Harvesting golden

opportunities in Indian
agriculture: from food
security to farmers’
income security by 2025
July 2017

Authored by:
Avinash Goyal
Chandrika Rajagopalan
Lutz Goedde
Nitika Nathani
Copyright © 2017, by McKinsey & Company, Inc.
Harvesting golden
opportunities in Indian
agriculture: from food
security to farmers’
income security by 2025
July 2017

Authored by:
Avinash Goyal
Chandrika Rajagopalan
Lutz Goedde
Nitika Nathani
 Preface

In the 1960s, India embarked on an ambitious agricultural transformation. The use of high-
yielding seeds and fertilizers ushered in the “green revolution”— a new era of immense
productivity and a crucial step in the newly independent country’s journey towards food
self-sufficiency. Today, with minimal dependence on imports, the agriculture sector’s
contribution to GDP stands at an impressive USD 262 bn. With higher total return to
shareholders than the Indian market, the Indian agribusiness companies have played a
significant role in achieving this.

The Government of India has recently adopted a visionary goal of doubling farmer incomes
by 2022. Boosting farmer incomes can infuse greater vitality into the sector overall.
Agriculture companies and the government could work together to realize this dream,
unlocking around USD 175 bn of agriculture GDP and almost doubling farmers’ income in
the next 7 to 8 years.

This paper highlights the megatrends expected to drive the next wave of growth in Indian
agriculture and identifies a broad set of investible themes as potential focus areas for
players. The six emerging trends shaping Indian agriculture are: rising food demand; a shift
in consumption patterns; scarce natural and labour resources straining supply; the potential
to improve yields; scope to cut wastage in the food chain and technological disruption.

Against this landscape, agriculture and related companies (e.g., equipment, financing, etc.)
could focus on seven investible themes towards directly or indirectly enhancing farmer
incomes:

1. Invest in food and vegetables and pulses value chain to meet demand.

2. Invest in the fast-growing cold chains and cold-storage markets.

3. Establish market linkages between farmers and buyers.

4. Unlock a large opportunity through digital and analytics.

5. Invest in ecosystem partnerships for disruptive solutions.

6. Enter the agriculture services market.

7. Offer agriculture financing and crop insurance to strengthen the ecosystem.

  

India’s pursuit for food self-sufficiency since independence shaped the growth of the
agriculture sector. Between now and 2025, the new vision could rejuvenate the sector and
transform the quality of life for India’s farmers.

iv Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025
Acknowledgements

The authors would like to thank several people who helped to make this report possible,
starting with Anu Madgavkar (Partner, McKinsey Global Institute) and Sunil Sanghvi (Senior
Partner, Chicago office)—who offered valuable industry perspectives from time to time.

The authors are grateful for the expert guidance of many industry leaders on the topic.

The project team consisted of Ankur Aggarwal, Anushi Shah, Devam Sardana,
Natasha Mittal, Parv Aggrwal, Saagar Sinha, Sahil Aggarwal, Shishir Gupta and
Vipul Agarwal. Other McKinsey colleagues who supported this effort are T. Teena Roy
(research); Anamika Mukharji, Malini Sood, Noorain Nadim and Punita Singh (editorial
support); Pradeep Singh Rawat, Salvator Tudu and Vineet Thakur (graphics design);
Natasha Wig (external relations); and Andrews Xavier (administrative support).

Avinash Goyal Chandrika Rajagopalan

Partner Associate Partner
McKinsey & Company McKinsey & Company

Lutz Goedde Nitika Nathani

Senior Partner Engagement Manager
McKinsey & Company McKinsey & Company

Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025 v
vi Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025
Harvesting golden opportunities
in Indian agriculture
India’s determined pursuit of agricultural self-sufficiency since independence has led the
country to have a high-growth agriculture sector today. Despite this, India’s farmers are
not faring too well and only a third of all agriculture companies posted a profit in recent
years. The government’s recent shift in approach, by adopting the goal of doubling farmer
incomes, is a welcome attempt to transform the sector. There is scope for agriculture
companies and the government to ride emerging megatrends and successfully be a part of
this transformation.

The outlook for Indian agriculture and farmers

Minimally dependent on imports, India’s agriculture sector’s GDP stands at an impressive
USD 262 bn. This is due in great measure to the agribusiness companies which have
demonstrated higher growth than several other sectors in the last few decades. Growth in
the total return to shareholders in agriculture in the last 10 years is 28 percent, an impressive
17 percent higher growth than that earned by the Indian market.

