Agriculture: Twenty Years from Now...

Following is a summary of my remarks in an “Agri Panel” at the Global Entrepreneurship Summit earlier today, in response to the question, “What do you think will be game-changing about how we think about agriculture, twenty years from now?”

Soon after the panel moderator sent me this very interesting question a couple of days ago, the first thing I did was to post this question on Twitter, Facebook, and LinkedIn to crowdsource thoughts from my friends. There were nearly two hundred unique responses! They added up to twenty pages of text, without counting the number of pages in the links I received. Overwhelming, isn’t it?

All I am doing now is to simply synthesize those inputs and share with you J

The future of any system is shaped the current aspirations of the key stakeholders. Let’s take a look at the aspirations of the consumers, producers and the society at large…

Consumers want sufficient quantity of food (because we would be nearly nine billion by then, and on average richer than today), that is tasty (although, a friend did say in lighter vein, “since we will have nano-bots in our blood streams, and since our memories could be uploaded on to cloud, maybe we don’t need food and therefore no agriculture; we probably just need some electricity, or batteries, or just a few hours of exposure to sun ;-), is safe (you are all consumers here, don’t you agree that harmful chemicals in food is your topmost concern?), nutritious (scientists say that most of the world is suffering from invisible hunger), and all of these at reasonable prices!     

Farmers want higher incomes (as you know, per capita income of farmers around the world, especially in emerging economies, is far lower than the general per capita) with lower risk (weather and disease related production risks, price volatility). Their labour deserves more dignity (as it is, hardly any youth from the next generation wants to be a farmer) and they deserve better quality life (as in, the conveniences and comforts that are common in urban settings).  

Society at large would like agriculture to conserve natural resources (water and top soil, for example) and where possible, actually renew them. Agriculture needs to be resilient to climate change (the summer rains and warm winters, extreme climate episodes like heavy downpours on one hand and droughts on the other, etc), and again, where possible, positively impact climate change (sequester carbon, minimize greenhouse gas emissions etc).

An interplay of these different - at times conflicting - aspirations gives rise to three distinct scenarios, all of which will co-exist in twenty years. Let me label them: Farms as Factories, Homes as Farms, and Back to Basics!

Farms as Factories: By using the metaphor of factories, all I am saying is that the consistent quality of output will be produced, crop after crop, by leveraging the evolving technologies – both farming (like seed, nutrients, farm-equipment, agronomy practices etc) and digital (IoT, block chain, hyper-spectral imaging, GPS / GIS etc). A friend called them, “hardware, software, and liveware”). Another friend went to the extent of visualising a self-managing seed! These seeds will analyse the experienced conditions like soil, weather, water etc and invoke the necessary embedded features that would maximize the yield and quality. This may sound like fantasy today, but those of you who are familiar with experiments on seeds with multiple layers of coating in the past may very well say this could be a reality in twenty years!

Homes as Farms: I am sure, you have heard of vertical farming, balcony farming, kitchen gardens and such other names. Once supply chains are established to supply DIY-type mini production units, seeds, nutrients etc to the households, this phenomenon will expand more rapidly. This food is safe without any doubt in the consumer mind, and zero carbon miles! Business Models are also in the works for another kind of service. If you are not adventurous enough to grow crops in your backyard yourself, you can simply let out the space to Service Providers who can grow crops on a BOO model. Besides experts growing the crops in this model, a colony-level kitchen garden is more optimal than a household level garden. And a third model, which is not a ‘home-as-farm’ strictly speaking, is a partnership between a group of, say, five thousand, consumers and a community of, say, five hundred farmers. I know of several such partnerships across cities, built as WhatsApp Groups integrating even the e-commerce functionality.       

Back to Basics: Much of today’s ills of agriculture are due to chemical-intensive mono-cropping paradigm. A more sustainable future scenario would be an integrated farming system consisting of polyculture, permaculture, organic compost, bee-keeping, animal husbandry, renewable energy. In fact, I already see some farms where solar energy brings larger revenue than the conventional crops.  

As the panel went forward, there were other questions, but for now I am wrapping up this post without covering them.

As always, comments are most welcome J This is a live and lively topic! 

