Rural Markets and Agriculture

India has emerged as a major global economic power with the economy registering high growth rates in the recent past. Parts of India have started to display signs of affluence, but this progress has not even uniform. The rural regions have not been able to match their urban counterpart. Even with increasing urbanization and migration it is estimated that 63 percent of India's population will continue to live in rural areas in 2025.The development of rural India is essential for sustaining the Growth levels in the country. With agriculture being the primary employer of more than half of India’s population. However, in recent years, agricultural growth has dropped. The growth rate in agriculture sector investment and profitability, net sown area under crops and the area under irrigation have also dropped.

Agriculture being the mainstay of India’s economy, it is imperative that considerable efforts are made to extricate the sector from stagnation. Larger irrigation facilities better seeds and agri-inputs at reasonable costs will have to be provided to farmers. The access to improved inputs and technologies will have to be coupled with provision of finance infrastructure and marketing facilities. Agriculture needs to become an income producing activity and farmers should not be left to the uncertainty of weather, financial resources, and markets.

One of the key reasons for the stagnation of India’s agriculture is the falling productivity. Challenges with hard and soft infrastructure coupled with poor sources of information and financing have created a lot of distress in the sector. 2008-09 was the poorest year in the last 5 years, with the agricultural sector growing at 1.6 percent. Hurdles in the Agri-supply chain with respect to poor seed development, poor Crop selection and management techniques, inadequate irrigation and water conservation measures, poor cold chain and processing infrastructure, lack of research and development and poor extension of current technologies have resulted in wastages. Lack of basic infrastructure such poor roads inadequate education and healthcare facilities have also inhibited the growth of this sector.

Beside the transport, the state of infrastructure for horticultural produce as well as meat products leaves much to be desired. India has around 5000 cold storage facilities, of which 90 percent are privately owned. Nearly 80 percent of the cold storage facilities are accounted for by a single commodity namely potato. Addressing these structural challenges through innovative measures and technologies which effectively link production systems with processing and consumption an lead to self sufficiency in food as well as improvement in rural welfare.

In order to achieve this, we need to work on resolving some of the self-made Problems as well as build mechanisms to address external problems such as climate variability and erosion of natural resources. By analysing the various linkages in the agriculture value chain and identifying the challenges within each, we could come up with effective solutions. This could not only unearth new opportunities but could also transform these challenges into potentially profitable investments.

There is a need for new technologies, new organizational structures, new institutional responses and, above all, a new compact between farmers, technologists, scientists, administrators, businessmen, bankers and consumers. Hence, there is a need for creative and imaginative solutions that increase agricultural productivity, farm incomes, and food production and, at the same time, also contribute to greater purchasing power for the poor.

Akshay Jambhulkar

PGPABM I

2009-11

Importance of Management Education in Agriculture Sector

Introduction:

India is an agrarian economy and agriculture is considered as the backbone of our economy. In India, Agriculture has been practiced since ancient times, when other developmental sectors were not even in existence and farming was mostly treated as a life sustaining activity. Today, Due to the impact of globalization; production and marketing have become the buzz words in agriculture sector; biotechnology, precision farming; and various hi-tech and mechanized techniques have resulted in paradigm shift in agriculture.

Over and above, education plays a prime role in achieving the development in any sector. Currently, agribusiness education is one of the promising qualifications helps to mould the personnel in to potent managers having managerial expertise. To realize the real potential in Indian agriculture and to grow it to the point of a prospective sector, it is necessary to manage the sector like a professional enterprise.

Need, importance and scope of agribusiness management education:

Agriculture has achieved satisfactory growth since last few decades, but presently due to various national and international factors the agriculture growth is relatively stagnated. The up gradation is needed right from harvesting the agriculture produce till it reaches to consumer level. Majority of farmers and small entrepreneurs are not well about standard practices required during pre-harvest and post-harvest operations, which plays a vital role in overall productivity. On the other side to many middleman in marketing channel are major cause of concern. As a result of this, the farmer who is the key performer in farming is not getting possible return to his produce. Consequently overall distortion in marketing channel and high price to final produce adversely affect on cost competitiveness. In addition to this growing population has resulted into global disparity between market demand and supply side of agricultural produce. Thus special consideration is required on proper management practices, redusing raw material wastage at farm and processing level, effective marketing strategies like advertising, positioning at national and international level etc. Finally proper management of all the agribusiness activities right from planting the seed to getting the actual reward at market place is required. These issues are expected in agriculture sector which certainly has hidden potential of creating second wave in agriculture revolution.

