High growth ideas from India's lowly farmsteads

Farm sector's share in the GDP is 14% and 51% of the workforce depend on it. Despite this, most people who depend on it lead precarious lives. This si

Farming and farm-based sectors such as food processing, textiles, and leather are the primary provider of livelihood for the vast majority of India’s population. The country’s wealth and its economy are inexorably linked to the well-being and success of the agricultural industry.

Agriculture, besides its dominant role in the country’s economy, also has positive linkages. On the one hand, these linkages are with other modern industries such as fertilisers, agrochemicals, and farm machinery; and on the other, with traditional industries such as textiles, leather, and food processing.

The share of agriculture in the country’s GDP (gross domestic product) is around 14 per cent, and some 51 per cent of the country’s workforce is dependent on it. Agriculture also contributes significantly to India’s export earnings and the country is among the top ten leading exporters of farm products. The Indian agro industry covers a very wide spectrum that includes dairy, food processing, fisheries, meat, poultry, food grains, fruits, vegetables, spices, among others. Despite all this, most people who depend on it lead precarious lives. This situation needs to change quickly.

Impressive farm credentials

Let us look at India’s inherent strengths. It is the largest producer of pulses, milk, cashew, mangoes; and the second-largest producer of wheat, rice, sugarcane, tea, fruits and vegetables. It enjoys surplus production to export commodities such as milk, cashew, and tea. It also exports rice, wheat, and sugar. 

Globally, the country is the second-largest cotton-growing and cellulosic fibre-producing country, the second-largest producer of silk, and a significant player in wool.

Therefore, the textile industry has distinct advantages. With a large livestock comprising cattle, buffalo, goat, and sheep, India supports a big leather industry. With an annual output of 130 MT, India is the world’s largest producer of milk. The country has emerged as the second-largest producer of sugar. Again, India is the second-largest producer of fruits and vegetables.

India is also the world's second-largest producer of textiles. Next only to agriculture, it offers direct and indirect employment to over 45 million and 60 million people respectively.
It contributes to 10-11 per cent export earnings, 14 per cent to industrial production, and 4-5 per cent to the GDP. Therefore, the growth and all-round development of this industry will have a force multiplier effect.

Abundant availability of cotton, wool, silk, jute, and skilled workforce provide competitive advantages to the textile industry.

The report, ‘Vision, Strategy and Action Plan for Indian Textile and Apparel Sector’, submitted by the Expert Committee to the Ministry of Textiles, believes that the Indian textile and apparel business have the potential to reach $350 billion in the domestic market and $300 billion in the export market by 2025. The way forward is to go up the value chain by exporting more of finished products.

The leather industry in India, endowed with 21 per cent of the world’s cattle and buffalo, and 11 per cent of the goat and sheep population, employs close to 2.5 million people and exports finished leather products — apart from meeting almost 10 per cent of the world’s raw leather requirements. It creates jobs outside the country as well. The industry, producing around two billion sq.ft. of leather, earns 50 per cent of its revenues from international trade.

Abysmal productivity, efficiency

Despite these inherent strengths, none of these sectors are working at the required level of labour productivity and efficiency. While we often hear of farmers’ suicides or workers not getting paid, we also hear of huge grain losses during transportation and storage.

Many times farmers are forced to sell their produce at unremunerative prices because of lack of storage. India may be the second-largest sugarcane grower, but we do not produce enough ethanol. Even though the country is the second-largest grower of fruits, India’s fruit import bill is going up. Only two per cent of these crops are processed into value-added products, against 80 per cent in advanced countries. The textile industry also is unable to compete with countries such as Vietnam and Bangladesh.

These industries can leverage technology to improve productivity and competitiveness. There are signs that it is beginning to happen. Some farmers are beginning to use smartphone applications and portals. For example, now a farmer can access Farmers’ Portal, a government of India hosted site, for information on specific subjects around his village/block/district or state.

Web-based auctioning

  The information is as text, SMS, email or audio/video in the language he or she understands. Then there are WhatsApp groups providing information regarding best agricultural practices.

Many corporate players in the consumer goods business provide web-based auctioning and epayment facilities that open up access to better prices and markets for even small growers.

Farmers are also beginning to use solar pumps, and some have set up even rooftop solar-powered warehouses. While all these are good beginnings, lot more remains to be done.        

Agriculture is a business activity and not just a livelihood. Their land is their fixed asset, and ability to cultivate crops, grow fruits, vegetables, or breed cattle are their core competencies. Like in other businesses, to succeed and to be profitable they have to effectively address financing, supply chain, marketing, customer and supplier relationship, warehousing, logistics, and such other challenges.

They have to manage their costs, eliminate wastage, earn profits, understand customer expectations, and learn to delight them. Amul’s corporate approach (Gujarat Cooperative Milk Marketing Federation) is a good example of how agribusiness can be profitable. India needs more such examples.

The main reason why farmers lead precarious lives is the delusion that they are not in business and their inability to transform themselves into a corporate structure. Other reasons include lack of skills to manage their businesses and dependency on middlemen to handle supply chain issues, and inability to reach out to customers and the government to fix minimum support prices (MSP).

This mindset should change and the government, organisations and institutions, must help in bringing about change. They should adopt modern practices, including management, and leverage technology to become more productive and efficient.

For this they should turn to academia and technology providers and build robust, mutually rewarding relationships. These are some of the other prerequisites for agriculture to be profitable. If agriculture becomes profitable, India’s economy would prosper.

OPPORTUNITIES

Some farmers are beginning to use smartphone applications and portals.
Leather industry earns 50 per cent from exports, which can be scaled up considerably
Indian textile and apparel business have the potential to do $350 billion domestically and $300 billion in exports

WEAKNESSES

Huge grain lossesduring transportation
and storage    Reason?
    Lack of storage facilities
We do not produce enough ethanol despite demand
Reason?
    Inadequate production and pricing mechanism
India’s fruit import bill
is going up
    Reason?
    Only two per cent of fruits are processed
Indian textiles can’t compete with Vietnam, Bangladesh
    Reason?
    Inadequate productivity, competitiveness


THREATs

Most farmers lead precarious lives
Farmers do not think that theirs is a business
They depend on middlemen for supply chain issues
They are unable to reach out to customers
They are unable to lobby the
government for MSP

(The author is an independent industry analyst and automation consultant)