The rise and rise of agri business in India

Rajiv Theodore
Tue, 01-12-2020 09:10:40 PM ;

Agri business has today emerged as a lucrative sub sector. Recent estimates place the size of the global agribusiness at US$ 5 trillion. For India, it is also the most significant sector of the economy, both from the perspective of inclusive growth and from national and global development perspectives of addressing the challenges of food, livelihoods, energy and environmental security. The value chain of agribusiness links input companies, farmers, traders, food companies, retailers, and various other service providers and regulatory institutions. There is a huge diversity and variety in each component of the value chain. Input companies range from strong R&D-based companies to generic manufacturers, farmers from small subsistence holdings to high tech holdings, and food companies and retailers from small and medium sized enterprises (SMEs) to large multinational corporations. The large scale, wide diversity and range of stakeholders in the value chain make agribusiness the largest business sector globally. In this article let’s look at the resilience and endurability of India’s agricultural business during the current Covid –19 pandemic and its future outlook. 

With increasing private investment in the food retail sector and impending changes in contract and marketing laws, shorter and more direct supply chains with traceability are expected to become more common. The incidence and spread of coordinated supply chains will be closely connected with the pace and direction of food retail sector modernisation within India. Changes in food retail have been gradual, and considerably slower than observed in many other developing countries. Supermarket procurement for sourcing of fruits, vegetables, dairy and meat strongly influence the organisation of the supply chains. ‘’The rising scale of organised retail in the Asian countries (like Metro Cash & Carry, Tata Chemicals and Field Fresh Foods, Bharti Enterprises, Reliance Fresh in India) is now playing a vital role in organising farmer production bases and integrating these into the retailers’ fresh produce supply chain, thus procurement systems in this segment is changing fast responding to the consumer demand and competition.,’’  Pankaj Arora, who runs a agro-based supply chain outfit from Delhi told Life Glint.

The Covid-19 pandemic significantly disrupted Indian agriculture, and forced players across the agri-value-chain to remodel day-to-day operations. With agriculture declared an essential industry, farmers continued to farm despite disruptions at every stage of the agri-supply-chain. The impact of Covid 19, one of the largest global exogenous shock to economies, India’s  supply chain in the near term future would be nothing less than transformational. The demand and supply structure has been hit and as a result of the haphazard scenarios thus created  these chains are either fractured or badly disrupted. However several new scenarios emerged post the pandemic. Some of them are :

*One of the trends that has been noticed is that the sourcing is increasingly becoming localised. This has been accentuated as government policies too encourage localisation and domestic manufacturing that would prompt the setting up of value chains not only catering to the domestic markets but also feeding the global demands.

*Another new factor that is emerging is the increase in importance of risk management and mitigation in supply chains. As companies increase their safety stock, as opposed to earlier times when the procurement was just matching the demand, there is also the need for larger warehouses.

*Also, there is this   increasing dependence on automation of various kinds more so after Covid 19 basically for enhanced speed, safety and omni-channel procurement. Automation of various kinds, in handlings goods, like palletization of cargo, conveyor systems, robotics, drones, drop boxes are gaining prominence.

*Then there is  the increase in management costs and eventually insurance overheads for companies as those engaged in supply chains need to enforce enhanced levels of compliances such as sanitisation protocols for their workers, products and even transports !

*All this also increases the degree of  digitalisation as every step of the logistics process

*Gaining in importance is the increasing usage of a combination of transport systems  —say for example there is now more  usage of  transports depending on each other via rail, roads and waterways. This would lead to a reduced dependence on inter-state transportation per se.


‘’On a general scale, the food markets in India whether it be in the urban or rural areas are replete with several players which in other words reflects a fragmented structure. The agri-food sector specifically had shown, however, significant resilience despite the early stage disruptions, confusion and anxiety. There are but broad patterns in the agri-food system that is quite discernible. There had been an overall decline in demand, especially in cities mainly because of the reduced footfall in hotels, restaurants and other forms of catering leading to farmers pricing nearly collapsing,’’ said Abhay Bakshi, an expert in supply chain management especially focussed in rural areas told Life Glint in a chat.  It has been seen that many farmers either held on to their produce for better futures or sold it throwaway prices. It must be recalled here that due to lockdown many retailers had difficulty in procuring the produce from farmers. Also, food prices in urban areas rose because of the disruptions in supply chain, labour issues and escalating transport costs.