Around 33 percent of the agriculture companies have generated positive economic profit
over 2010 to 2015 (Exhibit 1). These companies have used several strategies to generate
value, such as de-risking the business through diversifying geographies, ensuring proximity
to customers and achieving operational excellence to drive profitability.

Recent trends are prompting an increasingly urgent question around the sustainability
of value creation in the future. The extreme weather volatility, growing food demand and
wide gap in productivity between India and its closest peers, and the need to manage food
prices and import pulses to meet demand have all highlighted that India needs to rethink its
approach.

In a significant mindset shift, the government’s focus is moving from increasing farm output
to improving farmer incomes—it has set an aspiration to double farmers’ incomes by 2022.
This will enhance productivity and have multiplied effects on the larger ecosystem.

Boosting farmer incomes in India

Indian farmers face multiple challenges, primary among these are excessive stress on land,
water and soil health, lack of knowledge/information about high value/growth products,
limited exposure to high productivity practices, weak market linkages, inefficient supply
chains with high levels of food wastage and an acute dependence on rainfall.

Increased farmer incomes will:

ƒƒ Foster the use of mechanized techniques to efficiently use stressed resources.

ƒƒ Increase farmers’ knowledge of the high productivity practices and high value product
choices available to them.

ƒƒ Help farmers to better navigate market inefficiencies rather than settling for lower prices
set by the middlemen.

Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025 1
 Exhibit 1

~33% of the agriculture companies in India have created value or

had positive economic profit over the last 5 years
Total annual EP generated by all companies
Average economic profit, 2011–15 put together in the respective quintile
(INR million)
N=1031
Cutoff for Cutoff for
60,000 (852) 164
bottom quintile top quintile

50,000 Bottom Middle Top

Nestle
40,000
UPL
Average EP

30,000
ITC
20,000
Coromandel

10,000

-10,000

-20,000

-30,000

-40,000

-60,000
(2,828) (212) 4,146

Learning from top players

▪ De-risking of business and portfolio through geographical diversification and exports
▪ Proximity to customers, value added products and investment in brand building
▪ Operational excellence to drive margins and efficiency

1 Analysis includes 103 firms across different sub-sectors of agriculture and food industry. Revenue cut of INR 200 cr has
been considered. Within diversified, machinery, irrigation and input equipment, storage and logistics firms, only agri.
related firms have been considered. Firms with less than 40% of revenue from food and agri. industry have been
omitted

SOURCE: McKinsey Strategy Practice (Beating the Odds model v19.0) and Corporate Performance AnalyticsTM

To increase farmer incomes, India needs to adopt a higher value mix of farm output, capture
greater value through better storage and processing, and make market mechanisms more
efficient for farm inputs, financing and sale of output. Doing this will require all stakeholders
to make bold bets by building partnerships, adopting granular crop and micro-market
approaches and developing new business models. We estimate that such measures could
unlock roughly USD 175 bn of agriculture GDP and increase farmers’ income by 85 percent
by 2025 (Exhibit 2).

2 Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025
Exhibit 2

Unlocking supply by ~40% will increase agricultural output by

~US$ 175 bn (~70%) over current output
Potential to unlock supply by ~40%, … will generate incremental agriculture GDP of
producing additional ~440 mn MT of food … ~US$ 175 bn by 2025 (over 2015)

Crop produce vol (mn MT) GDP from agriculture (US$ bn)

450

2005 796 400

US$ 175 bn
~70%
350

2015 1,145
300

250
2025 1,587
200

~40% 150
2005 10 15 20 2025

SOURCE: FAOSTAT; OECD FAO Agricultural Outlook 2014; NITI Aayog

Understanding the megatrends

While pursuing the objective of doubling farmer income, it is important to keep an eye on
the emerging trends in Indian agriculture. These will continue to shape growth and will lead
towards the themes for transforming the sector:

1. Additional food demand of around 400 mn tonnes by 2025: A four-fold growth of the
Indian middle class in the last decade, combined with urbanization and higher GDP, have
prompted a higher demand for food. If current trends continue, food demand is likely to
grow by over 2.5 percent year-on-year over the next 10 years (Exhibit 3).

2. Shift in consumption towards fruits and vegetables, and pulses: Unlike the
consumption of rice or wheat, which is linearly related to GDP, the consumption of fruits
and vegetables (F&V) and pulses follows an S-curve relation to GDP (Exhibit 4). Over
time, the Indian diet has seen a significant shift to higher protein intake. India is entering
a hot zone in this space with projected demand growth at a CAGR of 8 to 11 percent
(Exhibit 5).

Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025 3
 Exhibit 3

High value crops like F&V, pulses and oilseeds could drive the
additional food demand of ~400 mn MT per year by 2025

Domestic demand projection Projected 10-yr

(mn MT) CAGR (%)
GDP per capita has increased
3.5 times from 2000 to 2015 2-3% p.a.

1,350-1,500 4-7%
38% of the population will live 1,132
in towns and cities by 2025 F&V 5-6%
400-500
(31% in 2010) Pulses 266
22 35-40 0.5-1%
Rice 92 100
The Indian middle class is 86 99
projected to grow to 200 mn Wheat 74 90-105 1.5%
strong by 2020 (50 mn in 2010) Oilseeds
Others1 642 640-670 4-6%
Significant shift in consumption
basket toward high value crops 0-0.5%
(5-7% growth from F&V, pulses
compared to ~2-3% overall) 2015 2025 projected
1 Include sugar, plantation, other cereals, etc.

SOURCE: FAOSTAT; NITI Aayog

Exhibit 4

The growth will be majorly driven by F&V and protein consumption

increase, while wheat will only grow at population growth
Per capita consumption of protein in the world 1 Per capita consumption of F&V in the world 2
Per capita protein consumption (g/day) Per capita F&V consumption (kg/year)
120 600
100
400
60
200

0 0
0 5,000 10,000 50,000 55,000 0 10,000 40,000 50,000
GDP per capita GDP per capita

Per capita consumption of wheat in the world 3

Per capita wheat consumption (kg/year)
250 India Iran
200 Egypt Mexico
150
China United States of America
100
Brazil
50
0
0 2,000 4,000 6,000 8,000 10,000
GDP per capita

1 Data for the year 2008-13; 2 Data for the year 2002-13; 3 Data for the year 1980-13

SOURCE: FAOSTAT; World Bank

4 Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025
Exhibit 5

Trends and opportunities shaping the future of agriculture in India

1 Additional food demand of 400 mn

MT by 2025
▪ Increase in urbanization from
GDP per capita vs. processed food per capita, 2015
31% in 2010 to estimated 38% by
2025 and 4x growth in middle
Processed food per capita (kg / capita)
class over the decade
400
2 5-6% CAGR growth of F&V and
pulses in India (~2x the global Warm up Hot Chilled out
growth) zone zone zone
▪ Increase in GDP per capita, 350
change in customer preferences
towards healthy food are the
key factors
300
▪ Pulses preferred as they are cheap
source of proteins
▪ Food processing sector entering
hot zone (S curve), expected to 250
grow at 8-11% pa

3 Increasing stress on supply due to

scarcity of resources 200
▪ Land, labour migration to non-farm Brazil
jobs, water stress, climate change;
54% of India faces high or
extremely high water stress 150

4 157 MT (~30% of total yield) of food

wastage across the value chain
▪ This accounts for half the food 100
wasted in South and South China
East Asia Vietnam
▪ F&V and cereals are the biggest 50 India
contributors with 37% and 25%
food losses

5 Significantly lower yields than 0

Asian averages, headroom for 2x 100 1,000 10,000 100,000 1,000,000
improvement
▪ Average rice yield is 3.6 t/Ha 2015 GDP per capita
(US$)
compared to 6.7 t/Ha in China

6 Technological disruption reaching

farmers directly

SOURCE: FAOSTAT; WTO; NSSO

3. Stress on supply due to scarcity of resources: India’s farm resources like land,
water and soil health are hugely stressed. More than half the country faces water stress
with withdrawals at 40 to 80 percent of available supply. Similarly, the labour supply is
stressed too; India’s labour market is making a natural structural transition from farm to
non-farm jobs—agricultural jobs declined by 25 mn between 2011 and 2015, while non-
farm jobs rose by 33 mn. The rising wages for farm labour make it imperative to improve
farm productivity through mechanization and other measures.

4. Scope to improve yield: Indian crop yields are still significantly lower than Asian
averages (Exhibit 6). For example, the average rice yield in India is 3.6 t/ha compared
to 6.7 t/ha in China. This could improve by at least 40 to 70 percent with suitable
interventions. If productivity does not improve, the country could fail to meet the

Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025 5
 projected food demand for 2025 and remain dependent on imports of rice, pulses
and F&V. To meet the growing demand for pulses, India will need to import around 13 mn
to 17 mn MT of pulses by 2025. India would then constitute a very large percentage of
global trade volumes in pulses.

