Reverse pitch: Farmer inclusive business models next big investing theme in food, agriculture

Pankaj Raina, vice-president, Zephyr Management LP.
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By Pankaj Raina

Increasing urbanisation, growth in the middle class and the accompanying change in nutrition needs will increase demands on agriculture

The agriculture sector accounts for around 17% of India’s gross domestic product and employs close to half of India’s labour force. While many segments of the economy are experiencing improvement in productivity through modern management practices and use of technology, besides capital investment, the agriculture sector remains set in old ways.

Increasing urbanisation, growth in the middle class and the accompanying change in nutrition needs will increase demands on agriculture. The segment will do well to infuse the entrepreneurial energy, which has transformed sectors such as IT, pharma and financial services, to drive growth.

The inefficient agriculture supply chain, which is plagued by the presence of inefficient intermediaries capturing a large share of profits, poor infrastructure and outdated farming techniques, also provides significant opportunities for entrepreneurial innovation. Entrepreneurs could also develop low-cost tools, smart farming techniques and warehousing facilities, besides improving the quality of inputs and extending the reach of irrigation, to transform agriculture in India.

Aspiring agri-entrepreneurs can also play a big role in providing nutritious food to address health needs, given that increasing affluence and lifestyle changes are influencing food consumption, which in turn is negatively impacting health. Now that the consumer is willing to pay more for functional food, such as fortified wheat and soya milk, they can be produced through demand-led vertically integrated models that accrue multifold benefit to the farmers. This can only be made possible through farmer inclusive business models, which integrate farmers as the source and the grower, and also include the processing, distribution and marketing of the end product.

Private capital and farmer-inclusive business models is critical to agri enterprises, and for the country’s long-term economic success.

Source: Livemint

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