Project report for Rural Godown Industry

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Introduction

A godown is a holding area that is used to store items. Warehouses are generally used in ecommerce to hold goods in stock so that the fast shipping periods needed can be reached. Agriculture, the cornerstone of the Indian economy, contributes to the country's overall economic development and influences the standard of living for more than half of the population. With 179.9 million hectares under cultivation, India is the world's second largest agricultural region. In the global scenario, the country has emerged as a major player in agriculture. In 2020, the Indian Godown/warehouse sector will be worth INR 676 billion. Warehousing is the process of storing materials and merchandise in order to preserve the quality and quantity of items that can be used in the future. It acts as a node in the logistics value chain, allowing for the aggregation, sorting, and delivery of goods across the supply chain. The Indian rural godown/warehousing industry is forecast to expand at a Compound Annual Growth Rate of 9.10 percent between 2021 and 2026, according to IMARC Group.

Several factors have aided the growth of the warehousing industry in especially rural India, including the country's evolving tax system, growth through major industries such as cars, food, agriculture, pharmaceuticals, FMCG, and the advent of organised retail. Rural godown spaces of organised players across major centres grew by 77 percent year on year in 2017, reaching 46.2 million square feet in 2018. The main adopters of centralised warehousing spaces in the country are 3PL, e-Commerce, Fast Moving Consumer Durable (FMCD), Fast Moving Consumer Good (FMCG), Automotive, and Retail sectors. In 2018, the 3PL and e-Commerce players remained the most involved users of structured warehousing rooms.

Market potential & Strategy

The Indian rural godown market is extremely fragmented, with a number of unorganised players competing. Unorganized players, who run small-sized warehouses with little to no mechanisation, control about 90% of the warehousing space in the rural region. After the incorporation of the Goods and Services Act and the attainment of infrastructure status, India's Rural godown and logistics market is expected to draw approximately INR 691 billion in investment over the next 4-5 years. Since 2014, developers and institutional investors have invested more than INR 470 billion in the country's warehousing market, with an average investment of INR 19 billion per transaction.

The rise in international business is also driving the growth of the rural godown industry in India. The entry of various international and domestic companies into the region, as well as the development of manufacturing plants, has expanded export opportunities, fuelling demand for warehousing space across the country. As compared to the rest of the world, India has the smallest storage space for modern facilities particularly in rural areas. Moreover, poor road infrastructure, limited accessibility, inability to accommodate high traffic density, and inadequate air and sea port capacities all lead to the country's logistics sector's increased cost per transaction. With right planning and proper execution, first mover’s advantage can be gained with adequate investments in the infrastructure required for a flourishing godown industry in the rural parts of the country.

 

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