Most people know India as the world’s destination for “outsourcing.” India is indeed the world’s outsourcing hub. There are a number of reasons why India presently holds 65 percent of the global offshore business process outsourcing (BPO):
- India is the largest English speaking nation in the world
- India has a stable government with attractive information technology (IT) policies
- The 12-hour time difference from the United States enables work to be completed earlier than expected
- India has a robust and growing IT sector.
Less well known is that India is a farming powerhouse. Stereotypical images of starving people couldn’t be farther from the truth — Mother India ranks second worldwide in farm output. She is not only self-sufficient in food-stuffs, but a net exporter of a variety of grains as well.
The agriculture sector employs 66 percent of the country’s workforce, and accounts for almost 23 percent of GDP. Blessed with land that, in many locations, is capable of three separate crops a year, the impact of agriculture on the country is astounding. Not only is India the world’s largest manufacturer of tractors, with 29 percent of the world’s output in 2013; India is also the world’s largest tractor market.
Other notable aspects of India’s agricultural might include:
- 400 million acres of arable land, second only to the United States
- India is the world’s second-largest producer of wheat and rice
- India is among the top three global producers of pulses, cotton, peanuts, and fruits/vegetables
- India has the world’s largest herds of buffalo and cattle, and is the number one producer of milk
- With a thriving poultry trade, India is the world’s third-largest producer of eggs
During the past 69 years, India has made steady and impressive increases in food production. The gains have been due to efforts to improve roads and power generation infrastructures, as well as the sharing of improved farming techniques.
In spite of these impressive gains in productivity, however, there is still room for improvement. India’s crop yields are on average only 30-to-60 percent of the yields achieved for farms in developed nations. They also suffer some of the world’s highest food losses after harvest, primarily due to poor transportation infrastructure and a disorganized marketing environment.
The uncertainties and obstacles of farming make it a difficult occupation even in highly-developed nations like Canada and the United States. In India, it is oftentimes brutal — in 2012, farmers accounted for more than 11 percent of all suicides in India.
Indeed, Indian agriculture is not for the faint of heart. Farmers regularly face a number of significant challenges, any of which can ruin them. The five most prominent challenges for Indian farms are:
Poor infrastructure — Rural roads are of very poor quality, affecting timely delivery of needed supplies like seeds and fertilizers to the farms. Likewise the roads affect the timely transfer of harvests to market — resulting in one-third of food produced spoiling before it can be sold.
Lack of cold storage is another infrastructural blight. Foodstuffs are difficult to store before and during transit, particularly during times of extreme weather. Without such facilities, it is difficult to maintain a stable supply and price for the products. The uncertainties created by this situation can cause a substantial loss in potential profits.
A tragic example of this is in dairy farming. Farmers harvest significant amounts of milk on a daily basis, but are not always able to get it to market before it spoils. They end up losing out on sales without an opportunity to recoup any of the expense of feeding and caring for their herds.
Weather-related challenges — Farmers everywhere pray to their gods for good growing weather. India’s weather uncertainty is significant, because 65 percent of agricultural land is entirely dependent on irrigation by rainfall.
Adverse weather conditions make the risk of crop failure high because too little water is just as dangerous as too much water. Farmers often lack timely information on the weather conditions and are often unable to make informed decisions on the types of crops to plant and when to plant them.
Insurance can mitigate the economic damage of a crop failure, but less than two percent of Indian farmers purchase such policies. The biggest reason a farmer doesn’t purchase a policy is lack of knowledge. Banks and insurance companies haven’t made much of an effort to educate and include rural farmers on policy prices and coverage.
Farmers who do purchase crop insurance policies generally borrow from local lenders, who often charge exorbitant rates of interest that can leave farmers exposed and at risk of losing their land.
Poor farming techniques and policies — A large percentage of Indian farms are traditional, using cattle to plough and relying on outmoded and inefficient practices. Such practices often lead to either under- and over-fertilization of crops. And those crops may not be the best fit for a particular plot of land.
Traditional farms also tend to have the lowest rates of per capital yields and profits. Farmers need to be introduced to, and see the value in using, techniques that help avoid soil exhaustion and erosion, and that increase crop yields.
One major factor inhibiting the growing of the best crops for the soil is purchasing agents who set a minimum support price (MSP) for certain crops. Instead of letting the market decide the price of a particular crop, and allowing individual farmers to make their own decisions on what to grow, MSPs often cause an entire community to grow only those crops that will bring in the set price.
MSPs have been proven to discourage farmers from exploiting integrated farming and other crops that are more sustainable for a given locale. Overtime, without rotation of crops, a plot of land becomes exhausted as the nutrients are consistently used up, leading to a reduced ability to nourish the plants. This in turn leads to farmers earning less money.
Illiteracy and under-education — India still has a tremendous education gap between its urban and rural populations. Literacy, a key indicator for economic progress, isn’t as high as one would expect. Basic education, especially in rural areas, is spotty and is caused and characterized primarily by poverty, a non-standardized school system, poor facilities, and inadequate instructors. (The average pupil to teacher ratio for India is 42:1.)
Additionally, most rural farmers lack access to a reliable electrical grid, much less to information technology that can help them learn new farming practices. The difficulty of introducing new practices is compounded due to language barriers — India has at least 22 nationally recognized languages.
Many farmers also lack skills that would enable them to find employment during times of crop failure or between the planting and harvesting seasons.
Retail uncertainty — Farmers in developed countries benefit from easy and timely access to market information. India’s farm market is fragmented and rife with intermediaries that exert a downward pressure on farmer profits. The system works in a straightforward, if unfair, manner: small rural farms sell their crops to purchasing agents for corporate buyers at a local, government-mandated market called a mandi.
Many of India’s rural farmers are illiterate and without access to timely market information. As a result, they are forced to accept whatever price the agent sets for that day. A high percentage of agents often exploit farmers and buyers via unscrupulous practices that, along with other challenges, increase a farmer’s costs while reducing his profits.
According to experts in the field, Indian farmers typically receive between 10 and 23 percent of the price that Indian consumers pay for the same produce — the difference is eaten up by “inefficiencies and middlemen.” The farmer is then expected to cover his overhead out of that thin margin. Compare this to farmers in developed nations, who face fewer market hurdles and as a result receive somewhere between 64 and81 percent of what consumers pay for their produce.
The challenges facing India’s agricultural industry are significant. Outmoded farming techniques, lack of education, and timely and easy access to markets need to be addressed and solved. Of significant concern is the anticipated growth in India’s population. Currently Indian farmers produce 260 million tons of food to feed 1.2 billion people. By 2040, Indian farmers will have to produce 500 million tons to feed 1.5 billion people.
Although there isn’t a simple one-size-fits-all solution, one factor that will play a central role in meeting India’s food needs is information technology (IT). The Indian government and some private corporations see the value of increasing crop yields and have begun finding ways to implement IT into the agricultural industry.
Editor’s Note: This is the first in a series of two articles. The next article will explore potential IT solutions to India’s farming problems.