Agriculture & Rural Development In India_group 7

Agriculture & Rural Development in India Group 7 Sameer

Sohail Sankar Himanshu

Arun VM

Indian Agricultural Growth Trends •

Agriculture and allied sector contributes ~20% of the total GDP

•

Provide employment to around 57% Indian population

Agricultural production is low due to • Illiteracy, insufficient finance, and inadequate marketing of agricultural products • Lack of modern technologies, agricultural practices and irrigation facilities

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Vital Statistics 700000

25 %

600000

20 %

500000 400000

15 %

300000

10 %

200000 5%

100000

Total National Exports

%age Agriculture Exports to Total National Exports

0% 1990-91 1991-92 1992-93 1994-95 1995-96 1999-00 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

0

India's Exports (INR Crs)

1200000

8% 7%

1000000

6% 800000

5%

600000

4%

India's Imports (INR Crs) Total National Imports

3%

400000

2% 200000

1% 0% 1990-91 1991-92 1992-93 1994-95 1995-96 1999-00 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

0

%age Agriculture Imports to Total National Imports

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India's Exports of Agricultural Products (INR Crs)

6000 5000 4000 3000

FY 04-05 FY 05-06

2000

FY 06-07 FY 07-08

1000 0

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Agro Based Industries • Three types –Village, Small scale and Large scale industries • Village Industries owned and run by rural households with very little capital Investment and a high level of manual labour. E.g.: Pickles, papad, basket making etc • Small scale industry characterized by medium investment

and semi-automation. E.g. : edible oil and rice mills • Large scale industry involving large investment and a high level of automation. E.g :Sugar, jute and cotton mills

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Rural markets

Growth Engine during economy downturn FMCG Sector •

10% Increase In FMCG Rural Market Size Likely, Urban Size To Fall By 25%: ASSOCHAM

Retail Sector •

Rural retail market constitutes around 40% of the total size of the Indian retail market

Auto Sector •

Rural markets‟ share in Maruti‟s overall sales during Apr-Jan 2009 has gone up to 8.5% from 3.5% in the same period last year

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NREGS

National Rural Employment Guarantee Scheme •

People can claim work as their right at least 100 days per household and Govt. will provide employment at minimum wage, else eligible for unemployment payment

•

Covers 613 rural districts in the country

•

4.46 Cr. households provided employment, 215.62 Cr. person days of labor generated and 27.12 L works taken up

•

Budget allocation increased to Rs 30,100 Cr. in interim budget 2009-10

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Water conservation, irrigation canals, land development, rural connectivity and flood control activities

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Criticism from World Bank – “policy barrier for economic development”

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Domestic agricultural policy overview Agricultural Price Policy • •

Agricultural Trade Situation

Primarily focused on wheat and rice National Food Security Mission (NFSM) o aims to increase the country‟s wheat, rice, and pulse production o through dissemination of improved technologies and farm management practices

– Indian government use high tariffs and non-tariff barriers to limit imports of agricultural products – India‟s average WTO bound agricultural tariff is 112 percent – Median applied agricultural duty is 35.2 percent – Some sensitive food items are protected by much higher bound duties, ranging from 50 to 150% – For most agricultural products, the government levies – A countervailing duty equal to domestic excise taxes, – 3% education cess (surcharge), – 4% “special” countervailing duty on all direct and indirect taxes

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HUL – Project SHAKTI Changing Lives in Rural India

Shakti is HUL's rural initiative Objective - creating livelihoods for rural women, organise in SelfHelp Groups (SHGs), and improving living standards in rural India. To empower underprivileged rural women by providing incomegenerating opportunities, health and hygiene education through the Shakti Vani programme, and creating access to relevant information through the iShakti community portal. Shakti Vani - social communication programme. iShakti - the Internet based rural information service

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•

Started in 2001, now extended to about 80,000 villages in 15 states.

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~ 25,000 women entrepreneurs

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A typical Shakti entrepreneur earns a sustainable income of about Rs.700 -Rs.1,000 per month, which is double their average household income.

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„Shakti‟ - working closely with the rural development departments of the state governments, as well as large number of NGO‟s across the geographies it currently operates in.

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Focus on training farmers, animal husbandry, generating alternative income, health & hygiene and infrastructure development.

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Co-Operative Societies • Today, India's Cooperative Movement is the largest in the world.

• Development Areas : agricultural research, irrigation systems, and public policy on agriculture, impressive agricultural credit delivery systems through an extensive network of co-operative societies. • Govt. policy on rural/agricultural credit provides 1) Timely and adequate credit to farmers for increasing agricultural production and productivity 2) Better access to institutional credit for the small and marginal farmers

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Traditional Trade Model – मंडी

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E-Choupal Business Model • Bypasses Govt.-mandated trading mandis • Less capital investment • USD 3000-6000 setup cost, USD 100pa maintenance cost • Host farmer – Sanchalak • Order seed, fertilizers & other products

Farmer

ITC E Choupal

Consumer

Sanchalak SPJIMR-PGPM Group 7

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Transaction cost Comparison Mandi & E-Choupal

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Win-Win Model Benefits to farmers: • Faster processing time, bonus points system, cost saving • Easy access to foreign agricultural market data (Chicago Board of Trade) • Accurate market price knowledge, market trends, weather information, higher yields, sense of empowerment • Soil testing service to improve crop quality • Rural e-literacy development

Benefits to ITC: • E-Choupal model works as a distributor network for ITC • Almost no or very less investment • Good market for ITC products • Choupal Sagar, telemedicine, eco tourism, traditional craft business … next big things in rural market???

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Free Trade Issues in Agriculture • WTO‟s Agreement on Agriculture (AOA) incorporated three commitments – – In market access – Domestic support – Export subsidies

• Farm subsidies and support in OECD countries increasing ($315 bn in 2004) • India opened up its market leading to increased vulnerability to highly subsidized imports like tea, coconut and edible oils (Rs. 5000 Cr. in 1995 to Rs. 15000 Cr. in 1999-2000) • Food security being compromised on account of trading being done by multi national companies and scrapping of public distribution systems

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Agricultural SWOT Strengths -Huge domestic market -Round the year availability of seeds and labor -Wide variety of crops -Traditional means of livelihood for rural populace

Weaknesses -High working capital requirements -Low availability and use of technology -Inadequate linkages between R&D and industry -Huge dependence on monsoon (rain fed agriculture) -Fragmented land holding

Opportunities -Huge potential for agro based industries -Expanding global reach due to favorable Govt. policies

Threats -Affected by extreme weather conditions like droughts and cyclones -Emerging economic challenges like WTO and liberalization etc. -Migration of youth to urban areas

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धन्यवाद्

जय किसान SPJIMR-PGPM Group 7

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