Potential in agribusiness education :

Agriculture is the foundation of Indian economy. It provides food for the mankind and raw material for the industry. India has suitable climatic and geographic condition favourable to agriculture growth and undoubtly agriculture will always be an indispensable sector of Indian economy. There is need to divert knowledgeable experts and dynamic manpower to the rural area to manage the agricultural land effectively.To shape the Indian agriculture into commercially viable entity, there is vital need to inculcate the spirit of enterpreneureship, and only then agriculture can become a major contributor to the nation’s gross production. By the involvement of corporate sector, agriculture field can shift from merely the stage of self sufficiency to profit gaining enterprise which will result in overall development development of Indian economy. Management education surely help in developing trained personnel to cater to the agriculture industry and by creating such dynamic workforce India will certainly become the leader in agriculture.

Akshay Jambhulkar

PGPABM I

2009-11

FIGHTING AGAINST THE MONSOON-BY IRRIGATION WAY

FIGHTING AGAINST THE MONSOON-BY IRRIGATION WAY

Water, as an input to agriculture, is critical for sustaining the food security. India faces the daunting task of increasing its food grain production by over 50 per cent in the next two decades. Increasing competition for water in agriculture, industry, domestic and environment uses is already manifested in inter- and intra-sector, basin, state, district and village level conflicts.

These will escalate further as India's annual per capita water availability goes below water scarce threshold level of 1700 cubic meter within the next two decades. In six of the country's 20 major river basins (with less than 1000 cubic meter of annual per capita availability), water resources are under stress and depleting. By the year 2025, five more basins will become water scarce and by 2050, only three basins in India will remain water sufficient. Supply expansion, to meet expanding needs, is constrained by availability and rising economic and environmental costs associated with its development and use. The status of irrigation infrastructure and prospects for its sustainability, both physical and financial, for future water-food security is the issue under focus.

Irrigation Infrastructure

Existing status

Irrigation has traditionally helped Indian agriculture to grow. But, the last decade witnessed a slowing down of increase in irrigation potential resulting in a slowdown of agriculture growth to a mere 2.6 per cent in 2006-07. Till March 2007, the anticipated irrigation potential created was of about 102.77 million hectares but the utilisation was only for 87.23 million hectares. This meant that still over 30 per cent of India’s agriculture land is dependent on rainwater for crop survival. Himanshu Thakkar of South Asia Network of Dams, Rivers and People, says the government’s irrigation policy has failed with growth rate of irrigated land falling from 4.23 per cent in 1970s to less than 1.5 per cent in the first decade of this century despite spending about one lakh crore for the sector in the 10th plan.

Since 1950, India has made direct public investment of Rs 88100 crore in providing major, medium and minor irrigation infrastructure with an irrigation potential of 91 MHa. India Water Vision, 2025 estimated the gross water demand for multiple uses to double in 25 years from now with corresponding investment needs of Rs 20000 crore per year. As of now, India's irrigation infrastructure is expanding by 1.8 Mha of irrigation potential with a public outlay of Rs 7000 crore per annum. Current annual expansion is one-third less than the maximum growth achieved in the past. Deceleration in irrigation potential created through major and medium schemes started during 1980s as a consequence of declining real government expenditure on this sector.

Amidst competition from non-agricultural uses in households, industry and environment, supply of irrigation will have to keep pace with the targeted annual agricultural growth rate of over 4% in the Tenth Five Year Plan. To achieve this growth rate, irrigation sector should grow by at least 5% per annum, given 1% growth in rainfed sector, Demand-supply management in water sector and efficiency in its every use is critical for providing sustainable water-food security to the country.

