Unlocking the potential of India's hinterlands

Only when the inland is connected to the coast, when they come on equal playing ground, having continued access to the latest technologies, knowledge, and infrastructure, will the full potential of our great nation be realised

Published: 12, Sep 2018

Ajit Venkataraman is the Managing Director for APM Terminals Inland Services, South Asia.

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Image: Shutterstock

India has traditionally been living with the great divide – rural and urban, cities and villages, harbour and inland. Our hinterland – or remote parts of the country far from, and less connected to urban centers – have varied definitions. About 70 percent of India’s population, or approximately 700 million people, live in the country’s more than 600,000 villages. Today, India’s growth is hidden in our hinterland. The advent of the rural evolving into urban, and the accessibility of inland to the coast, has started to expose the potential that our hinterlands hold.

The more pertinent thought then is how do we best unlock the potential these regions hold? Are we doing enough to enable our hinterlands to become more robust and grow in a sustainable manner?

History shows that trade has the potential to transform nations or any geography for that matter, that it involves. India is a vast and diverse country and has an enviable coastline. There are unique products attributable to each region within our hinterland that has the potential for international trade. While traditionally the hinterlands have been the producers of these products (or raw material, thereof), they are also fast becoming consumers of imported products. Some of India's largest consumer companies now have a third of their customers in rural India.

In that sense, at a recent Indo-Dutch Forum, members of the World Bank declared that India has enough port capacity but needs more investments in multi-modal connectivity to existing ports. India’s villages contribute around half of the country’s gross domestic product (GDP). Imagine the explosive growth that the country can see, if these regions had a more robust infrastructure, skill development, and policies. India has been making progress in all these areas – but to varying degrees in the hinterlands. Commitment and focus is the key to everything here.

A Systematic Approach to Agriculture, the Need of the Hour
To get the right view of things, let’s take the case of agriculture. Over 58 percent* of rural households depend on agriculture as their principal means of livelihood. Unlike professional, large-scale farming seen in Western countries, a majority of India’s agricultural produce comes from these small, rural producers. The three key factors holding back our agriculture sector are waste and spoilage of food during transport, which costs the industry over $13 billion** per year, the inability to cover costs for the farmers, and the failure of the produce to meet international quality standards.

An efficient ‘farm-to-fork’ cold-chain network, with refrigerated containers and warehouses along the way to the urban centers, will help curb the current spoilage rate of agricultural output. An efficient logistics and supply chain network can be made possible by ensuring connectivity to the coast through rail, road or inland waterways interspersed with cold storage solutions. Parallelly, the answer to high costs and the inability to conform to international standards lies in access to the right infrastructure and application of world-class technology in farming and food processing. These will help producers capture value, as products retain quality. A systematic approach to improve supply chain efficiency and apply the latest technology for agriculture is essential to unlock the growth potential of the hinterlands.

An Inclusive Approach to Transformation, Key to Improving Competitiveness
In recent years, the Indian government has taken some critical steps. It has rightly identified trade, backed by a robust logistics and supply chain ecosystem, as one of the biggest forces capable of catapulting the Indian economy to new heights.

An in-depth assessment of India's standing compared to the rest of the world has helped policymakers have a clear vision of what we still need to achieve. We are on the cusp of a transformation of the logistics and supply chain sector. The entire value chain involved with Exim (Export and Import of goods), including shipping lines, ports and terminals, inland container depots, cold-chain and general warehouses, road-rail-air-waterway networks, and multi-modal transportation solutions all need to be considered and addressed. The future of logistics and supply chain in India needs to be built on the pillars of a well-planned, integrated solutions approach, skilled manpower, and advanced technologies.

Further, there is a need to transform the overall logistics and supply chain network across the country. To cement India's global competitiveness in trade, it is critical that we adopt global standards in technology, operations, safety, and quality.

Sagarmala, Bharatmala, and inland waterways projects (the coastal ports, road and inland waterways development programmes across India and its coastline), policies such as introduction of goods and services tax (GST) -- enabling development of warehouses closer to production centres, thereby ensuring growth moves inland -- opening of 100 percent foreign direct investment (FDI) in the food processing sector, focusing on skill development initiatives, are testimony to the sector starting to see change. The much-awaited accordance of infrastructure status to logistics and supply chain sector, backed by a dedicated team at the Centre, will bring about an unprecedented transformation.

Such initiatives don’t just improve trade, they are also a necessity for the overall development of our hinterlands. They entail the introduction of innovative technologies, generation of employment, and upskilling of the workforce. By enabling businesses to easily connect to global trade and meet customers’ requirements, increases revenue, thereby improving the standard of living in the hinterlands. It opens a whole new world of opportunities for the hinterland to grow and contribute to the nation and world at large. When the target is to improve access to our hinterlands, we are also targeting an audience that makes up 70 percent of the population – growth is naturally inescapable.

What cannot be ignored is that the hinterlands of India cannot be developed in exclusivity. An inclusive approach considering both the hinterlands and the urban coastal area, is what holds the key to this transformation. Only when the inland is connected to the coast, when they come on equal playing ground, with continued access to the latest technologies, knowledge, and infrastructure, will the full potential of our great nation be realised.

* Agriculture and allied industries report by IBEF (Jan 2018) ** data published by the ministry of food processing industries on August 9, 2016

The author is a Managing Director for APM Terminals Inland Services, South Asia.

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