Emerging Trends in Indian Agribusiness Sector: Prospects and Policy Options Vijay Paul Sharma Chairman, Agribusiness Management Indian Institute of Management Ahmedabad 380 015 Email: vijays@iimahd.ernet.in Vijay Paul Sharma

Presentation Outline Structural Transformation of Indian Economy: Major Drivers Constraints Restricting Participation of Smallholder Producers in Markets Policy Issues and Priorities to Accelerate Growth Vijay Paul Sharma

STRUCTURAL TRANSFORMATION OF INDIAN ECONOMY Vijay Paul Sharma

Still Single Largest Employer in the Economy????? 39% Still Single Largest Employer in the Economy????? 12.1% Vijay Paul Sharma

DRIVERS OF STRUCTURAL TRANSFORMATION Vijay Paul Sharma

Demand Drivers Rising Demand for High-Value Agri. Products Increasing Urbanisation Rising Demand for High-Value Agri. Products Higher Disposable Income  Expenditure on Non-Food Items Demand Drivers Changing Demographics 65% population <35 years Increasing Number of Working Women 12% in 1961 to 25% Changing Lifestyle and Aspirations Increasing Trade Opportunities Vijay Paul Sharma

Composition of Consumer Expenditure: Rural Vijay Paul Sharma

Composition of Consumer Expenditure: Urban Vijay Paul Sharma

Diversification of Indian Agriculture: Demand Drivers (Rural India) Source: NSSO (2013)

Diversification of Indian Agriculture: Demand Drivers (Urban India)

Expanding Agricultural Trade Surplus IGIDR Silver Jubilee Conference Vijay Paul Sharma

Supply Drivers Technological Interventions Private Sector Participation: Contract Farming Emergence of Organized Food Retail – from 1% to 7-8% Technological Interventions Cotton & Maize Supply Drivers Improved Infrastructure Entry of Fast-Food Supply Chains: KFC, McDonald’s, Pizza Huts, etc…. Increased Investment Vijay Paul Sharma

Cotton Production & Yield: Impact of Technology Vijay Paul Sharma

Maize Production & Yield: Impact of Technology Vijay Paul Sharma

Increased Investment in Agriculture Vijay Paul Sharma

Have Indian Farmers Responded to Market Signals? Vijay Paul Sharma

Diversification of Indian Agriculture: Supply Side Response TE1983-84 TE2011-12 Vijay Paul Sharma Source: CSO (2013)

MAJOR CONSTRAINTS RESTRICTING SMALLHOLDER PARTICIPATION IN EMERGING MARKET OPPORTUNITIES Vijay Paul Sharma

Major Constraints Inconsistency in Trade Policy Lack of Quality Post-Harvest Infrastructure Number of Small Farms & Fragmentation of Farms Major Constraints Food Safety & Quality Standards Availability & Cost of Labour Lack of Access to Technology, Inputs and Services Inconsistency in Trade Policy High Risks in Agriculture; Low Productivity Lack of Irrigation Facilities Land Tenure Systems Vijay Paul Sharma

Rising Number of Smallholders & Declining Farm Size Avg. Size 2.28 1.84 1.55 1.33 1.16 Vijay Paul Sharma Source: GoI (2012)

Average Farm Size (2010-11): State Level Difference Vijay Paul Sharma

Need for Collective Action Fast Scaling-up of other Segments of Value Chain Shrinking/Fragmenting Farms & Small Production Units Input & Services Seed, Fertilizer Pesticides, Credit Small Producers Agro- Processers Markets/ Retailers Logistics Providers Low/Uneven Bargaining Power  Exploitation Missing Direct Market Linkage Poor Access Need for Collective Action Vijay Paul Sharma

Trends in Sectoral GDP Growth: High Fluctuations in Agriculture Vijay Paul Sharma

Inter-state Performance of Agri. Sector (GSDP): 2001/02 to 2010/11 IIMA-IFPRI Workshop on Food Security Vijay Paul Sharma Source: CSO (2012)

Scope for Raising Yield Levels

Rice & Wheat Yield in Major States TE2011-12 Vijay Paul Sharma

Competing Uses of Land:  in Net Sown Area AIM MDP Jan 2013 Vijay Paul Sharma

Changes in Net Sown Area: State-level Analysis (TE1994-95 and 2009-10) Reduction in NSA (‘000 ha) States >500 Tamil Nadu (836), Odisha (703), Maharashtra (603) – Mainly due to  in Area under Non-Agri. use 100–500 Karnataka (333), Bihar (324), West Bengal (190), Kerala (157) <100 M.P. (75), H.P. (30), Punjab (16), UP (2) Increase in NSA (‘000 ha)  >500 Gujarat (774) - Due to  in Fallow & Waste Lands 100-500 Rajasthan (477), A.P. (140) <100 Haryana (58), J&K (3) Source: Govt. of India (2012) Vijay Paul Sharma

Reforms in APMC Act Stage of Reforms States/UTs Reforms Done A.P., Arunachal Pradesh, Assam, Goa, Gujarat, H.P., Jharkhand, Karnataka, Maharashtra, Mizoram, Nagaland, Odisha, Rajasthan, Sikkim, Uttarakhand Partially Done Direct Marketing: NCT Delhi, M.P. and Chhattisgarh Contract Farming: Chhattisgarh, Haryana, M.P., Punjab, Chandigarh No APMC Act Bihar (repealed in 2006), Kerala, Manipur, A&N Island, D&N Haveli, D&D, Lakshadweep Already provides for reforms Tamil Nadu Admn. Action Initiated Meghalaya, Haryana, J&K, West Bengal, Puducherry, NCT of Delhi and U.P. Vijay Paul Sharma

Policy Issues and Priorities to Accelerate Agricultural Growth Vijay Paul Sharma

Policy Priorities Improve Crop Productivity Increase in Public Investment in Agri. R&D including Extension Strengthen Market Linkages/Vertical Integration Better Rural Infrastructure – Public Investment Post-Harvest Management and Market Infrastructure – Public & Private Sector Vertical Coordination in Agri-Food Chains – Contract Farming Collective Action for Smallholder Market Access – FPOs, Coops, Producers Cos., etc. Strengthen Market Information Systems – PPP Mode

Thank you ! Vijay Paul Sharma