More importantly, existing and expanding irrigation infrastructure has to be physically and financially sustained for improving their efficiency. Yet concerns are emerging on the physical condition of the irrigation infrastructure created so far.

Vicious cycle

India's irrigation sector is caught in a vicious cycle. Inadequate funding for O&M over years has resulted in the neglect of maintenance and upkeep of the irrigation system leading to deterioration in the quality of irrigation service. Physically, the irrigation and drainage system is not able to receive and deliver the planned quantity of water matching with the demand pattern. Poor irrigation service, often not matching with the crop water requirements over space and time, results in low productivity of crops and income to the irrigators. Resultant dissatisfaction coupled with weak institutional linkage leads to under assessment of demand for water rates as well as low recovery of whatever is assessed. Progressive fall in the cost recovery increases revenue deficit causing adverse impact on O&M funding for maintenance works.

Vicious cycle of India's irrigation sector

Deferred maintenance of surface irrigation infrastructure over years has led to further deterioration of its physical service. This is witnessed by stagnating or falling irrigation coverage affecting agricultural growth in several regions. Surely, with future expansion in food production growth critically depending on the performance of irrigation sector, what is happening to the physical status of existing and expanding irrigation infrastructure does not augur well for India's future food security and agriculture performance.

Targets

Under the Irrigation Component of Bharat Nirman, the target of creation of additional irrigation potential of 1 crore hectare in 4 years (2005-06 to 2008-09) is planned to be met largely through expeditious completion of identified ongoing major and medium irrigation projects. Irrigation potential of 42 lakh hectare is planned to be created by expeditiously completing such ongoing major and medium projects.

There is a definite gap between irrigation potential created and the potential utilized. Under Bharat Nirman it is planned to restore and utilize irrigation potential of 10 lakh hectare through implementation of extension, renovation and modernization of schemes alongwith command area development and water management practices. There are considerable areas in the country with unutilized ground water resources. Irrigation potential of 28 lakh hectare is planned to be created through ground water development. The remaining target for creation of irrigation potential of 10 lakh hectare is planned to be created by way of minor irrigation schemes using surface flow. 10 lakh hectare of irrigation potential is also planned by way of repair, renovation and restoration of water bodies and extension, renovation and modernization of minor irrigation schemes. But the targets met at the Oct 2008 last year are very discouraging, which puts down the figure to 29.783 thousand ha only.

Assistance provided under AIBP

A Central loan assistance of Rs 36,417 crore under the Accelerated Irrigation Benefit Programme (AIBP) has been provided for 267 major and medium irrigation projects and 9,874 minor irrigation schemes since the introduction of the programme in 1996. According to the latest figures in April this year, the country had created an additional potential of 4,932 million hectares of land through major and medium irrigation projects and a potential of 271 million hectares through surface minor irrigation schemes upto March 2008. The provision for the AIBP in the 2009-10 was Rs 8,700 crore with Rs 7,000 crore allocation coming from the Planning Commission.

The total grants released for various AIBP schemes for 2008-09 was Rs 7,598 crore. The AIBP was launched in 1996-97 for providing loan assistance to the states for completing unfinished major and medium irrigation projects who were in advanced stage of completion and create additional irrigation potential in the country. Those who had received benefits included many north-eastern states, hilly states of Sikkim, Uttaranchal and Jammu and Kashmir, Himachal Pradesh and the infamous drought districts of Orrisa -- Koraput-Bolangir and Kalahandi (KBK). The AIBP has now changed its guidelines to benefit drought prone tribal areas of Maharashtra, Karnataka, Andhra Pradesh, Kerala and projects in the states where irrigation was below national average could be included with the Government funding 38 of the 65 major and medium irrigation projects in the relief package for agrarian distressed districts of these states.

