Infrastructure is the top barrier for multinationals in rural India

• The slow rate of reform and the country’s vastness means that companies wanting a share of this high-growth market need to employ cost-effective and innovative supply chain techniques
• A recent survey revealed that ‘inadequate infrastructure’ is the number one barrier for multinationals in terms of expanding into India’s growing rural market
• Moreover, it was also found that respondents believe that ‘supply chain and distribution efficiency’ are the key imperatives for profitable and sustainable growth in Indian rural markets
• Road construction and electrification are rapidly increasing in rural India, but these projects are often slowed due to high amounts of corruption and bureaucracy

FSG View: Multi-Layered Distribution Channel Network Ideal for Penetrating the Indian Rural Market

• Multinationals need to create a network of trusted distributors in order to reach the nooks and corners of a highly scattered rural setting
• Companies cannot use the conventional distribution model used in urban settings, by which products go from the factory to retailers or wholesalers. The model is obsolete due to the vastness of the country and the 638,000 villages scattered across it
• In order to reach the smaller villages while keeping costs low, companies need to use a series of large local distributors who in turn have access to the smaller distributors and wholesalers (see graphic for explanation)
• They should expect to monitor a complex system that involves multiple transactions and a large number of stakeholders