Decoding the Union Budget 2104: Agri Sector

Very few sectors are as important, yet as beleaguered as agriculture in India. Engaging more than 50% of the country’s workforce, it offers livelihoods to 75% of the population living below the poverty line. It consumes 80% of the nation’s fresh water resources, a quarter of the total electricity and more than 70% of central government subsidies. However, it accounts for just about 14 per cent of GDP.

Indian agriculture is heavily dependent on rainfall, with just about a third of the total arable area being irrigated. In recent times, temperatures as well as the variability in rainfall have been increasing, adversely impacting the farm production.

Consequently, the policy agenda must aim to contain food inflation, yet making farming profitable; make agricultural production and the farmers more resilient to weather variations; improve productivity of the subsidy spends, and minimise their market distortion impact.

Regrouping the proposals along the above lines will help decode the Budget.

Contain food inflation, yet making farming profitable:

Since this objective has an inherent conflict, the Government is using five different strategies to tackle the complexity, viz (1) funds have been allocated to set up two more research institutions of excellence, two additional agricultural and horticultural universities, and a Kisan TV, (2) substantial resources have been provided for upgrading the warehousing and agri-tech infrastructure, besides creating a corpus for ‘Long Term Rural Credit Fund’ to boost investments, (3) financial support has been extended to Bhoomi Heen Kisan through NABARD, and to set up a Producers Development and Upliftment Corpus (PRODUCE) to build the capacity of the producers organisations, (4) promised that the Central Government will work closely with the State Governments to reform the APMC Acts, and (5) proposed to establish a Price Stabilization Fund to mitigate the distress from price volatility.

Make agricultural production and the farmers more resilient to weather variations:

Besides giving impetus to watershed development through a new programme called Neeranchal, a new scheme called Pradhan Mantri Krishi Sinchayee Yojana has also been announced. If the Sinchayee Yojana is implemented as well as the earlier Pradhan Mantri Gram Sadak Yojana that made a significant difference to the rural road, we can hope for better days ahead in irrigating farms. Funds have also been allocated to establish a National Adaptation Fund to mitigate the challenges arising out of climate change. One would have liked to see some funds allocated to a reworked crop / weather insurance scheme too. That didn’t happen.

Improve productivity of the subsidy spends, and minimise their market distortion impact:

Quite rightly, it has been announced that MNREGA will now be substantially linked to agriculture and allied activities. Shortage of labour during the peak agricultural operations was a major problem of the farmers so far. It is also good to see the Government’s commitment to restructure FCI, and improve the efficiency of food grain management in the country. Perhaps the most important announcement related to agriculture in the Budget is the scheme to provide to every farmer a soil health card in a Mission mode. This will go a long way in scientifically rationalising the fertiliser usage and reducing the subsidies.

In sum, all of these steps will put more money into the hands of the farmers!

 

First published in the Rural Marketing Association of India's Special Budget Edition at http://www.rmai.in/pdf/rmai%2021-07-2014.pdf

Role of Agriculture in India's Double Digit Economic Growth

A couple of weeks back, I spoke on the subject at a CII Conference. This is a high level summary of my talk.

On the face of it, Agriculture has a very limited role in India's economic growth... Since agriculture forms less than 15% of India's GDP, even a 4% growth in agriculture - this itself is nearly twice as much as the growth rate of the last ten years - will barely add a half percent to the overall GDP growth number!

However, growth in agriculture is vital for Indian economy from three angles:

• in providing food & nutrition security to a growing population. Today child malnutrition is prevalent in 7 percent of children under the age of 5 in China and 28 percent in sub-Saharan African compared to a whopping 43 percent in India.

• in India's inclusive growth agenda. 50% of India's workforce still relies on agriculture as the primary source of their livelihoods - in other words per capita GDP of a farmer is one fifth of that of the rest of Indians.

• in dealing with the challenge of climate change. Remember, agriculture is a major cause and a victim, as well as a potential solution to this problem.

Interestingly, if Western Indo-Gangetic Plains and Godavari contributed to India's first Green Revolution, Eastern Indo-Gangetic Plains and Brahmaputra can deliver the second Green Revolution. Eastern region, especially the Indo-Gangetic Plains are well endowed with basic natural resources viz. fertile land, abundant water and lots of sunshine. But, the route needs to be different, as the context is different...

