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February - 2017 - issue > CEO Insights

Transforming Procurement to keep up with Digital First Economy

Rahul Garg, Founder & CEO, Moglix
Friday, March 3, 2017
Rahul Garg, Founder & CEO, Moglix
Indian Economy, the 6th largest economy in the world (by nominal GDP), is passing through a tunnel of several reforms which are being introduced by the government led by Narendra Modi aiming at long term progressive growth. The reforms are seemingly forward looking, encompassing a wide spectrum of growth aspects including way of doing business and of day-to-day commerce by common citizens casting a deep impact on the current business processes.

The Current Economy and the Enterprise Goods Procurement Industry

To understand the situation and impact better we need to see the fundamentals of the current economic characteristics. It�s a cash-intensive economy, wherein more than 95% transactions happen through cash � 4 times higher than other fast growing developing countries like Brazil, South Africa & Mexico. Cash-to-GDP ratio of 12% also makes it one of the most cash-centric economies in the world with more than 86% cash transactions happening in high-denomination notes, which are INR 500 & above.

Let�s also understand the enterprise goods procurement scenario in this context. Non-Corporate-Small-Medium-Business sector (NCSMB), which is also the backbone of the country�s economy, caters largely to the business-to-business and enterprise goods procurement supply chain. From manufacturer to distributor to dealer to retailer � this linear chain of supply chain players have been serving the goods procurement industry on a complex cash-credit mechanism for years. It�s majorly relation-based with �trust factor� playing a key role without having any robust or widely accepted practice of procedural and systematic transparency. The entire industry is governed by the Indirect Tax regime that has been one of the most complex and ambiguous in nature dividing the country into smaller taxable zones with disparate tax rates. So, saddled with so much complexity in tax systems and opaque, archaic business processes, the enterprise goods procurement industry was lagging behind for long.

The Reforms Paving the Way for the Paradigm Shift: Demonetization & GST


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