvements to efficiency.

There are high expectations for India to become one of the world’s leading economies in coming years. Its supply chain is far from perfect, and it’s important not to get carried away at 34th in the world, but the potential for growth is huge and it is certainly on target to become a world leader. 

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