Exhibit 6

Indian crop yields are still significantly lower than Asian averages

Yield (in tonnes/ha)

World Incremental
Indo- Asian top opportunity2
Crop India China Vietnam Thailand Malaysia nesia average quartile mn MT

Oilseeds 0.3 – – – 1.2 – 1.2 1.2 150-170

F&V 10.1 15.7 16.0 12.9 15.4 11.4 14.3 15.7 109-147

Rice 3.6 6.7 3.9 3.1 3.9 5.2 4.9 5.4 38-54

Pulses 0.5 2.3 – 1.2 – 0.6 1.2 1.9 21-40

Wheat 3.2 5.1 – 1.3 – – 3.2 4.1 15-30

~400 mn1 MT of additional production is possible if India moves current

yields to half of the current Asian averages or half of world top quartile

1 Calculated considering production of all crops at the current yield in India and world top quartile yield
2 Calculated from the yield difference between India and the Asian average yield and the yield at global 75th percentile

SOURCE: FAOSTAT

5. Opportunity to cut losses in the food chain: Around 60 percent of food loss
and waste in India happens between the field and the end-consumer, and this is
concentrated in a few crops (Exhibit 7)—especially F&V and cereals. Several challenges
limit cold chain penetration and adoption—high cost of stable power supply, low
capacity utilization and limited financing options. These challenges offer a significant
opportunity to improve farmer incomes by addressing the storage and handling of food
as well as creating market linkages to customers.

6. Technological disruption reaching farmers directly: Several companies are using

technology to disrupt existing models and directly reach farmers. While technology
is helping some companies to strengthen their sales force, others are leveraging it to
offer agri-advisory services to the farmers. These include providing weather-related
information (e.g., Skymet), integrating mandis (e-NAM), offering agronomic advisory
services, and connecting farmers directly to consumers (e.g., farmerfriend.in).

6 Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025
 These innovations will force incumbents to change their business models, and shift the
focus to creating value for farmers and increasing their share-of-wallet.

Exhibit 7

There is food wastage across the agriculture value chain

Food wasted In India across value chain

Processing Distribution
Production Post-harvest and and Consumption
packaging marketing
Total losses (percent)
9 100
20
11
29
31
60% of waste is between the field
and the end consumer and
directly affects the farm incomes
Internal data source

▪ Poor ▪ Poor ▪ Most food ▪ Limited ▪ Slower than

harvesting practices in processors transport anticipated
practices on-farm are not network for growth in
▪ Limited storage and linked to perishable processed
access to handling farmers produce food
technology ▪ Distress sales ▪ Insufficient ▪ Multiple requirement/
and Inputs due to local middlemen/ organized
retail
(seed, – Temporary processing agents/
fertilizer, etc.) glut In local value traders ▪ Limited
▪ Lack of farm markets addition linkage to
infrastruc- due to lack capacity export
ture, e.g., of on-farm (National markets
mechaniza- storage processing at
tion, water, – Lack of only 2% for
electricity, linkages to fruits and
etc. alternatives vegetables)
nearby

SOURCE: FAO 2011 food balance data, adjustments based on SIK 2009 methodology, World Research Institute, 2013

Tapping seven investible opportunities

All these megatrends help to identify seven investible themes for companies. These could
create value and boost farmer incomes.

1. Invest in food and vegetables and pulses value chain to meet demand: These
investments could unlock around USD 15 bn to 20 bn by 2025 and boost farmer income
by 35 percent. The value chain of fruits and vegetables will grow disruptively (Exhibit 8),
with demand concentrated in six crops—mango, tomato, potato, pomegranate, onion and
grapes. By 2025, these six crops will account for around 65 percent of the incremental
produce value, through a combination of exports and food processing (Exhibit 9). In
pulses, the demand will be driven by a need for packaged and branded pulses, fortified
pulses and the market for ready-to-eat snacks, which is growing at 20 percent CAGR.

Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025 7
 Exhibit 8

4 key factors that could make F&V an interesting value chain in terms
of opportunity for private sector
Opportunity areas

▪ Rol for farmers for F&V ▪ F&V domestic consumption

crops is 2x to 3x compared growing at 4% p.a. (volume
to other field crops growth) in last 5 yrs.
▪ F&V acreages have grown at ▪ Only 2% of F&V is processed in
3% p.a. in the last 5 years India (compared to 30-50% in
developed countries)
Potential to Headroom
increase to grow
farmers’ 4 1 food
income High ROI Growing processing
for farmers demand,
leading to trade
growth in volumes and
acreages domestic
consumption

▪ Fruits and Headroom for Low levels of

Vegetables efficiency government
account for improvement regulations
~40% of overall (yields and
▪ No MSP
Huge food wasted in losses) ▪ Subsidies for
opportunity India food processing
for input ▪ 33% loss across fruits ▪ Most Ripe for
players to and vegetables is 3 2 governments’ PE/VC
work on contributed by bananas, have abolished investment
seeds and onions, and tomatoes APMC - market
soil health ▪ Yields are lower than western linkages
averages across all fruits and
vegetables categories

SOURCE: FaoStat, FAO 2011 food balance data; World Research Institute, 2013; Rockefeller foundation –
Food Loss and Waste

8 Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025
Exhibit 9

Within F&V, six crops to contribute ~65% of incremental produce

value
2015 2015 Last 5 Amen- Total
vol- val- year ability to Projec- market
ume 1 ue 2 growth food Amen- ted Incremental produce size in
(mn (US$ rate process- ability to growth value 2 in 2025 2025 Key end
Crop MT) mn) (%) ing exports rate 3 (US$ mn) (US$ mn) markets

Juice, pulp,
Mango 19 820 5% 8% 1,200 1,800
nectar

Ketchup,
Tomato 18 550 8% 11% 1,100 1,600
purees

Raw, chips,
Potato 46 1010 5% 7% 1,000 2,000
frozen

Pomegra
2 190 12% 18% 900 1,000 Shelf, juice
-nate

Raw,flakes,
Onion 20 520 7% 10% 800 1,300
powder

Grapes 3 190 11% 15% 600 800 Wine, shelf

Juice, nectar,
Orange 8 390 5% 7% 500 800
shelf

Banana 30 1010 3% 4% 400 1,500 Raw, chips

Guava 4 130 10% 14% 400 500 Raw, juice

Peas 4 150 8% 11% 300 400 Frozen

Apple 2 230 3% 5% 200 400 Juice, cider

Brinjal 13 300 4% 6% 200 500 Raw

Papaya 5 140 7% 11% 200 400 Raw, shelf

Raw, Juice,
Others 82 2600 2% 3% 1,000 3,600 Nectar,
Frozen,
Shelf,
Canned,
Total 256 8230 4% 7% 8,700 16,200 Export

1 Refers to 3 year rolling average

2 At FY 15 wholesale prices
3 Projected Growth consists of Historical growth trends combined with the crops outlook to processing and exports
obtained though expert interviews and government policies

SOURCE: Ministry of Horticulture, APEDA

Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025 9
 2. Invest in the fast-growing cold chains and cold-storage markets: Despite current
challenges, this segment is expected to enjoy significant growth on the back of rising
food demand, supply deficits and improved market economics. The cold chain market
is expected to double in size to reach USD 7 bn to 9 bn by 2020 (Exhibit 10). Cold chain
players could invest in alternate energy technologies like solar-powered systems, they
can explore chemical treatments to extend the shelf-life of produce, set up pack houses
and reefer transport. They could also optimize the use of existing facilities by opening
them up for multiple crops instead of a single crop or product.

Exhibit 10

Cold chain market is expected to reach US$ 7 bn to 9 bn by 2020

Storage Transport

Temperature controlled
logistics market in India is Growth in cold chain market is expected to be driven by
expected to grow by 12-14% the dairy segment
Expected annual
Market size1 Market size by product category 2 growth rate3
US$ mn US$ mn Percent

Dairy and
1,850 900 750 1,650 15-18%
Dairy Pdts.
2013 3,150

1,300
Meat &
200 600 800 10-12%
Seafood
+13% p.a.

Fruits and
200 500 700 7-9%
Vegetables
2020 3,200 4,120 7,320

Total 1,300 1,850

Key drivers of growth

▪ Government support for cold chain infrastructure
▪ Growth in organized retail
▪ Growth in food processing

1 Only includes cold chain for agri use – does not include pharmaceuticals, ice cream and QSR markets
2 Includes storage and logistics
3 Expected growth rate till 2020

SOURCE: Euromonitor; TechNavio insights; Frost & Sullivan report

3. Establish market linkages between farmers and buyers: This will establish
transparency in pricing and better value, especially for perishable products. It could also
help to increase farmer incomes by at least 8 to 10 percent. In addition, it will enable the
downstream players to source more effectively by eliminating intermediaries.

10 Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025
 Farmer–producer organizations (FPOs) are already aggregating supply and supporting
farmers towards this goal.

