agribusiness, food security and financial inclusion in india

Agriculture Business, Food Security and Financial Inclusion? 2014

1 Manoj Rawat | Head Agribusiness RBL Bank, Mumbai | [email protected]

Manoj Rawat, Head- Agribusiness RBL Bank, Mumbai [email protected]

Agriculture Business, Food Security and Financial Inclusion

Its often quoted share of agriculture in GDP is < 14% and is continuously shrinking. While the share

of pure agriculture in national Gross Domestic Product (GDP) may have declined, the share of

agribusiness in is bound to go up significantly with the demand for value addition continuously

increasing in India.

With 60% of Indian families still depending on agriculture income for livelihood, India today is

largest producer of milk, pulses, and spices, maintains the largest cattle herd, have the largest area

under wheat, rice and cotton. Although the agriculture growth rate and per unit productivity

remains a big challenge and big area of concern, the country is steadily emerging as agricultural

power. Agribusiness can empower India emerge as "Global Agricultural Super Power".

Agriculture development to a large extent addresses the two key areas which are drawing the

maximum attention from Government, regulators, financial institutions and many others i.e., Food

security and Financial Inclusion. These twin areas are intertwined with the next phase of

economic growth of the India which we all aspire for, that which will be which lot more

participative, broad based & inclusive and can be become real engine which will propel country

into next growth trajectory.

While Food security of the country can be only ensured by pushing the Agriculture growth, the

Financial Inclusion in India can truly be delivered through a framework which has Farmers at

its heart.

Agribusiness is the next big opportunity

With mounting pressure of a growing population, the change in food consumption patterns, the

need for higher productivity per unit of input, demand of value added products, ensuring the

educated youth could be retained in agriculture and above all the need to ensure food security of

the country, Agribusiness is now being seen as next big opportunity and the growth engine of

future by the entrepreneurs, corporate houses, banks and financial institutions.

The 10 key pointers why agriculture remains at center growth and inclusive growth.

1. Agriculture still remains the mainstay of Indian economy

Agriculture sector remains the mainstay of the Indian economy, contributing about 14% per cent of

the national Gross Domestic Product (GDP). While agricultures share in Indias economy has

continued to decline due to the high growth rates of the industrial and services sectors, the

agriculture sectors importance in Indias economic and social well being goes well beyond this

indicator.



2. Capital formation in agriculture and Productivity

With 60% of Indian families are still depending on agriculture income for livelihood, India today is

the largest producer of milk, pulses, and spices, maintains the largest cattle herd, have the largest

area under wheat, rice, cotton and much more. While the country is steadily emerging as a global

agricultural hub, we still need to address serious issues and concerns on slow agriculture growth

rate, lack of capital formation in agriculture, fragmented agriculture landholding, inadequate

irrigation facilities, over exploitation of ground water and poor productivity per unit land. This

would lot of long term investment in agribusiness (especially private sector), innovations in

agriculture sciences, better agri- inputs, better technology, focus on natural resources conservation

and create a robust framework for modernization of agriculture.

3. Shift from Agriculture to Agribusiness

Indias food security will depend on increased crop productivity, higher milk yield, increase its

production of grains, fruits and vegetables, reduction in food wastage, managing land and water

resources optimally and developing a robust agri-marketing and logistics infrastructure and

enabling policies for capital investment in this sector. This is critical to meet the demand of a

growing population, to provide optimal nutrition to a large segment of society and to become a

global food hub. To do so, a highly productive, competitive and sustainable agricultural sector will

need to emerge at an accelerated pace and there needs to be a shift from agriculture to

agribusiness to revitalize the agriculture segment and achieve the 4 to 8 % growth rate on Y-O-Y

basis.

4. Agriculture credit is the most critical non-land input for development of Agribusiness

Over the years Agricultural credit has played a pivotal role in increasing agricultural production in

India. The flow of credit to agriculture has increased significantly in the recent at an annual

compounded growth rate of about 25%. The annual agriculture credit flow expected for this year is

INR. 700,000 crore ( USD 120 Billion) which may increase to INR 950,000 crore ( USD 160 Billion)

for the following year. A granular analysis would point to the fact that the flow of credit still needs

to be augmented. The amount that will flow through institutional framework should encourage

entrepreneurs, corporate houses and institutional investors in bring in investment for development

this sector.

5. Access of credit to Small & Marginal farmers

Although the amount of agricultural credit has increased during the last few years, the access to

formal sources of credit has been inadequate for small and marginal farmers, tenant farmers, oral

lessees, share-coppers, who constitute the bulk of farming community. Around 80+ percent of

farmers have land holdings less than 2 ha who are spread across 600,000 villages in India. We need

to increase our outreach to these farmers and it is possible with new innovations in product design

and methods of delivery, better use of technology, optimization of processes and better

understanding of agriculture landscape.



6. Financial Inclusion Small and Marginal farmers will be at the heart of inclusion policy

More than 2/3rd of Indias population is dependent on Agriculture and allied agriculture activities.

Bulk of our farming community belongs to Small and marginal category who own 83 % operational

holdings with 63% of farmers being marginal and having landholding



10. Agribusiness is bound to become the most critical business segment

Given the unlimited! opportunities and vast un-tapped potential, Agribusiness is bound to become

one of the critical business segment for the banks, financial institutions and corporate houses in

days to come and a key to achieve growth which is inclusive and generates economic value to all the

stakeholders. It needs to be appreciated that significant part of Financial Inclusion in India can be

achieved only through Agri-finance Inclusion.

It would be important to note that while we do have National policies on Agriculture, National

Policy on Farmers, Policy on Credit and Inclusion etc, however it is implementation where a lot

more concerted and coordinated efforts are required from various stakeholders to rejuvenate the

farm sector and bringing lasting improvement in the economic condition of the farmers. Effective

implementation of policy initiatives will call for comprehensive reforms and strong public, private

and people partnerships in the management of agriculture in India.

I would sum up by a quote made by Dr. Swaminathan, Eminent Agriculture Scientist The future

belongs to nations with grains and not guns.

Manoj Rawat

The views expressed in this article are purely personal.

Email: [email protected]

LinkedIn : http://in.linkedin.com/in/mkrawat

agribusiness, food security and financial inclusion in india

Documents