Entrepreneurial Ventures and Approaches for Advancement in the Indian Agriculture

Sector
Imagine, by 2020 Indias population will have risen to 1.4 billion from the current
1.2 billion (as per the UN data). This surge in population will be accompanied by
a concomitant rise in the percentage of urban dwellers (as more people from
rural areas lurch to the big cities in search of employment and better living
conditions), and steady growth in the income levels (in the booming cities of
India). To reach a sustainable level, food grain production in India must rise at an
annual CAGR of 4% between now and 2020, compared with the historical growth
rate of 2.5% during 1950-2007, according to the Indian Government. On a macro
level, all these (forecast) trends point at a growing concern for the Indian
economic planners increased stress on the national food and nutritional
security. Limited water and land resources, as more forests are razed to build
infrastructure to support rising population, further aggravate the problems that
are silently, like a ghost, and swiftly engulfing the Indian agriculture sector. Public
sector contribution to growth in the agricultural output, after having achieved
strong gains during the Green Revolution period of 1960s and 1970s, seems to
be showing signs of stagnation. To make up for this slack, private investments
will be required for setting up enterprises in the agriculture sector that can work
in more efficient, productive and organised ways. For such reasons, this topic is
of disproportionately high importance in the talks of shaping the future growth
path for the people of India, its industries and the overall economy.
The course should be designed to consist of four core modules. The first module
The importance of Agriculture Sector as one of the main engines of economic
growth will give an overview of the Indian Agriculture Sector and explain why
growth in this sector is important for Indias economic growth. In India, despite
steady progress in the industrial and service sectors, agriculture is still the
mainstay of the people. Agriculture employs about two-third of the total
population and accounts for 18% of Indias GDP the largest share. Growth in the
agricultural sector is of utmost importance because it has the most direct impact
on the economy.
Agriculture creates demand for raw materials and many industrial products, such
as fertilisers & pesticides, agricultural inputs and a variety of consumer goods.
Productivity increase in agriculture is significantly dependent on gross capital
formation through public and private investments. In the recent years, the gross
capital formation in agriculture as a proportion of total capital formation across
all sectors of the economy has shown a steady decline. Nonetheless, the share of
private investment in GCF in agriculture has increased over the recent years and
currently stands at three-fourths of gcf in agriculture.
Sustainable growth in agriculture is important not only for meeting the national
food and nutritional security of the people, but also to facilitate equitable
distribution of income in rural India and bring about prosperity in these areas.
Growth in agriculture has the maximum cascading effect on other sectors, and
helps spread the benefits of development over the wider economy and the
largest segment of population. Agricultural growth lowers poverty twice as fast
as any other sector, because it directly impacts the rural poor people which form
the largest segment of the population.
Increasing farm incomes is essential for equitable growth. Further, with
uncertainties in the global markets, hardening food and fuel prices, stability in
the domestic markets and food security depend crucially on growth in the
agriculture sector. This necessitates improvements in the forward and backward

linkages in order to enhance productivity and get the maximum out of per unit of
resource used.
For such reasons the poor health of the Agriculture sector due to inefficient
farming practices is of particular concern.
The second module will be shaped to provide an insight into the issues/problems
facing the Indian Agriculture Sector and less efficient farming practices.
Despite possessing the most fertile land areas of the world the Gangatic Plains
Indian agriculture sector suffers from low growth in agricultural crop yield. The
rapid increase in productivity achieved during the green revolution period have
leveled off, with soils responding only grudgingly to the heavy use of fertilisers
and farmers remain at the mercy of the monsoons. Politicians outbursts against
hoarders and speculators have stymied the development of storage facilities and
commodity markets. And their concerns to protect the farmers from exploitative
merchants have slowed the growth of contract farming. India's large agricultural
subsidies are hampering productivity-enhancing investment. Indian government
still fixes prices, subsidises inputs and sometimes waive-off loans to farmers,
thereby increasing the burden on state, when this public money can be spent on
agricultural research and infrastructure development. This discourages farmers
from diversifying. The International Food Policy Research Institute points out that
every rupee spent on agricultural research yields 9.5 rupees of output. In
contrast, an extra rupee spent on subsidising generates only 0.85 rupees of
output.
In India, land holding is highly fragmented. During the Green Revolution the
Indian Government broke the feudal order by limiting the size of land holdings
and transferring ownership to those who worked on it. This resulted in very small
average land holdings, making mechanisation less economical. The average land
holding in India is about 1.4 hectares. In contrast, the average land holding size
in Brazil is more than 70 hectares, according to FAO. In India, the farm sizes are
so small that if these fileds are irrigated, they are flooded wastefully, with water
flowing down furrows on eiter side of the crop, taking valuable nitrogen with it.
Supermarkets are also important to farmers as they account for half or more of
food sales and are steadily growing in developing countries. But these
supermarkets need uniform quality, large quantities and high standards of
hygiene, which the average smallholder is ill-equipped to provide.
In India, increase in net sown area has flattened out, so further increases in
agricultural output need to come from an increase in gross cropped area
(multiple cropping), coverage of area under irrigation and improvements in the
productivity levels. Agriculture sector needs well functioning markets to drive
growth, employment and economic prosperity in rural areas. To provide
dynamism and efficiency in the marketing system it is important to invest
heavily in the development of post harvest and cold chain infrastructure nearer
to the farmers fields (such as silos). Indian agriculture also has to diversify into
non-conventional high yielding/high value crops, raise productivity, restore soil
health and enhance the application of modern farming technology and
biotechnology. Fears that a less labour-intensive and more mechanised farming
methods could jeopardise jobs leads to popular resistance to investment in
new/modern farming practices. There is a long chain of intermediaries that
widens the gap between what consumers pay and what farmers receive for their
farm produce. Farm produce lacks an adequate chain of refrigerated storage and
transport.
Indian agriculture sectors vulnerability to the weather is highlighted by the fact
that a significant (about one-third) of the cropland is not irrigated properly and

