Agriculture

Introduction India is the second-largest producer of food in the world and holds the potential of being the biggest on global food and agriculture canvas, according to a Corporate Catalyst India (CCI) survey. The food processing industry is one of the largest in India in terms of production, consumption, export and expected growth. The Indian food industry is projected to reach US$ 300 billion by 2015. Agriculture sector has touched a growth rate of 4.4% in the second quarter of 2010-11 thereby achieving an overall growth rate of 3.8% during the first half of 2010-11. The sector witnessed a growth of 5.1 per cent in 2005-06, 4.2 per cent in 2006-07, 5.8 percent in 2007-08, (-) 0.1 percent in 2008-09 at 2004-05 prices. The low growth rate of 0.4 percent recorded by this sector in 2009-10 was mainly due to poor rainfall in 2009. As per the Advance Estimates (AE) of Central Statistical Organization for the year 2010- 11, the agricultural sector contributed about 14.2 per cent to the GDP, at 2004-05 prices. There has been a continuous decline in the share of agriculture in the GDP from 17.4 percent in 2006-07 to 14.2 percent in 2010- 11 as per Advance Estimates at 2004-05 prices. Falling share of agriculture in GDP is an expected outcome in a fast growing and structurally changing economy. The sector is critical from the income distribution perspective as it accounted for about 58 per cent employment in the country according to Census 2001. In terms of composition, out of the total share of 14.5 per cent that agriculture and allied sectors had in GDP in 2010-11, agriculture alone accounted for 12.3 per cent, followed by forestry and logging at 1.4 per cent and fishing at 0.7 per cent. The average annual growth in agriculture and allied sectors realised during the first four years of the Eleventh Plan Period, i.e. 2007-08 to 2010-11, is 3.5 per cent. Market Dynamics As per the second Advance Estimates, production of foodgrains during 2011-12 is estimated at an all time record level of 250.42 million tonnes (MT) which is a significant achievement mainly due to increase in the production of rice and wheat. Rice witnessed production of around 95.98 MT, Coarse cereals of 43.68 MT,

Pulses of 18.24 MT and Sugarcane of 342.38 MT, during 2010-11, according to data released by the Department of Agriculture and Cooperation. Sugar output in India grew 13 per cent in October 2011-March 2012, to touch 23.2 MT as compared to 20.45 MT in the same period last year, according to the Indian Sugar Mills Association (ISMA). India is among 15 leading exporters of agricultural products in the world. As per the International Trade Statistics 2011, published by the World Trade Organization (WTO), India's agricultural exports amounted to US$ 23.2 billion with a 1.7 per cent share of world trade in agriculture in 2010. On the other hand, India's agricultural imports amounted to US $ 17.5 billion with a 1.2 per cent share of world trade in agriculture in 2010. Exports of agricultural products are expected to cross US$ 22 billion mark by 2014 and account for 5 per cent of the world's agriculture exports, according to the Agricultural and Processed Food Products Export Development Authority (APEDA). India has emerged as world's top rice exporter overtaking traditional leaders, Vietnam and Thailand. India's total rice export in 2011-12 is expected to be 6.5-7 MT, which is around 7 per cent of the country's total production. Further, cotton yarn exports have increased by 15 per cent during 2011-12, due to rising demand in the foreign markets. During the last financial year, 872.68 million kg of cotton yarn were exported, as compared to 720 million kg in 2010-11, according to the data compiled by the Directorate General of Foreign Trade (DGFT). Meanwhile, oilmeal exports from the country has registered 8 per cent growth in volume and touched a figure of 5.5 MT in the financial year 2011-12 as compared to 5.1 MT in 2010-11. Major Developments & Investments Spice Board of India plans to promote exports of spices by establishing 25-30 spice parks in different parts of the country. This will help in achieving export of spices worth Rs 30,000 crore (US$ 5.60 billion) by 2020, as per Dr G K Vidyashankar,

Deputy Director (Marketing), Spices Board. These parks would give a common platform for farmers, traders and exporters. Maharashtra Government has invited corporates to propose integrated agricultural development (PPP-IAD) projects through public private partnership (PPP). IDBI Capital will be providing funding for the PPP-IAD projects. The National Bank for Agriculture and Rural Development (NABARD) has increased financial assistance in Gujarat by 50 per cent in 2011-12, to touch Rs 4,340 crore (US$ 810.38 million) as compared to Rs 2,894 crore (US$ 539.73 million) in the previous fiscal. The assistance is mainly for supporting agriculture, rural development and rural infrastructure development in Gujarat. Farm equipment manufacturers in the northern region, especially small and medium enterprises (SMEs) and their vendors, are upbeat over the robust demand for farm equipment in the domestic market. The factors driving the growth of farm mechanisation in the northern region are high quality, low cost and trouble-free maintenance, according to Analysts. Agriculture GDP: As one of the worlds largest agrarian economies, the agriculture sector contributed approximately 14.6% of Indias GDP (at 2004-05 prices) during 2009-10. Gross Domestic Product (GDP) of Agriculture and Allied Sectors and their share in total GDP of the country during the last 3 years including the current year, at 2004-05 prices is as follows: (Rs.Crore) Year 2006-7 2007-08 2008-09 2009-10 2010-11 GDP of Agriculture 619190 655080 654118 656975 692499 and Allied Sectors Percent to total GDP 17.4 16.8 15.7 14.6 14.2 Source: Central statistical organistaion,Ministry of statistics and programme implimentaion, Govt.Of India. Growth (over the previous year) in the Total GDP and that in the GDP of Agriculture and Allied Sectors at 2004-05 prices is given below: Period 2005-06 9.5 Total Agriculture & Allied Sector 5.1

2006-07 9.6 2007-08 9.3 2008-09 6.8 2009-10 8.0 2010-11 8.6 Source: Central Statistical Organization

4.2 5.8 (-) 0.1 0.4 5.4

Agricultural Production: As per the fourth advance estimates 2009-10, food grains production is estimated at 218.20 million tonnes comprising 103.84 million tonnes of kharif foodgrains and 114.36 million tonnes of rabi foodgrains. Further, production of all cereals was placed at 203.61 million tonnes as against 219.90 million tonnes in 2008-09 (final estimates).The production of wheat and rice in 2009-10 is estimated at 80.71 million tonnes and 89.13 million tones respectively. However, production of oilseeds decreased from 27.72 million tonnes in 2008-09 to 24.93 million tonnes in 2009-10. This was due to decrease in production of groundnut and castor seed.

