Wednesday, 24 March 2010

Investment Opportunities in Rural India

Here is a summary of my talk on "Investment Opportunities in Rural India" at the Credit Suisse Investors' Conference, Hong Kong in the session on "Emergence of Rural Asian Economy" (24 March 2010)

My talk had three parts.

1. What factors helped rural India grow phenomenally in the recent past?

2. Will the growth sustain?

3. What are the investment opportunities!

Six factors helped growth

1. Infrastructure investments (roads by Govt, telecom by private)

2. Higher farm incomes (high commodity prices, more crop diversification)

3. Government programs like Universal Education, Employment Guarantee, Waiver of loan repayment by small farmers

4. Remittances from youth employed in towns

5. Rural non-farm (live stock, new services)

6. Income from sale of land (urbanisation, industrialisation)

While there is no problem to this growth momentum in the short run, there are several (six again!) show-stoppers that need to be dealt with

1. Food Security, due to stagnating farm yields and land use diversification; malnourishment of women & children in particular

2. Climate Change will compound the yields problem. An IFPRI model says Indian wheat yields can decline by 50% by 2050; rice 17%, maize 6%. We need to build the small farmer capacity in yield improvements and in dealing with climate variability

3. Need to create more urban jobs, especially in small towns; ratio of agri workforce to arable land is rising to unsustainable levels

4. Investments in "energy" still woefully inadequate

5. Policy reforms to link farmers to markets have slowed down / reversed

6. Quality of delivery mechanisms for basic services still poor (education, health care, financial services)

These challenges present opportunities in four specific areas of investment!

1. Infrastructure businesses (energy solutions, logistics, micro irrigation). PPP opportunity

2. Provision of Basic Services (education, healthcare, financial services). PPP + innovative business models required

3. New Technologies (labour saving crops, chemicals, equipment; mobile phone apps, rapid testing equipment for crop quality & biometrics)

4. Delivery Channels (Govt Services, Agri Extension, Basic Services as in 2 above, Consumer goods)


  1. Sir,
    I really surprise and happy to talk these 3parts.
    Extreme bottom reached people can only knows this real facts.
    Here I would like to suggest few points.
    For growth:
    Farm income is average or low but business mediators only raised artificial price hike.
    Farmer's cost of cultivation which is more than harvested grain price, due to this, farmer decides to go for crop divesification, most of the farmers have no awareness about diversified new crop. so again they falldown into their traditional crop and its practices.

    Rural employment guarantee schemes temporary solution for farmers financial status that work involves in major development of rural infrastructure, but, simaltaneously, same farmers or labourers are not involved in farm business as their much interest, it causes to reduce area of cultivation.

    Delivery channels are poor and technologies we have sufficient and compare to this less amount of farmers only implemented updated technologies.
    Govt,policy makers has to concentrate more in the area of Research success to implementaion method and its measure of success ratio.
    Apart from human works..satisfactory..obviousely monsoon will work together with us and blessings of god.

  2. Kuchibhotla Srinivas29 May 2010 at 14:20

    Great thought provoking presentation.

    Adding some more investment opportunities in Rural India -

    1. Agri & Food Supply Chain particularly Harvest & Post Harvest Management of Agri & Horti Commodities, warehousing, logistics & marketing infrastructure

    2. Horti Exports particularly Banana, Pomegranate, Grapes, Mango etc

    3. Biofuel & Bioenergy space

    4. Collaborative Farming

    5. Retail will go small towns and cities

    Apart from the above, Manufacturers and BPOs might as well move to small towns for reducing operating costs & improving competetiveness

    Investments in ICT & PWRE (power, water, roads and education) will create sustained jobs and improve wealth.

  3. Dear Shiv

    Its awesoe one, bevcasue Rural india is he heart of India where lot of talents are underutilized. Also I agree to all the points of growth except employment guarantee scheme, which is one of the biggest blunder government has done. it will definitely going kill the farm and farm products as well as make people turn away from work and become lazy

    If Skill upgrades and automation is taken to the farm and villages definite India is going for a much faster growth

    Bobby Mathew

  4. Thanks Vijay, for elaborating some aspects...

  5. Thanks Bobby :) Yes, the reaction for MGNREGA has been mixed based on how the implementation was managed on the ground.

    Farmers, of course, are bitter with the rising labour costs.

    On balance, however, I still endorse the scheme.

  6. Yeah of course I do agree on the issue of higher ratio of agriworkforce to land , the second biggest challenge is the dipping yield of major crops.

    But I doubt that by creating more urban jobs would really help in controlling the problem as I don't see that is a supply demand gap between uarban jobs and urban workforce, infact it can create a problem of urban migration . what is wrong in creating rural jobs. Rural Employment Gurantee Secheme is I think is the Good idea but shall be expanded to talent and skill oriented to deploy rural workforce rather than just labour intensive work.

  7. Naveen: Urban need not mean the top fifty cities; the opportunity is in building the next five hundred towns. More jobs can be created here, without pressurising the infrastructure in the top fifty. These jobs need not be in exclusion to rural jobs.

    Given the skill sets of the target families, MNREGA has to primarily focus on labour intensive jobs at this time. Concurrently skill building programmes have to be mounted...