An Incredible Journey through India

Special to China Daily, by Marcos Fava Neves

Almost two weeks traveling in four big cities (Mumbai, Hyderabad, Chennai and Delhi) and several rural villages of India is an incredible and unforgettable experience. My learning was present in every street, road, building, sightseeing, taxi driving or whatever interaction with its people and geography.

The consumption details of this very diverse society were perceived at every meal, either taken in the luxury Taj Hotels restaurants, in booming fast foods or in small villages, with farmers. After this visit I came back convinced that in several places of the world we will see changes in the next 10-20 years, but seems to me that India will have the leading speed of changes. In India, definitely things will happen.

This article has three parts, first to address some socio-economic numbers and impressions, second to talk about agriculture’s development and challenges and third, to share the development agenda learned and discussed.

Walk on the streets feeling that you are in a country of more than 1,2 billion inhabitants place, that grows almost 2 million people per month, or 20 million in a year, or one South Africa each two and a half years, or one Brazil each 10 years or even… one USA in 15 years is… unique.

Being the world’s fourth largest economy based on purchasing power parity and growing from 6 to 10% per year in terms of GDP, we may imagine that in ten years from now we will have one more India in place.

It is a large economy of still poor people, having very unusual consumption patterns. This characteristic takes us to lots of people consuming products occasionally or at small portions. It is, for most of its population, a business with low margins but large volumes. India means a large aggregation of small parts.

It is quite a heterogeneous society, a unique cocktail, difficult to be found. And this heterogeneity seems to be increasing due to the internationalization of Indian society. We see the mix of local diverse culture with occidental culture coming in with Indian’s students coming back from experiences abroad, fast food chains moving in, web access and other facts.

India has gone through an impressive process of information and technology, so people are connected, mostly the younger generations from all social classes. An Indian economist told that 40% of the population has access to toilets but 50% to mobile phones. They are typing all time and talking.

It is a well-known country for its business process outsourcing, for building up smart solutions, a service driven society, which definitely changes the way companies do business, offer services or charge for guarantees. India has interesting small business models, from people dedicated to cook, going to houses, dedicated to laundry, clothing, whatever.

India is also famous for its micro-credit initiatives and huge programs of financial inclusion using the bank system, based on technology platforms.

My taxi drivers during these days showed an incredible performance in the unique experience to face the streets and roads in India. I can’t understand why India doesn’t have Formula 1 champions. The culture of the “horn” is a nice way to manage a mess that is in some way organized. They were always nice people (of course sometimes with a poor English) and offered a creative free service. Whenever I needed them, they told me that I should phone they wouldn’t take the call and would come to the place to pick me up. This is the “missed call” movement. All for free!

I could see some efforts of the Government in reducing taxes, still very high, and also I listened to several critics coming from farmers and business people due to the large size of Governments and difficulties to cut costs and also a propensity to corruption. I perceived in youth generation a large disappointment with Government, according to them, due to its cost, level of corruption, time to take judicial decisions, low infrastructure investments, among others. There is a common perception that Government doesn’t follow the needs of the youth, and this is not a good indicator. Being from Brazil, nothing new for me.

The growth and development challenge can be smelt in every breath. Almost 400 million people in India survive with a daily income of US$ 1,25. It is a country with still more than 60% of the population in rural areas, which is a huge a challenge. The incredible information that Mumbai grows 400.000 people per year was given to me.

But it was also said that the major urbanization changes are happening in the enormous amount of 50-100 thousand people cities, much more manageable. The major impact of urbanization is the change in consumption habits. While in the USA fast food sector grows 4% per year, in India it is growing 35% per year. Specialists say that fast food market was of US$ 1 billion in 2010, and may approach US$ 3 billion in 2015, when McDonalds plans to have 500 outlets, Yum! plans to expand 500 new units of Pizza Hut, Taco Bell and KFC and Domino’s Pizza also expanding its 500 units.

Other topic that deserves our attention is that India is a very young country. While in China we have the policy of one child per couple, India grows fast and has today almost 600 million people with ages below 25 and 225 million among 10 to 20 years. India will have in the future a huge amount of people at working ages, and this is a very competitive factor. The decision here is crucial, not only for India, but for several countries like Brazil.

To transform this immense youth in what I call a cargo truck, to help carry society forward, than to leave them without support and transform them in cargo to be transported by others is probably the major challenge of these countries.

In 2013, with several improvement suggestions, India is launching the “food security bill”, to create obligations for the State to guarantee food to every person that lacks resources to purchase the minimum amount of food for a healthy life. This fact will bring huge impact in food chains and food imports, since it means investments of Federal budget in the food markets. India is still far behind the development China had in reducing poverty and this Government regulation can really alter the future of India, solving problems of poverty and giving conditions to a much more competitive society in the future.

