| Honourable Prime Minister Shri Atal Behari
Vajpayeeji, Honourable Minister for Rural Development Shri Venkaiah Naiduji, The President
of Assocham Shri Raghu Mody, distinguished gentlemen on the dias, Ladies and Gentlemen : It is axiomatic that high rates of economic growth cannot be
sustained without putting in place an effective growth strategy for rural India. Growth in
rural incomes is both a means and an end of India’s economic development. The
slowdown of industrial growth has brought out even more starkly the vital need to sustain
rural demand.
The inspirational vision of doubling per capita incomes
within the next ten years set out by the Honourable Prime Minister has already unleashed
several initiatives for development of rural infrastructure – physical, social and
institutional – through an outlay of public finances. The entrepreneurial energies of
the Private sector also need to be harnessed in bringing about competitiveness of
India’s rural sector. As the economy globalises, liberalisation in trade of agri
products will pose both formidable threats and exciting opportunities. In the absence of
competitiveness, it can threaten rural employment. On the other hand, competitiveness can
lay open the opportunities of remunerative world markets.
A Blueprint for Corporate participation in rural India
No Indian enterprise using agri raw materials can
attain decisive international competitiveness in isolation. This competitiveness is
inextricably intertwined with that of the farm sector and indeed, the entire value chain
from the farm to the consumer, both domestic and international. The corporate sector has
an enlightened vested interest in contributing to, and securing the competitiveness of the
entire value chain of which it is a part.
One of the key objectives of second generation reforms
should be to fashion a climate in which the corporate sector can pursue its objective of
creating shareholder value more readily by contributing to the prosperity of the Indian
farmer. Traditionally, the Indian corporate sector has by and large viewed its
contribution to the rural sector as part and parcel of its social responsibility, outside
of its commercial objectives. Such contribution, therefore, tended to be either limited in
scope or unsustainable.
The imperative of competitiveness of the farm sector, and
indeed, the entire value chain as a pre-condition for business success in a fast
globalising environment has prompted the corporate sector to seek solutions with urgency.
The two most commonly advocated solutions for improving farm economies are consolidation
of land and contract farming. Both have evoked strong reactions from the farming
community, particularly among small and marginal farmers, arising from apprehensions of
large scale displacement of labour and fears of exploitation at the hands of more powerful
corporate entities. This is one reason why there is political hesitation in gathering
support for contract farming, even though contract farming is the quickest way to bring
about efficiencies.
Harnessing Technology for rural partnerships
An alternative model that captures the advantages
associated with contract farming, yet engages the resources of the corporate sector more
equitably among farmers would be more preferred and therefore, more appropriate to the
unique structure of Indian agriculture at this point of time. As the rural infrastructure
in India matures, and over time, the farming community develops a more pervasive sense of
security borne out of prosperity, there will be a wider acceptability of ideas like land
consolidation and contract farming.
Rapid developments in Technology, particularly Information
Technology, make such a model conceivable. The primary ingredients of the alternative
model are :
- Use of Information Technology to deliver real-time
information and customise knowledge to improve farmers’ decision making ability to
align farm output to market demands and secure quality, productivity and improved price
discovery.
- Use of Information Technology to aggregate demand in the
nature of a virtual producers’ cooperative to access high quality farm inputs and
knowledge at the lowest cost, and
- Use of Information Technology to set up a direct marketing
channel virtually linked to the mandi system for the purposes of price discovery, yet
eliminating wasteful intermediation, multiple handling and thus reducing transaction costs
and making logistics efficient and cost effective.
The corporate entity that invests in such an
e-infrastructure and creates abiding value for the farmer in this manner would be rewarded
in more ways than one – as a trustworthy supplier of goods, services and inputs and
as a buyer of cost effective, quality farm outputs to support its competitiveness in the
marketplace. This infrastructure can also be used for channelising services related to
credit, insurance, health and education.
This model, in facilitating a direct marketing channel in
competition with the existing mandi system, is in conformity with the reforms recommended
by the Shankarlal Guru Committee appointed by the Ministry of Agriculture. This will thus
encourage the mandi channel to become more efficient and shed some of the malpractices
that have crept in due to its monopoly status. This will also conserve public resources
that would otherwise be required for the expansion and upgradation of mandi
infrastructure. Such a digital infrastructure would also serve as a strong foundation for
creating a vibrant futures market to facilitate farmer risk management.
Such an approach is illustrative and can be, with
appropriate modifications, applied to all facets of agriculture like floriculture,
sericulture, horticulture, aqua farming, poultry farming, animal husbandry etc. International
competitiveness can thus be engendered wherever it is feasible to create a structure where
the corporate sector’s need for creating shareholder value can be enmeshed with that
of the farming community in a mutually supportive, interlocking and interdependent
partnership.
Utopian as it might appear at first sight, this model
is not merely a fancy academic exercise. Indeed, Respected Prime Minister, my company ITC
has demonstrated the feasibility of this model through its click and mortar initiative
titled e-Choupal. It is a matter of pride for me to share with you that this initiative
has already become one of rural India’s largest internet-based interventions,
reaching out to some quarter million farmers in two thousand villages through 460 choupals
in the states of Madhya Pradesh, Karnataka and Andhra Pradesh. The customisation of the
content to local requirements and in the local language has made it user friendly for the
farmer. This model has met with enthusiastic response from farmers, and has thus
encouraged us to plan for the extension of this initiative to another eleven States. This
pioneering initiative is a manifestation of my company’s commitment well beyond the
market and is based on the understanding that Indian agri-based exports would sustainably
create value only if the entire value chain from farm to consumer is internationally
competitive.
Growing competitiveness of Indian agriculture induced
through such a market led business model, can trigger a virtuous cycle of higher
productivity, higher incomes, enlarged capacity for farmer risk management, higher order
of investments, feeding even higher quality and productivity. On the other hand, growth in
rural incomes would also unleash the latent demand potential for industrial goods so
necessary for the economy into a higher growth trajectory.
I may have overstated my case if I have carried any
impression that such an endeavour as described by me is a cakewalk. There is many a
challenge primarily in the form of infrastructural inadequacies, including power supply,
telecom connectivity and bandwidth, apart from the challenge of imparting skills to the
first time internet users in remote areas of rural India.
The benefits of rural initiatives tend to be back ended,
thereby stretching corporate resources. One cannot expect everyone to be fired by passion
alone. In order to mobilise wider participation by the private sector in similar
endeavour, governments, Centre and State, can play a catalytic role by crafting a
nurturing policy framework. Incentives to encourage investment in this sector could be
confined to an initial period of say 3 to 5 years, until the rewards of the virtuous cycle
kick in.
Another example of private sector involvement can be in the
area of wood based industry. Biotechnology-based farm forestry programmes would bring into
productive use vast tracts of degraded private land, create the biomass to restore
ecosystems, provide a sustainable source of productive employment among the weakest
sections of rural population, and secure a competitive source of wood-based raw material.
Here again, my company, together with select NGOs, has embarked upon a social farm
forestry programme that dovetails into the raw material requirements of its paperboard
undertaking, thereby creating a mutually beneficial virtuous economic cycle with the
marginal farmers in rural Andhra Pradesh. Due to paucity of time I will refrain from
expounding the merits of this approach any further.
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