Budget and its implications

Irrigation is sine qua non for agricultural growth but the Central Budget’s total provision for development of water resources is Rs 1003 crores only. About 40 million hectares of land is unutilised in the country precisely because there is no proper conservation and management of the rain water. Total allocation for what is known as National Programme for Comprehensive Land Resources Management is Rs 360 crores only in the current year’s budget. If rain water could be harvested large part of such land can be put to some productive use. Watershed development holds the key to development of such areas which is equally labour intensive. It may be noted that most of the so-called drought prone area in the country has higher rainfall than Punjab or Haryana which are the granaries of India. It is the inability to harness rainwater that explains low productivity in rainfed areas. But the budgetary outlay in the current year for watershed development is a measly Rs 1773 crores only. The Budget papers mention that it will cost about Rs 12,000 to develop one hectare.

It has now been decided to include watershed development programme under National Rural Employment Guarantee Programme and allocation for the same has been raised from Rs 16,000 crores in 2008-09 to Rs 30,100 crores in 2009-10. This is welcome but given the enormity of the problem of conservation, regeneration and augmentation of natural resources and of providing employment to roughly 80 lakh persons who are being added to the rural labour force every year investment on such activities will have to be raised manifold if in has to make any impact on the situation.

Conclusion

The recent failure of monsoon has an alarming effect on our food grain production thereby on Indian economy. So creation of extra water potential is of utmost importance. Not only creation but the judicious use of existing facilities is also very important.

By

Parag Rastogi

PGPABM II

MANAGE

Coming back......

Hi everyone,

Sorry for the break in the postings on this blog..........we will soon come with new postings and expect lot of discussion from everyone.

Regards
Shashank

Teaching finance the hard way

I was recently asked for my views on whether and how we should change the way we teach finance after all that we have seen in 2007 and 2008. Some of my thoughts are as follows.
Quantitative models based on non normal fat tailed distributions with non linear dependence structures (copulas) are hard, but we must not shirk hard mathematics. It is much easier to talk about 2.33 standard deviations and simple correlations, but much of this is a delusion when applied to financial markets. It is even easier to adopt the viewpoint of some of Taleb’s followers that models are useless, but this is the path of nihilism. I think there is no place in finance teaching either for delusions or for nihilism. It is the creativity and subtlety of Mandelbrot that attracts me.
Fat tailed distributions also required us to re-examine the use of historical data in financial modeling and simulation. Five or even ten years of historical data tell us very little about the true distribution if it is fat tailed. A lot of what happened during 2008 would have appeared ex ante impossible to anyone looking at several years or even a few decades of history. But one can see many parallels if one is prepared to go back several decades or a few centuries. Since we do not usually have high quality data going that far back, the implication is that historical simulation should be de-emphasized in favour of robust models that are qualitatively consistent with decades if not centuries of historical experience and extrapolate far beyond recent experience. I have long been fond of saying that one must approach the study of finance with Ito’s lemma in one hand and Kindleberger’s book in the other. Needless to say, the version of Ito’s lemma that I like to have in one hand is the one for semimartingales and not the one for Brownian motion alone!
There is a need to shift from behavioural traits to hard nosed rational models. It is amazing but true that so much of what happened during 2007 and 2008 can be explained as the rational response of economic actors to altered fundamentals. I think that the crisis has taught us that finance is not a branch of psychology. For example, reliance on credit history (FICO scores) during credit appraisal assumes that default is a behavioural trait that can be measured using past track record. Rational models (Merton style models) assume that people default when it is rational to do so and focuses attention on modeling the fundamentals (for example home prices). Clearly lenders would have been much better relying on rational models rather than presumed behavioural traits. Unfortunately, during the lending boom, behavioural models held sway and these were supported by the short historical time series data that was then available.
Much of modern finance deviated too far from its micro foundations in terms of well defined fundamentals. Derivative models allow us to compute implied volatility and implied correlations (and if necessary the entire implied risk neutral distribution) and start valuing anything without any regard to fundamentals at all. Models then become over calibrated to markets and under grounded in fundamentals. For example, quite often derivative textbooks and courses do not encourage us to ask questions like: what is the fair value of an option if we assume that the underlying is 10% overvalued in the marketplace. Just as finance is not a branch of psychology, it is not a branch of mathematics either.
We need to teach more about the limits to arbitrage not in terms of behavioural finance, but in terms of well specified market micro structure with proper attention paid to transaction costs, leverage, and collateral requirements. The important stream of literature linking funding liquidity and market liquidity needs to be part of the core courses in financial markets.
Perhaps we teach too much of ephemeral institutional detail. A lot of the details which we taught to our students during the last 3-5 years has been obsoleted by changes in the market structure. Investment banks are gone, the Libor market is barely recognizable and risk free government paper is no longer risk free. When we are preparing students for a career and not for their first job, we must emphasize functions and not institutions; concepts and not context.
In short, I believe finance teaching particularly in MBA courses during the early and mid 2000s became too soft and easy to cater to the needs of an ever growing body of students who sought a career in finance without any real aptitude for the subject. We dumbed finance down for the mass market. The time has come to go back to teaching finance the hard way – and perhaps there will be fewer students in the classroom.
Source:-
Jayant Verma's Blog