This is India, a country that gives several important signals to international society.

In this second part about India, I give some information about agriculture, collected in two weeks of visits and interviews and raise some of the topics that make part of the strategic agribusiness agenda. As a first impression, Indians have a passion to owe land and this land is what will be passed to their children. Indians love children too!

India has a large proportion of arable land, 180 million hectares, almost 60% of the land existing (330 million hectares of surface) and produces the second largest crop in the world. It is a very challenging land structure, since almost 75% of the land is in properties of less than 5 ha, and as average, one to two hectares per farming family. Imagine land ownership in the future, dividing this area with some children.

Agriculture is strongly dependent on the Monsoon and the amount of rain that it will bring. The Monsoon is the direct responsible for the amount of income available in a particular year.

We can find a great diversity of climates, allowing several products to be produced. India, after China, is the second largest producer of rice and wheat, fruits and vegetables. Rice is a major crop, occupying 44 million hectares and producing more than 90 million tons. Wheat also is an important product, with more than 80 million tons per year. Corn occupies 8 million hectares. India is among the world’s five largest producers of 80% of the crops (agriculture produce items).

Agriculture has seen a huge development due to adoption of technology. Grain production jumped from 50 million tons in 1950 to more than 250 million tons in 2012. Irrigated area in India went from around 20 million ha in 1950 to 65 million in 2010. By 2012, around 17% of India’s agricultural output is exported and it still is the primary occupation of 52% of local population. But due to this population growth, per capita availability of grains fell 10 kg in ten years.

Several other changes can be seen. Farmland management is also concentrating, with the growth of land lease and more efforts to build scale, probably the biggest challenge in India’s agriculture.

Due to the industrial and services business growth, as in most countries facing urban development, it is natural that agricultural share in GDP declined, from 56% in 1950 to 14% in 2012. There is a movement of a more feminization of agriculture and Brazil is also an example of this issue.

Several challenges face the fast development of agriculture in India. In the innovation process, according to companies interviewed, the regulatory systems are an issue, taking long time to register products The challenge of urban areas advancing over farming areas and labor costs increased 50% in the last two years since the service sector is attracting people previously available for agriculture. Although India has a lot of water, it is also becoming an issue, due to pollution, usage by its growing population and other challenges.

India will also have to develop food safety (quality) and traceability, develop environmental protection laws, improve labor laws that definitely will increase its production cost in the future, like what I have seen in Brazil in the last 10 years.

Productivity of Indian agriculture is still very low and this means that several growth possibilities are possible. In China, the average size of properties is half the size of India, but productivity is the double in most crops. India produces as average, 50, 60% of the world’s benchmark in each crop, meaning that it is possible to improve production in India, using the same land.

Finally, the third and last part of the article is the strategic agenda of Indian’s agriculture for competitiveness. It is not different from most of the countries. It involves:

a) Increase in social improvement programs - it was said about a desire to increase social security programs with a focus more on investments and less on subsidies, to make these programs more sustainable.

b) Research and development - attract more private investments to research, considering local specificities and farmers needs, more private and public partnerships, research driven to reduce countries disparities, promoting more extension to reach farmers with innovation outputs. Increasing research towards water uncertainty.

c) Human capital - increase youth health, nutrition and education, capacity building for agriculture and also vocational training.

d) More value capture and diversification - intensification of crops (from grains to poultry), diversification to crops where lands could be more used and supply more value (from sugar cane to horticulture and fruit production) and efforts to improve collective actions of farmers.

e) Infrastructure - improve in investments of rural infrastructure, build more storage capacity, water storage capacity, stock operation and policies, improvement of cold chains, among others.

f) Increase in agricultural production - increase in yields, modern farm technology, storage and waste, irrigation, access to credit, land lease and land management, more mechanization (improving number of tractors, harvesters, and other equipment)

g) Institutional environment - gradually move to a less regulated and more market driven agricultural chains, with clear, efficient and better managed organizations promoting institutional development.

India is a fascinating country. I really think that it is in India that we will see real and fast changes in the world. Even with the chances to increase agricultural output due to more productivity, with the growth expected for the next 10-15 years in the income and population, huge urbanization and minimum wage and social support programs, I believe India tends to strongly increase its participation in world food imports and definitely will be one of the superpowers in world economy, GDP, products and services trade.

The author is professor of strategic planning and food chains at the School of Economics and Business, University of Sao Paulo, Brazil (www.favaneves.org) and international speaker. Author of 25 books published in 8 countries and in China, “The World on the Tongue”.