FDI relaxation in e-commerce to benefit grocery start-ups: Icra

It aslo said that, new initiatives are expected to help improve margins for farm produce and contain food inflation as well

The relaxation of FDI norms in e-commerce will help grocery start-ups access funds more easily, domestic ratings agency Icra said on Wednesday. 

"The move to open up the domestically manufactured food products sector to FDI will enable farmers to directly sell their produce to retailers, thereby reducing margins for middlemen," it said in a report.

"Further, potential investments by the investors in cold-storage and warehousing will ease supply-side pressures and arrest wastages, that have been driving inflation," it added.

In the present scenario, lack of investment in logistics and inadequate storage facilities have been creating inefficiencies in the food supply chain, leading to significant wastages.

Relaxation of local sourcing riders for single brand retail, which has been a major deterrent to FDI in the past, would encourage more foreign retailers to the country, resulting in improvement of supply chain and distribution efficiencies, Icra noted.

These new initiatives are also expected to help improve margins for farm produce and contain food inflation as well, it added.

According to the report, overall the policy changes will help improve the balance sheet and liquidity profile of retailers and support their expansion plans.

Over the long-term, the landscape is expected to become "extremely competitive" with focus on achieving high levels of operational efficiencies becoming critical for success, Icra said.