Opening India up to foreign direct investment (FDI) in multi-brand retail formats would encourage improvements in the supply chain and lower fruit and vegetable prices, according to a report from research firm Credit Rating and Information Services of India Limited (CRISIL).

The company said a move toward FDI had "the potential to reduce the prices of perishable food produce such as fruits and vegetables in India over the long term".

It is also believed that allowing FDI in India would prompt a flood of investments in the country's supply chain and logistics infrastructure for fruit and vegetables, the Press Trust of India reported.

Wastage in the existing supply chain served to inflate fresh produce prices to Indian consumers, and it is hoped allowing foreign investment would reduce this.

"Indian consumers pay nearly 2-2.5 times the price paid to a farmer as compared to 1-1.5 times in developed markets where the penetration of organised retail is much higher," said CRISIL's director of research Nagarajan Narasimhan.

The Indian government is currently assessing whether or not to relax the FDI laws, which at this stage permit foreign companies to own 51 per cent of a single-brand retail format but prohibit investment in multi-brand stores.

A discussion paper on the issue said establishment of cold chains and other infrastructure could cut down food wastage by more than half, and CRISIL estimated the value of fresh produce waste in 2009/10 at around Rs630bn (US$13.67bn).

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