Capital Formation in Agriculture: Investment or Capital formation in public sector includes irrigation works, command area development, land reclamation, afforestation, development of State Farms, etc. Capital formation in private sector includes construction activities in private sector including improvement/

reclamation of land, construction of non-residential buildings, farm houses, wells and other irrigation works etc. The machinery component includes tractors, transport equipment, agriculture machinery / equipment. It also includes livestock development. Productivity increase in agriculture is largely dependent on capital formation. Gross capital formation GCF (investment) in agriculture sector relative to GDP in this sector has shown a steadily increasing trend from 15.8 per cent in 2005-06 to 20.3 per cent in 2009-10.

Agricultural marketing

Agricultural marketing covers the services involved in moving an agricultural product from the farm to the consumer. Numerous interconnected activities are involved in doing this, such as planning production, growing and harvesting, grading, packing, transport, storage, agro- and food processing, distribution,

advertising and sale. Some definitions would even include the acts of buying supplies, renting equipment, (and) paying labor", arguing that marketing is everything a business does. Such activities cannot take place without the exchange of information and are often heavily dependent on the availability of suitable finance. Marketing systems are dynamic; they are competitive and involve continuous change and improvement. Businesses that have lower costs, are more efficient, and can deliver quality products, are those that prosper. Those that have high costs, fail to adapt to changes in market demand and provide poorer quality are often forced out of business. Marketing has to be customer-oriented and has to provide the farmer, transporter, trader, processor, etc. with a profit. This requires those involved in marketing chains to understand buyer requirements, both in terms of product and business conditions. In Western countries considerable agricultural marketing support to farmers is often provided. In the USA, for example, the USDA operates the Agricultural Marketing Service. Support to developing countries with agricultural marketing development is carried out by various donor organizations and there is a trend for countries to develop their own Agricultural Marketing or Agribusiness units, often attached to ministries of agriculture. Activities include market information development, marketing extension, training in marketing and infrastructure development. Since the 1990s trends have seen the growing importance of supermarkets and a growing interest in contract farming, both of which impact significantly on the way in which marketing takes place. The concept of Rural Marketing in India Economy has always played an influential role in the lives of people. In India, leaving out a few metropolitan cities, all the districts and industrial townships are connected with rural markets.

Rural Market "The future lies with those companies who see the poor as their customers." - C. K. Prahalad , the global management guru.

The concept of Rural Marketing in India Economy has always played an influential role in the lives of people. In India, leaving out a few metropolitan cities, all the districts and industrial townships are connected with rural markets. The rural market in India is not a separate entity in itself and it is highly influenced by the sociological and behavioral factors operating in the country. The rural population in India accounts for around 627 million, which is exactly 74.3 percent of the total population. The rural market in India brings in bigger revenues in the country, as the rural regions comprise of the maximum consumers in this country. The rural market in Indian economy generates almost more than half of the country's income. Rural marketing in Indian economy can be classified under two broad categories. These are:

The market for consumer goods that comprise of both durable and nondurable goods The market for agricultural inputs that include fertilizers, pesticides, seeds, and so on

The concept of rural marketing in India is often been found to form ambiguity in the minds of people who think rural marketing is all about agricultural marketing. However, rural marketing determines the carrying out of business activities bringing in the flow of goods from urban sectors to the rural regions of the country as well as the marketing of various products manufactured by the non-agricultural workers from rural to urban areas. To be precise, Rural Marketing in India Economy covers two broad sections, namely:

Selling of agricultural items in the urban areas Selling of manufactured products in the rural regions

Some of the important features or characteristics of Rural Marketing in India Economy are being listed below:

With the initiation of various rural development programmes there have been an upsurge of employment opportunities for the rural poor. One of the biggest cause behind the steady growth of rural market is that it is not exploited and also yet to be explored.

The rural market in India is vast and scattered and offers a plethora of opportunities in comparison to the urban sector. It covers the maximum population and regions and thereby, the maximum number of consumers. The social status of the rural regions is precarious as the income level and literacy is extremely low along with the range of traditional values and superstitious beliefs that have always been a major impediment in the progression of this sector. The steps taken by the Government of India to initiate proper irrigation, infrastructural developments, prevention of flood, grants for fertilizers, and various schemes to cut down the poverty line have improved the condition of the rural masses.

PorterS Five forces model

Bargaining power of customers

Bargaining power of supplier

Threats of potential entrants

HIGH Unfavorable
Too many small firms. No dominating firm.

Threats of substitute products

MEDIUM

Competitive Rivalry
MEDIUM
Multitude of choices. Buying product of one brand or the other does not cost customer anything leading to high competition.

HIGH LOW Unfavorable Favorable

Low Switching Cost. Large number of suppliers in the country

Buyers are numerous and fragmented. Considering buyer power retailers, they are able to negotiate price with the company

Numerous substitutes are available.

Cost of switching suppliers is low. Prices of substitutes are low.

Little product differentiation. Customer switching costs are low.