that much farming is done at subsistence levels without the use of modern
technology.
Farming in emerging economies is riddled with market failures and does not
react to price signals as other businesses do.
In emerging economies, the amount of good, product land is declining, buried
under the concrete of fast expanding cities. So, food increases now need to come
mainly from higher yields.
The third module will be designed for Case Studies How private investments in
Agriculture sector in the past have successfully transformed the look of acres of
land? This module will also take students to rural India where they will meet local
farmers to understand their problems and closely study various regional markets
at local levels.
Private firms are finding their own way around the obstacles.
In 1980s, Pepsi, an American food and soft drink giant, offered thousands of
Punjabi farmers an alternative to their traditional rice and wheat crops (which
were in abundance during that period). It reintroduced groundnut, a crop that
uses less water than rice and adds nutrients to the soil. However, growth in this
kind of contract farming was hampered by state governments regulations on who
could buy produce and how. Most states have now eased those restrictions,
raising hopes that contract farming could flourish once again. Contract farming
accounts for a small fraction of Indias total annual agricultural output of $220
billion.
Organised retailing will also help overcome some operational issues. Food World,
a Chennai-based grocery chain, cut out the middle man in the rice trade by
buying directly from the mills. Food World buys vegetables directly from 50
farmers and helps supply them with seeds, fertiliser and irrigation.
It took McDonalds roughly six years and $100 million to set up a reliable supply
chain in India. The supply chain begins with 2000 acres of potato fields in
Gujarat, cultivated by 400 farmers under contract with McCain Foods, which
supplies frozen fries to McDonalds. Hitesh Patel, for example, used to grow
cottonseed on his six hectares in Idar village, about 125 km from the McCain
Foods owned Mehsana Plant. Four years ago he planted a hectare of potatoes at
McCain Foods urging and under its guidance. Now he plants potatoes on all of
the six hectares he owns and another 1.6 hectares he has leased. McCain offers
him a fixed price for potatoes, which is better than what he gets in open mandis,
markets where vegetables and fruits are traded. It took McCain Foods several
years of experimentation to produce potatoes that were suitable for processing
into fries.
Investments by multinationals such as McDonalds can spread into the wider
economy. McDonalds, for example, invited East Balt Commissary of Chingo,
whose founder supplied buns to Ray Krocs first McDonalds franchise, to go to
India to train the Cremica bakeries in Delhi and Mumbai. It (McDonalds) also
asked Schreiber International, whcich supplies sliced cheese, to tie up with
Dynamix Dairy in India. As a result, many other companies, such as Nestle,
Unilever and Pepsi, started doing business with Dynamix Dairy.
China is finally opening up to private agricultural investments, in part because
new laws allow farmers to lease land, thus making possible economies of scale.
Asian Bamboo, a company listed in Frankfurt, leases 27,000 hectares in Fujian
province. It made a profit of 21 million on sales of 44 million in 2008, reflecting
how agriculture can be an extra-ordinarily high margin business. The
spectacular growth in Brazils agriculture sector in the last decade is something
to learn from. IN less than 30 years, Brazil has transformed itself from an
importer of food to one of the worlds largest breadbasket. The total area

