Sunday, June 10, 2007

A second Green Revolution in agriculture?

While our cities and industries have been growing at an unprecedented rate, our agriculture is stagnant. In India 70% of the people are employed by agriculture but they contribute just 20% of GDP. Several reasons like small land holdings, poor knowledge about soil requirements, unavailability of credit, poor logistics are some of the reasons. Even if agriculture grew by 2% higher than what it currently does, sustaining double digit GDP growth will be possible. When companies like Reliance, Wal Mart enter food retail there will be several changes. These companies will provide cold chain facilities (currently more than 50% of produce is wasted in the supply chain), by eliminating the middle trader they will give better price to the farmers and yet offer lower prices to their customers, also they will export a certain fraction which will only give higher returns to farmers. These companies will also make available better technologies to the farmers hence increasing their farm yields, pushing their sourcing costs down and offering even lower prices to the consumers. Everyone is benefited by this improved farm to plate efficiency. Read my previous post on Mukesh Ambani for more information about this retail strategy. Here is a link which gives M.S.Swaminathans views on a second Green Revolution!

I am pretty optimistic about this.


Aditya Pethe said...

Does seem good doesn't it. Finally the farmers could end up getting their due. :-)

Pratik Bhandari said...

Yes finally prosperity for everyone in India, not just software programers ;)

Roodge said...

i havent read the link yet, but I was thinking about this. I don't think its going to be as easy it seems on paper. Eliminating the middle man, will cause problems. These middle men carry plenty of clout amongst the farmers. Its not going to be easy for these corporations to bypass these guys so easily. They can use various tactics..even including matching prices...with the corporates. My feeling atleast. I think for the retail to work better, Walmart/Ambanis may eventually have to work with these middle men and improve their resources first. Because they know how to interact with the individual farmers far better than a corporation could do it. Sure, overall prices might go up..but also, if 50% of the produce is being wasted right now...and assuming that eventually 10% will be wasted with all the new efficiency, the increased supply will drive prices down and both farmers and middle men will flourish.

What do you think?

Pratik Bhandari said...

hi roodge, long time. glad to see u back on blogosphere.

I had a previous post on "mukesh ambanis big plans", I will quote him from that interview.

"Let me give you some numbers. Take potatoes, the most common food across the world. From Bill Gates to my driver, everybody eats potatoes. Now, plot the prices. Farmers in Uttar Pradesh and Bihar get about Rs 4-5 a kilo; in the Middle East, the wholesale price is about Rs 25-30 a kilo. In the US, Sam's Club, it is Rs 90 a kilo. In Europe, it is Rs 110 a kilo. The arbitrage is 1:20. If we get our produce right, and if the US market is opened up, you will be surprised how quickly we reach $20 billion.

The food market is much bigger than the software services market. And the money goes straight into the hands of millions of farmers. The spinoffs are enormous -- jobs, houses, durables, a whole new consumption boom will start in rural areas. "

"we will reduce the cost to consumers by 20% and increase the efficiency of farmers thrice over. Farm incomes can go up 600% to 900% over the next few years from the current base."

"Having looked at it obsessively for the past year, I feel that we can convert all our disadvantages into an opportunity. We have fragmented landholdings; but we can integrate that with technology."

I dont think, that corporates will not be able to deal with farmers. Corporates will give farmers better technology resulting in increased produce. They will have better logistics resulting in less loses. They will create and drive a new level of efficiency. Hence they will pay more to the farmers and yet lower existing food prices.

Plus corporates have an export option after satisfying domestic demand. huge margins in export will allow them to have lower margins domestically and be more competitive.


"With proper inputs, there is no reason why Indian farmers cannot become world-class. What is missing? It is distribution."