Firstly, the per farmer land holding in Eastern region is just about a half of the national average and is not even a fourth of the Western Gangetic Plains. So, the ecosystem needs to factor this in, in terms of crops grown or technology inducted or the enabling institutional framework.

Secondly, the market for food in India in late 50s and early 60s was founded on a ship to mouth supply chain. The institutions created by the Government at that time, viz. Public Research System, Government Agri Extension System, Food Corporation of India, Public Distribution System, APMC Market Yards were relevant for that context. Today, with rising incomes and growing urbanisation, the consumer is seeking quality, variety, convenience, safety etc. Such market is better served by the Private Sector. The Government has to play the role of a Reformer and Regulator, rather than being a Player as before.

To co-opt private sector, reforms in agricultural marketing are key - Agricultural Produce Marketing Act, Essential Commodities Act and Forward Contracts Act.

To empower small farmers, producer company type institutions need to be built, which facilitate crop diversification as well as growth of livestock & fisheries.

To raise productivity, deal with climate change, and use natural resources like water more efficiently, development of new technologies is key.

Role of Corporate Sector in Inclusive Growth: Importance of Business Model Innovation

Earlier today, I spoke at the SMF-IIMA Conference on "Challenges to Inclusive Growth in the Emerging Economies".

My talk posed and answered four questions.

Q1: Who is "excluded" from the current growth process, that we now want to include?

Two sets of people are excluded, may be are even short changed, from the exciting growth story of the emerging economies in general, and India in particular, in recent times.

1. Some sections of our population, because they suffer from certain inherent disadvantages, are excluded from the new economic opportunities and growth (e.g. farmers, rural crafts persons, people with physical disabilities etc)
2. Some other people are excluded from the economic equations, because they don't have a say today! I am talking about our grand children and their grand children. The decisions taken by our generation have a bearing on the availability of natural resources (e.g. water) and the quality of ecology (green house gases) when they are around on this planet.

Q2: What can Corporate Sector do in this context?

Traditionally inclusive growth has been the domain of Government, Civil Society Organisations, Multilateral Institutions. Although there has been some progress over all these decades, none of us can feel satisfied with today's position of either of these excluded segments. For example, per capita GDP of an Indian farmer is just about 1/4th of that of rest of Indians. And, the concerns on climate change are at a level we have never seen before.

Programmes of these agencies miss out on one or the other aspects of three crucial areas.

1. Sustainability - where the programmes are subsidy based, their long term sustainability is suspect
2. Outcome effectiveness - for the target segment of people is weak, as the programme focus is typically on outlays
3. Scalability - is often the most challenging aspect of a successful programme

Call these SOS, if you will, by the first letters of the three areas. That's the message to the world.

On the other hand, by the very nature of enterprises, Corporates survive & thrive by doing these three things right...

1. Profit, the key metric of financial sustainability is the core objective of any commercial enterprise
2. Value Proposition to the target group of customers is the essence of market and competitive strategy, and guarantees outcome effectiveness.
3. Growth, the other metric by which Corporates swear, is what goes into determining market capitalisation of an enterprise

In other words, Corporates have the specific wherewithal to engage in inclusive growth agenda by applying these capabilities and deal with the SOS challenge.

Q3: Why is Business Model Innovation important?

Despite such a case for Corporate involvement in inclusive growth, there is widespread skepticism too!

Many in Government and Civil Society are skeptical about the intentions of Corporates. They simply see such engagement as a lip service, since they believe that 'profit' and 'inclusive growth' are at cross-purposes

Even the Financial Investors see a conflict between a company's profit objective and its social or environmental engagements.

On the other hand, if Corporates stay out, the SOS challenge unlikely to vanish. If the income divides expand and the ecological insensitivity continues we will have a serious problem. No business can succeed in a failed society, or in a world where natural resources are exhausted.

Then, there is also a huge business opportunity in selling products & services to the poor, and in selling eco-friendly products.

How do we reconcile these conflicting realities? The only answer is Business Model Innovation.

If we are able to innovate business models in a way that the profit objective of Corporates is enmeshed with the social or ecological benefits to the community at large, the new goal will be well aligned.