Time to Show Professionalism

The financial turmoil is now in full swing and is showing its impact on world economy as well as on employment. Most of developed countries are in recession and developing country’s economy is going slow. In India this is placement season for the management and engineering students. Last year the season was full of roses for students. Some of them got a package up to Rs 1 crore. But this time there is yet no news regarding the highest packages. The only news is coming about the pink slips to employees, retrenchment which is the part of company’s survival strategies in slowing down economy.
In India every year lakhs of engineers and management students are produced by education industry which generally never face recession. Many out of them either do not get the job or if, get it below their potential and expectations. Now to be an engineer or management students is not as difficult as earlier because of mushrooming of institutes. Because of this the quality of students as per industry standards has come down.
Last year when economy was on boom, no of institutes increased their fees and seats. One of their arguments behind this was the average annual salary what the students offered. But the situation is now different for each and every institute and students who are currently passing through this worst ever scenario in world history. The students of current and just coming batches are main victim of this turmoil. The jobs have been dried up and packages have also been shrunken. They are facing a situation about which they would have never thought before joining. They had seen last year placement scenario where the companies were lining up to embrace their seniors with fat packages but the situation is just reverse, now students are looking for companies. Even though companies are coming in campus, but offered packages are not less than a disappointment for the students. Now their main objective is to be placed as early as possible. The biggest loser in this situation would be the students who had taken loans for getting admission in institutes in hope of hefty packages. This condition is not good for banking sector as well, as no. of education loans might become NPA because of poor placement scenario which might lead to defaults. The students would not be able to pay their EMI timely because the packages would be lower than the expectations and in worst cases students would not get the jobs.
In this horrible scenario Satyam fraud came as last nail in coffin for techies. This incident made the situation worst for its 53000 employees although for their rescue Government has appointed a new board. But what will be the future of those students who got placement in Satyam and were supposed to join later in April or May 2009.
This is the time for the education industry to show their professional attitude regarding the fee structure and batch strengths. When companies are reducing their work force and are giving the indication of cutting down the salaries, there is no need to increase the seats and hiking the fee. They can increase the strength of batch and fee as per industry requirement. By not increasing the seats they will help the society to control the structural unemployment.
Mayank Rastogi
PGPABM,1st year
MANAGE

The Transgenic Crop--Can this be our next stepping stone to becoming a bread basket?