planted with grains in Brazil has risen from around 38 million hectares in 2000 to
around 48 million hectares in 2010. Over the same period, grain output in the
country has shot up from around 80 million tonnes in 2000 to 150 million tonnes
in 2010. This miraculous transformation has been brought about by huge private
investments in the agriculture sector in the last decade. BrasilAgro, a company
that buys and modernises neglected fields, uses radio-transmitters to keep track
of weather, runs SAP software, employs 300 people and uses the latest
revolutionary techniques and chemical treatments to prepare soil and GM seeds
to achieve high yields at its large-scale farms. Such a system approach had all
the interventions worked together. Such carefully designed plans led to the
miraculous growth in Brazilian agriculture industry.
The fourth module will inform the students of the techniques and
ideas/suggestions on how private sector investments will help mitigate the
problems of Agriculture sector in India. This module will assist/guide prospective
entrepreneurs in their future endeavour.
Installation of local weather forecasting stations near farmlands with support (in
the form of technology/equipment, human resources and funds) from private
investors.
Organised retailing will help overcome many operational problems by cutting out
the number of mediators in trade and improving the storage and distribution of
farm products. Better storage and transport facilities will also allow farmers to
profit from growing fruits, vegetables and flowers.
Continous research for developing higher yielding seeds is required and farmers
should be educated by these new, better varieties of seeds through training,
media campaigns, agriculture fairs or promotions. One solution is to increase the
use of Genetically Modified (GM) seeds which give higher yields and require
considerably less amount of fertilisers and pesticides than the regular seeds. GM
technology, unlike other agricultural practices, was developed and initiated by
private companies. In India, however, the widespread use of GM seeds is yet not
possible because of governments unwillingness to allow their use under
pressures from NGOs.
Some corporate companies have started to invest directly in farming in poor
countries by providing farmers with newer, better varieties of seeds and drought
or disease resistant plants. Agricultural centres one-stop shops where farmers
can buy agricultural inputs, lease farm equipment and get crop insurance can
be set up in rural areas near farmlands.
There is a lot of agricultural research that needs doing and this is where private
sector involvement can help. From soil management to weather forecasts to the
preservation, study and use of agricultural biodiversity, there are many ways to
improve the agricultural systems and make them more resilient and profitable. A
good farm is not just a clever crop, it is an ecosystem managed with intelligence.
Private companies can ensure remunerative returns to the farmers for their
agricultural produce to enhance farmers incomes and help restore confidence of
farmers.
Private companies should endeavour to bring about the integrated development
of marketing of agricultural produce to safeguard the economic interests of the
farming community. Private firms should assist states in management of drought
and help them undertake scarcity relief measures. Private firms should be
promoting scientific methods of cultivation and plant protection through the
dissemination of appropriate information and technology.
Ensuring a holistic development of agriculture and allied sectors.
Restoring soil fertility (like in the case of BrasilAgro) and productivity can be
achieved through private investments.

Private investments can help develop support services and allied sectors.
Support services include provision for seeds, irrigation, power, machinery and
implements, fertilisers and credit at affordable rates.
Introduce measures which can help attract and retain youth in farming and
processing of farm products for higher value addition by making it intellectually
stimulating and economically rewarding.
Introduction of new farming techniques. Brazilian farmers pioneered no-till
agriculture, in which the soil is not ploughed nor the crop harvested at ground
level. Rather, it is cut high on the stalk and the remains of the plant are left to rot
into a mat of organic material. Next years crop is then planted directly into the
mat, retaining more nutrients in the soil.
I believe, the highly talented Wharton community can be of great help in
achieving this transformation. A course custom-tailored on the above lines will
surely generate interest and help seed ideas inside student camps on how to
explore the opportunities in the Indian agriculture sector, which has a high
growth potential. Some students with strong motivation and determination might
take the entrepreneurial path to take initiative to make this transformation a
reality, while others will be equipped with the knowledge and ideas to about the
various issues facing the India agriculture sector. Some of them can indirectly
contribute to the growth in this sector by helping in spreading awareness among
the farmers communities on what measures can be taken to achieve better
yields, and by tapping emerging opportunities in the allied sectors (such as
providing genetically modified seeds, and technologically advanced equipments).
Who knows one day one of these Wharton students will lead a transformation
process in the Indian agriculture sector by setting up agriculture enterprises,
much to the likes of Brazils Brasilagro, a multi-billion dollar company working
towards transforming barren/infertile land into high yield farms.