While many Corporates create shareholder value indifferent to society, and some even do at the cost of society, the conflict can be resolved if shareholder value is created "through" serving society. That's where business model innovation comes in!

By calling it business model innovation, I am distinguishing it from product or service innovation that can help inclusive growth. Renewable energy, micro finance, mobile phones, and road infrastructure are some examples of such product & service innovations.

Q4: Is there a special tool kit for business model innovation for inclusive growth?

Based on my experience in building the many phases of ITC eChoupal, and having observed several other inclusive growth initiatives of ITC from ring side, I see three important tools in a kit that will help innovate business models and deliver inclusive growth.

1. Co-creation together with the Communities: Both design and execution. This makes up for the missing infrastructure (eg individual credit rating, dispute resolution) through infusion of social capital. This also cuts costs. More importantly this co-opts lead consumers and helps accelerate product & service innovation. Two of the new institutions innovated under ITC eChoupal system viz. Sanchalak and Samyojak are vital components of a co-creation platform.
2. Leveraging Technology: Technology helps in remote delivery of services (eg eLearning, Telemedicine) and overcomes the physical access barriers as well as the knowledge concentration barrier. Technology can multiply productivity. Technology can also personalise solutions to individuals, so important given the heterogeneity of the target segment we are talking about. Technology helps in precision, leading to better resource usage and improve quality of the output.
3. New Revenue Models: Integrating the micro producers into value chains that connect them to the markets, is one way in which their share of a consumer price can be taken up. The principle of "Third Party Pays", as in Media business, is an important way in which the burden on the low-income producers or consumers can be reduced. This leads to rapid market expansion. Platforms that can carry products & services of several other organisations can create "increasing returns ecosystems" and deliver exponential growth, once the network effect sets in.

Wish you good luck, in co-creating a new world order :)

Agriculture & Climate Change: Aligning Small Farmers

Last week I spoke on this topic at the Global Forum on Food & Agriculture, Berlin. These were the broad talking points I had jotted down for myself:

A. All of us know the three dimensions of agriculture vis-à-vis climate change

1. That agriculture is a part of the problem, causing climate change through Green House Gas emissions (methane from flooded paddy fields & ruminants like cows, nitrous oxide from the soils, CO2 from fossil fuels used in farm equipment etc)

2. That agriculture is also one of the most vulnerable sectors impacted by climate change (fall in productivity due to changing weather patterns)

3. And, that agriculture can be an important part of the solution to climate change (through emission reductions, carbon sequestration, increasing soil organic matter etc)

B. At a macro level, what needs to be done to produce abundant food that is safe, healthy and climate friendly also seems to be reasonably well known!

But, unlike in other sectors, the key actors that need to implement these solutions are hundreds of millions of small farmers spread around the world.

C. The challenge of aligning the small farmers to climate change issues is four fold!

1. Bringing relevant information to farmers living in dispersed geographies, especially where the supporting infrastructure is weak

2. Personalising the sustainable crop & livestock management practices to individual farmer circumstances, and then transferring that knowledge

3. Coordinating availability of all inputs like credit, water, seeds, risk management instruments etc, so that the new knowledge is actually adopted by everyone

4. And, most importantly, providing a financial incentive to the individual farmer when he has a difficult trade-off between today’s cost and tomorrow’s benefit, or between individual effort and common good

D. There is a solution to this apparently complex challenge. In fact, it is practically demonstrated through our company’s innovative business model named ITC eChoupal; that reaches four million small farmers in India today.

Although Information Technology is the most known face of ITC eChoupal, the model has three equally important components.

1. Firstly, leveraging Internet and increasingly Mobile phones so that real time information and personalized knowledge can reach the small farmers in an audio visual mode

2. Secondly, co-opting social capital through user groups that can help equitable distribution of common resources like water; also helps in accessing indeigenous knowledge and in conducting participative research

3. Thirdly, a collaborative network of organizations working together to bring a complete end-to-end solution to the farmer through a meta-market approach

E. With this approach, I am confident that we can align small farmers in the war against climate change. This alignment will happen faster, if the international community creates a fair reward system for farmers recognizing their contributions to climate change mitigation (eg carbon sequestration activities and bio-based energy services)