Almost all discussions on agriculture begin and end with concerns about the plight of the farmer, the margins of the intermediary, and the ineffectiveness of government policy to address the real issues of those engaged in agriculture. It is easy to blame the government, whether it's the dispensation at the state, Centre or both. Moreover, both are also perfectly capable of blaming each other, even if they are on the same side of the political constellation. Thus, most state governments accuse the Government of India (GoI) of not raising Minimum Support Prices, and backing out of procurement, while the GoI holds states responsible for announcing a "bonus" over and above MSP. When global commodity prices go down (as they have in recent times), states want the Centre to establish a special fund, or reschedule loans, or offer a special package.
This is all fine, but where do we go from here? Is there something fundamentally wrong, or is there light at the end of the tunnel? I believe that the fundamentals are in order, and if the government focuses on markets, education, research, standards, facilitating global trade and extension activities, the markets will take care of the rest.
1. The growing demand for high-value agriculture
Not only is the demand for agriculture growing, the nature of the demand is changing from cereals to high-value agriculture (HVA), viz. fruits, vegetables, organic produce, dairy products, fisheries, poultry. Over the last two decades, the cereal sector has touched a plateau. Of course, since most transactions in cereals are dependent on minimum support prices and government procurement, the production will be steady and risk free -- but the real growth and momentum will come from high-value agriculture, which will spur "on-farm investments", specialisation in labour and better market linkages, including production for global markets. HVA will also catalyse farmers into joining hands to establish their producer organisations, or at least get into common marketing arrangements as in the 'Mahagrapes' (Maharashtra Grape Growers Association), which has opened up the European market to farmers in Nasik and surrounding areas. Annual exports have touched Rs 150 crores in a good year, and together they were also able to establish protocols for good agricultural practices, which enabled them to re-enter the European market after the EU had red-flagged Indian grapes for not conforming to their standards.
"Given the first two propositions - the growing demand for HVA and the standard of technology available -- it is almost axiomatic that entrepreneurs will want in on the game."
Dairy farming is another sector with immense growth potential. As the demand for milk and milk products grows on account of higher incomes, and the shift from cereals to proteins, farmers are finding it more profitable to rear cows and buffaloes rather than grow crops. Private dairy players have modelled themselves on the well-established norms of Amul with regard to transparency in milk testing at the primary level, and the clear link between the quality of milk and the procurement price. Many state governments have announced additional incentives for dairy farming. States like Punjab are taking a leadership role in this, as it also fits well into the imperative of diversification, especially in the context of the acute pressure on water. Milk production is superior to paddy, both in economic and ecological terms.
2. The right technology is available
If demand for HVA is growing, technology too is not lagging behind. From laser levellers to micro-irrigation and fertigation to potato diggers, onion planters, tissue culture labs for seedlings, greenhouses for year-round production and cold-chain infrastructure: technology is available and farmers are more than willing to accept it, especially where hire-purchase models, or rental models are viable options.
It's also easier to access technology now, thanks to the collaboration agreements that are in place with countries like Israel, Holland, France and Germany. Even though one does not have precise figures for the growing sale of farm and agri-equipment, the increasing number and popularity of agricultural exhibitions across the length and breadth of the country - including the Northeast -- is a sure indicator that agricultural technology is generating not just interest, but profitable business models.
3. Agribusiness entrepreneurs are keen
Given the first two propositions - the growing demand for HVA and the high standard of technology available -- it is almost axiomatic that entrepreneurs will want in on the game. From the micro, small and medium enterprise (MSME) sector to global corporates, everyone wants to have a share in this pie. All the recent announcements from the government - whether it is on the national farmers' market, or agriculture insurance, or the support to micro-irrigation within the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) - are giving an impetus to the growth of agribusiness in the country. The largest agribusiness in the country --the Food Corporation of India -- is also up for restructuring, and if the report of the committee headed by Shanta Kumar is accepted, it will be a remarkable fillip to the sector. New agribusiness opportunities are coming up in agri information relating to monsoons and markets, and almost all the leading names in India - from Reliance to Tata's to ITC -- are not just into agribusiness, but finding new and more profitable avenues.
4. Right noises on the policy front
Last, but not the least, the government is making the right noises on the policy front. From financial inclusion for all farmers coupled with an insurance regime to hedge risks and a national market platform for the establishment of a pan Indian market and the recently announced Pradhan Mantri Krishi Sinchai Yojana, there is sufficient buzz around agriculture and agribusiness. Whether or not these pronouncements are backed by action and allocations will be known only with the passage of time... in the interim there can be no doubt that the sentiment is favourable, and in all likelihood, investments in agribusiness will be equally, if not more competitive than investments in manufacturing and services.