FDI in retail – the Indian farmers' perspective

A potent solution for several deficiencies of Indian agriculture

- Motilal Oswal

The Government of India's recent decision to permit FDI in the retail sector has raised a high level of debate and a major political fallout. For a perspective from one of the key constituents – farmers – we organized a concall with Mr P Chengal Reddy, Secretary General, Consortium of Indian Farmers Association. We present the key takeaways.

·             Indian agriculture is plagued with lack of storage, investment and technology, low price realization, appropriation by middlemen, and huge wastage to the extent of 30-40%. Indian retailers have lacked the scale, technology, management vision and focus to change this.

·              FDI in retail would expand the outreach of Indian produce to the world market (e.g. access to 350 Wal-Mart stores in China in one go). It could lead to multiple other benefits: (1) uniformity in farming practices and scaling-up to suit global requirement, (2) enhanced branding and visibility, (3) superior back-end infrastructure, (4) significantly lower wastage, and perhaps most important, (5) integration of agricultural policies and implementation at various levels of government.

·             The political differences in this regard are largely on the surface; more and more states are expected to put in enabling provisions (like amending APMC Act) to introduce FDI in retail. While contract farming would increase, fears of job loss are unfounded as FDI is justifiably allowed only in bigger cities, and further, it would gain  currency only among the upper class. n While the role of middlemen is likely to stay because of their superior reach, efficiency is likely to be enhanced and exploitation reduced.

·             Finally, sugar sector liberalization is in the offing. This would provide major opportunity to (1) increase yields and revenue, and (2) diversify sources of income.

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