Time for Agriculture to Metamorphose in Agribusiness

An Expert's View about Food , Beverages and Tobacco in India

Posted on: 13 Mar 2010

A significant worldwide trend in public policy in recent years has been to disengage decades of direct government involvement in the agricultural sector. Price supports, input subsidies, and publicly owned agriculture-related institutions have been increasingly dismantled in favor of private market determination of prices and other incentives. Contributing to this trend toward free market economies are the growing global efforts to liberalize trade by lowering tariffs, harmonizing other standards.

TIME FOR AGRICULTURE TO METAMOPHOSE IN AGRIBUSINESS Saurabh Singh, Faculty Agribusiness Management; Pantnagar A significant worldwide trend in public policy in recent years has been to disengage decades of direct government involvement in the agricultural sector. Price supports, input subsidies, and publicly owned agriculture-related institutions have been increasingly dismantled in favor of private market determination of prices and other incentives. Generally speaking, the arguments in favor of this approach center on the anticipated gains in production efficiency that would arise from free movement of resources. Contributing to this trend toward free market economies are the growing global efforts to liberalize trade by lowering tariffs, harmonizing other standards, and facilitating foreign direct investment. While the short-term adjustments to increased competition are recognized as potentially painful, it is generally agreed that medium to long-term gains more than compensate. Nevertheless, in a very real sense, the adjustment to removal of both domestic support structures and barriers to external competition may be especially painful for smaller producers, a group which is often the target of poverty alleviation measures. When public support has been extensive and in place for long periods of time, private market offerings have typically been stifled if not forbidden. This implies that there may be some delay between public sector withdrawal of services and their replacement by private enterprises. Therefore, an effective adjustment strategy in the post-reform era must include components that boost the ability of smaller producers to respond effectively to market incentives. The development efforts must begin to strengthen the price side of producer income in ways that do not undermine efforts to reduce government involvement. More emphasis must be placed on facilitating the marketing aspects of agriculture, i.e., agribusiness, for producers with limited resources. Key is assisting producers to overcome problems of imperfect markets and empowering them to be competitive participants in the market system. Various Forms of Value Added Products and Other Revolutions in Wing These efforts have had a significant impact as the processed food sector is attracting a lot of investments. This sector registered a growth rate of 8.5 percent during 2006-07. However, several schemes and projects which look good on paper have not taken off as expected. Key problems include weakness in implementation, lack of creating forward and backward linkages resulting in huge losses due to sub-optimal or non use of created infrastructure. From the development perspective, critical issues for inclusive and equitable growth are involvement of small and marginal farmers in value chains, linking farmers to markets and other initiatives such as ?Rural Business Hub?, formation of ?producer companies? will contribute to linking farmers to markets. The processing is in the unorganized sector, enabling this sector to meet the requirements of the new food safety laws is critical to link them to the modern system. In addition to this, balanced regional growth throughout the country is also important so that each area gets a fair chance to share the benefits of this metamorphosis. Indian food-processing sector is undergoing rapid transformation. As the economy of the country moves on the path of development, agricultural sector evolves from traditional subsistence level farming to commercial agriculture producing high value and processed products. There is high potential demand in the domestic as well as export market. On the supply side, with vast arable land and agro-climatic diversity, India has the potential to be a food basket of the world. With this interaction of demand and supply forces the food processing sector has the potential to be the driver of economic growth and enhance rural incomes. Food Processing Industry is widely recognized as a 'sunrise industry' with a vision to make India the Food Basket of the world, achieves what has been achieved in the field of computer technology. While steps have been taken in the right direction, the critical issues in the way forward are inclusive and equitable growth by ensuring participation of small and marginal farmers, backward areas and regions and small and micro enterprises in the value chains. It has been observed in various developing countries around the world that benefits of the modernizing sector do not automatically accrue to all stakeholders in the system. Particularly at risk are small scale farmers, faced with increasingly strict agro-industry standards and contractual arrangements, and small scale traders, processors, wholesale markets and retailers, who must compete with large food suppliers and manufacturers. Recognizing the importance of agro industry development in enhancing rural incomes and agribusiness development with inclusive growth it has become clear worldwide that the most rapid growth in agriculture has for quite some time been occurring in post-production activities. This is in large part being driven by the growing number of middle income consumers even in lower income countries and their demands for better quality value-added products. Agri-food systems world-wide are increasingly being dominated by vertically coordinated, if not vertically integrated, organizations. High concentration and vertical co-ordination of agri-food systems is already a reality in high income countries. Negligible presence of agro-industry and agribusiness resulting in low level of value addition of agricultural commodities has been one of the main causes for stagnation in rural incomes. Conversely, an analysis across countries and regions, substantial agribusiness sector generating high value addition to the outflow of goods, correlate with a higher level of agricultural GDP and rural incomes. Thus, with increasing incomes, agribusiness development is inevitable. Now only thing required is to make sure that all the stake holders are treated in an equitable and fair manner. [Mr. Saurabh Singh happens to be Management Speaker, Consultant, Author of Many Refereed Research Papers, Monographs and Books. Presently he is Assistant Professor at College of Agribusiness Management, a constituent college of Asia?s one of the Agriculture, Technology and Business Management oriented university named Govind Ballabh Pant Krishi Evam Prodyogik Vishwa Vidyalaya, Pantnagar, U. S. Nagar, PIN 263145, Uttarakhand, INDIA. The University has been a place where Nobel Laureate Norman E. Borlaug, who also is recipient of Padma Vibhusan awarded by Government of India. The author?s biography can be located at Amazon and for detailed info on him the readers could visit his Blog and University Page. He can be found at saurabhrnsingh@gmail.com]
Posted: 13 March 2010

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