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

SPJIMR-PGPM Group 7 2
 Vital Statistics
700000 25 %

600000 India's
20 %
Exports
500000
(INR Crs)
400000 15 %
Total National Exports
300000 10 %
200000 %age Agriculture
5% Exports to Total
100000 National Exports
0 0%
2003-04
1990-91
1991-92
1992-93
1994-95
1995-96

2004-05

2006-07
2007-08
1999-00
2002-03

2005-06

1200000 8%
7% India's
1000000
6% Imports
800000 (INR Crs)
5%
Total National Imports
600000 4%
3%
400000
2% %age Agriculture
200000 Imports to Total
1%
National Imports
0 0%
1990-91
1991-92
1992-93
1994-95
1995-96

2003-04
2004-05

2006-07
2007-08
1999-00
2002-03

2005-06
SPJIMR-PGPM Group 7 3
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

SPJIMR-PGPM Group 7 4
SPJIMR-PGPM Group 7 5
 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

SPJIMR-PGPM Group 7 6
 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

SPJIMR-PGPM Group 7 7
 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

• Water conservation, irrigation canals, land development, rural connectivity

and flood control activities

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

SPJIMR-PGPM Group 7 8
 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

SPJIMR-PGPM Group 7 9
 HUL – Project SHAKTI
Changing Lives in Rural India
Shakti is HUL's rural initiative

Objective - creating livelihoods for rural women, organise in Self-

Help Groups (SHGs), and improving living standards in rural India.

To empower underprivileged rural women by providing income-

generating 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

SPJIMR-PGPM Group 7 10
• Started in 2001, now extended to about 80,000 villages in 15 states.

• ~ 25,000 women entrepreneurs

• A typical Shakti entrepreneur earns a sustainable income of about Rs.700

-Rs.1,000 per month, which is double their average household income.

• „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.

• Focus on training farmers, animal husbandry, generating alternative

income, health & hygiene and infrastructure development.

SPJIMR-PGPM Group 7 11
 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

SPJIMR-PGPM Group 7 12
Traditional Trade Model – मंडी

SPJIMR-PGPM Group 7 13
 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

ITC
Farmer E Choupal
Consumer

Sanchalak

SPJIMR-PGPM Group 7 14
Transaction cost Comparison
Mandi & E-Choupal

SPJIMR-PGPM Group 7 15
 Win-Win Model
Benefits to farmers: Benefits to ITC:
• Faster processing time, bonus • E-Choupal model works as
points system, cost saving a distributor network for
• Easy access to foreign ITC
agricultural market data • Almost no or very less
(Chicago Board of Trade) investment
• Accurate market price • Good market for ITC
knowledge, market trends, products
weather information, higher • Choupal Sagar,
yields, sense of empowerment telemedicine, eco
• Soil testing service to improve tourism, traditional
crop quality craft business … next
• Rural e-literacy development big things in rural
market???

SPJIMR-PGPM Group 7 16
 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

SPJIMR-PGPM Group 7 17
 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
Opportunities
-Huge potential for agro based
industries
-Expanding global reach due to
favorable Govt. policies
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
Threats
-Affected by extreme weather
conditions like droughts and cyclones
-Emerging economic challenges like
WTO and liberalization etc.
-Migration of youth to urban areas

SPJIMR-PGPM Group 7 18
 धन्यवाद्

जय किसान

SPJIMR-PGPM Group 7 19