The present situation of rising food prices has created such a situation world over that various policy makers and governing bodies are mulling over as to what went wrong. Among the various reasons of sudden food crisis, the most prominent one being the sheer neglect of Research and Development in our agricultural sector.
That time when our country India was a begging bowl, Green revolution came as a rescuer and embellished us with various high yielding varieties and high input system resulting in a sudden rise in the production charts. But this process seemed to have reached a plateau. So now to pull this cart further we can consider a highly controversial issue here that is ‘’The Transgenic world’’.
This question is often asked that- Is the transgenic world, a world of myth? Can this be the solution of the above problem?
Transgenic crops or genetically modified crops (GM crops) are the crops whose genetic characteristics have been altered by the insertion of genes or a gene from another organism using the techniques of genetic engineering. This whole idea of matching and mixing the various traits of the organisms has opened up many possibilities like,
 Better resistance to stress
 More nutritious staple food: for example, Golden Rice has higher levels of vitamin A in its grain
 More productive farm animals: for example, genes might be inserted into cattle to raise their milk yield
 More food from less land: improved productivity from GMOs (Genetically Modified Organisms) might mean that farmers in the next century won’t have to bring so much marginal land into cultivation
 GMO might reduce the environmental impact of food production and industrial process: as genetically engineered resistance to pests and diseases could greatly reduced the chemical needed for crop protection and its already happening
 Rehabilitation of damaged or less fertile land
 Bioremediation
 Longer shelf life: the genetic modification can make them less likely to spoil in storage or on the way to market which will reduce massive wastage incurred in transport and supply.
 Better management of agricultural crops
 Improved weed control resulting in less tillage and soil erosion, and water conservation.
Transgenic crops were also patentable enabling protection of developer’s intellectual property rights. In 1996, four transgenic crops developed by Monsanto were approved and were released and grown in USA for the first time. Then in the year 2002, our country India also joined this transgenic race after the apex body, Genetic Engineering Approval Committee (GEAC), Ministry of Environment and Forest, Govt of India, gave approval for three transgenic Bt. Cotton hybrids for commercial cultivation.
But problem arose when reports came from different quarters regarding the undesirable effects or as Scientists might put it ‘’ unintended effects’’ of transgenic crops. For instance, while discussing pest resistant crops, no new technology in agriculture has been adopted so fast in the history as Bt. Cotton. But the constant use of it led to the outbreak of secondary pests demanding more pesticides to be applied on that front. And in our country many farmers do not even know whether they are using genetically modified seeds or not when they go for using it because they do not know the proper source or information regarding that.
So before exploring further in this world of transgenic, several issues and concerns of farmers need to be addressed and allayed.
 Pesticide resistance: in case of Bt spray (a microbial spray) which is applicable under organic rules, here the gene engineers the plant to produce the toxin in each and every cell thus furthering the chances of pests to develop resistance against Bt. If this were to happen, an environmentally safe and benign pesticide will be lost from the farm managers.
 Gene flow: the transgenic crops can cross with its wild relatives and can transfer various traits, thereby making them stubborn with the newly acquired weapons in its arsenal like disease resistance / pest resistance making them even more difficult to contain
 Effect on beneficial organisms: reports say they can harm the soil microbes which can indirectly harm various important soil processes like phosphorous uptake by the crops etc. In case of Bt. Cotton crops, bollworms are annihilated beyond the threshold level, endangering its predator species.
 Reduced crop genetic diversity: if the inserted gene can stay away and contaminate the native varieties then it’ll create a serious threat to the inherent crop biodiversity of our country.

So, more research is needed to determine the conditions under which gene flow from transgenic plants is likely to be significant. The issue of food safety is also a major concern as it affects domestic market and export. Some of the food safety concerns are,

 Possibility of new pathogen reduced nutritional value
 Possibility of toxins in food
 Transfer of antibiotic resistance to human
 Introduction of human allergens etc.

Raising transgenic crops can create some problems for the farm management. Like if the farmer is raising both transgenic and conventional crops, cultural operations will be different for both of them and also harvesting should be separate which is not so easy in all cases. Again farmers who choose not to raise transgenic crops still are at a risk by contamination from the transgenic ones.
The problems and concerns of farmers and general public will not be solved by biological or natural sciences alone. We need a humane element to it. Farmers should have that freedom of what to grow and for us what to eat depending upon the choices based on true facts. Definitely no technology is hundred percent perfect, it has glitches and short comings. But if we want to be prioritized then let’s face it.....because without facing, we can’t get the answer.

Note: References for the above article has been taken from various magazines like Agriculture Today, different newspapers and informative websites.
Anyakshi Das
PGPABM-I
MANAGE, Hyderabad