It is also seen that the small corner stores or the Kiranas that includes the street vendor managed to successfully navigate the challenges of the lockdown and in a  way embraced technology and kept supply chains functioning. There was a swell in the number of these informal retailers mainly because many workers had lost their jobs and had attempted to earn through street vending. Moreover the low entry barriers to informal retail led to an expansion in the number of informal retailers of food during the lockdown. The lockdown also triggered setting up a number of important innovations as many farmers began delivering produce directly using WhatsApp to secure orders in urban areas etc. While, some farmers travelled to cities to set up shop at roadsides. Yet another notable factor seen is that despite the collapse of farmers prices and difficulty in selling the produce many regions in the rural areas experienced high levels of food security.

The robustness of rural supply chain has already been recognised by the government. It must be recalled that the government has taken several initiatives at national level in the recent past. The National Agriculture Market (e-NAM) a pan India unified electronic portal has been set up where farmers can directly sell their produce. It connects all the markets formed under Agriculture Produce Committee (APMC). Presently 585 markets are being connected to this portal. Traditionally, farmers sold their products through the physical Mandis or Bazar Committees which were highly incompetent and levied a number of duties on their products. Under e-NAM, there is only one license for each State and duty is levied only on one point. Prices are decided through electronic auction. It is now facilitating the conversion of the whole state to one market. The farmers are directly exposed to the markets and available prices. They can finalise the price and then sell their produce. This system is more transparent and has facilitated farmers to get better price for their agro product.

‘’Agriculture has the potential to be the growth engine for India’s economy as well as provide livelihood and sustenance to millions. Digital transformation is the much-needed catalyst that will not only empower Indian farmers with better access to information, markets, credit, finance and insurance, but also streamline local and national agri-supply-chains. It will also help small farmers to become a key part of the big picture and help to boost not just  crop productivity, but also enhanced farm profitability,’’ said Vijay Anthwal, a Delhi based supply chain consultant in an interview to Life Glint.

Today, a whole new eco-system with a host of novel features has been introduced to the agricultural sector of the country: Digital and analytics has poised to  play a critical role in building India’s farms of the future. Precision farming including integrating field data, weather patterns to drive agronomic advice to farmers, and yield forecasting. Efficient farm lending with electronic applications, disbursal of loans, insurance payouts linked to weather, field data, Direct Benefits Transfer in agriculture. Centralised platform integrating farmers and wholesale markets, to provide timely information for price realisation. IoT-based advanced analytics in manufacturing plants to improve availability, throughput, (u may retain this word-- as ‘’Throughput’’ is the amount of a product or service that a company can produce and deliver to a client within a specified period of time.) and save costs.

Financing and crop insurance — can help in strengthening the ecosystem. Provide innovative financing models to farmers through partnerships with manufacturers, weather forecast agencies, and digital partners. Offer easy financing for Farmer–producer organisations (FPOs) for community infrastructure for storage and transportation. Create digital ecosystems for financing and crop insurance.

Establishing market linkages between farmers and buyers — This will establish transparency in pricing and better value, especially for perishable products. It could also help to increase farmer incomes by at least 8 to 10 percent. Investing in cold-storage — despite current challenges, this segment is expected to enjoy significant growth on the back of rising food demand, supply deficits, and improved market economics. The cold chain market is expected to double in size to reach $7 billion to $9 billion by end of 2020. Cold chain players could invest in alternate energy technologies like solar-powered systems, they can explore chemical treatments to extend the shelf-life of produce, set up pack houses, and reefer transport. They could also optimise the use of existing facilities by opening them up for multiple crops instead of a single crop or product.