4. Unlock a large opportunity through digital and analytics: Digitization and analytics
will play a critical role in building India’s farms of the future (Exhibit 11). Potential
disruptions that could unlock value through the food-chain are:

—— Precision farming including integrating field data, weather patterns to drive agronomic
advice to farmers and yield forecasting

—— Efficient farm lending with electronic applications, disbursal of loans, insurance

payouts linked to weather, field data, Direct Benefits Transfer in agriculture

—— Universal platform integrating farmers and wholesale markets, to provide timely

information for price realization

—— Supply chain management

—— IoT based advanced analytics in manufacturing plants to improve availability,

throughput and save costs

—— Commercial excellence in micro-markets, pricing and channel management.

Exhibit 11

Digital and advanced analytics applications across the value chain

Electronic Insurance Precision Online Predictive Real

applications, payouts farming market- pest time
and disbursal directly integrating field places manage- yield
of loans, data linked to data (using IoT for ment fore-
backed credit weather and sensors), equip- using big casting
risk field data weather data, ment data
assessment aerial imagery, rental analysis
etc.

Selling and
Financing Farm inputs Farming
distribution

Information Tech Online Price RFID

(weather, enabled agri market- discovery, enabled
crop -extension places for marketing supply
advisory) workers – agri-inputs and sales chains with
through e.g., remote through web end to end
text/chat/ consultation platform track and
calls to farmers trace of
produce

Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025 11
 5. Invest in ecosystem partnerships for disruptive solutions: A slew of startups
are playing in one part of India’s agriculture value chain to disrupt prevalent business
models. In response, larger players could partner with them or incubate their own new
businesses. The effort would ultimately result in innovative solutions for farmers.

6. Enter the agriculture services market: Rising wages, growing awareness of farm
mechanization, and easier credit lending to farmers will all boost the market for a shared
farm-economy. There is potential to create a marketplace for equipment rentals. Given
the small and scattered land holding patterns in Indian agriculture, the services market
is bound to increase in the years to come. Such agriculture services will increase the
adoption of farm mechanization, which in turn could increase farmer income by around
5 percent.

7. Offer agriculture financing and crop insurance to strengthen the ecosystem:

—— Invest in end-to-end value chains, particularly in F&V and pulses, where demand is
expected to grow disruptively.

—— Provide innovative equipment-financing models to farmers through partnerships with

manufacturers, weather forecast agencies, and digital partners.

—— Offer easy financing for FPOs for community infrastructure for storage and
transportation.

—— Create digital ecosystems for financing and crop insurance.

The government’s pivotal role

The government can continue to support businesses to create value in the agriculture
sector. In particular, it could enable the shift towards improving farmer incomes through a
focus on six crucial areas:

ƒƒ Modernization of farm production, agriculture input markets, storage, and market access
to serve local, national and export demand

ƒƒ Enable portfolio shift towards high value crops through differentiated value chain strategies

ƒƒ Shift in focus from primary production towards processing and retail

ƒƒ Increase in land and labour productivity in agriculture

ƒƒ Greater private sector engagement

ƒƒ Concrete projects and well-defined performance indicators to track transformation and

collaboration between stakeholders.

  

An incremental agricultural GDP of around USD 175 bn could help almost double the
farmers’ income in the next 7 to 8 years. This will require all stakeholders to tap emerging
opportunities. Understanding current megatrends in this context can help to chart a clear
course of action towards achieving these aspirations.

12 Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025
Exhibit 12

Focusing on the 7 investable themes could almost double the

farmers' income by 2025

Contribution to doubling farmer income

Index

Agri GDP growth effect Price and cost effect

185
4-5%
8-10%
10-12%

25%

35% 185%
100%

Farmer F&V yield Other crops Wastage Direct market Agriculture Expected
income and acreage yield and reduction in linkages3 svcs mkt level of
level in shift effect1 acreage production leading to farmer
2015 effect1 and post adoption of income
harvest2 farm mech4 in 2025

1 Due to increase in yield because of better farm inputs and digital & analytics initiatives as well as shift of acreage to
higher value crops
2 ~50% wastage reduction from current levels by supply chain improvements and cold storage developments
3 Connecting farmers directly to end consumers/market by removal of intermediaries
4 Assuming ~20% reduction in labor cost as a result of farm mechanization

Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025 13
 Notes

14 Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025
Notes

Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025 15
 Notes

16 Harvesting golden opportunities in Indian agriculture: from food security to farmers’ income security by 2025
July 2017
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