FDI and its prospects in agriculture

3. 1
•To understand the concept of FDI in Indian
Agriculture & allied sectors economy
2
• To understand the pros and cons of
FDI on Indian farmers
3
• To analyse and understand the
compatibility, scenario, trend, TOWS matrix
and changing policies with respect to farmers
Outline Of Presentation
1

4.  A company from one country making a
physical investment into building a
factory in another country.(DIPP, 2014)
 Investment made to acquire lasting
interest in enterprises operating
outside the economy of investor.
What is FDI?
2

5. FDI policy, 2000 permitted 100% FDI in agricultural
sector under Floriculture, Horticulture, Development
of Seeds, Animal Husbandry, Pisciculture,
Aquaculture, Cultivation of Vegetables & Mushrooms
and services related to agro and allied sector in the
automatic route.
Tea sector, including plantation 100% FIPB
(Foreign Investment Promotion Board)
Budget 2016: 100% FDI to be allowed in food
products produced and marketed in India
FDI is not allowed in any other agriculture sector
(Source: DIPP Circular 2014)
FDI in Agriculture Sector
3

6.  To increase growth of the Retail sector in
India especially unorganized sector
 Push to infrastructure, improvement of
supply chain
 Push to productivity - The Farming
Community in India
 Boost Human Development Index.
 Upgrade technology, employment and
revenue
Why FDI in India ?
4

7. Eyes on FDI
inflow…
6 Source: DIPP,GOI 2015

8.  Canada is ready to partner with India in processing
industry in pulses and canola.
 Fiji in rice, horticulture, fisheries and animal husbandry.
 Tafe Motors and Tractors Ltd. (TAFE) has invested
around US$ 140 million by US- based AGCO
Corporation.
 ADAMA Agrochemical plans atleast US$ 50 million in
India
 Oman India Joint Investment Fund, SBI bank & State
General Reserve fund (SGRF), has invested Rs. 95 crore
in Gujrat
 In this direction, 25000 crore for RIDF and Rs. 5300
crore for micro irrigation programme (Union budget
2015-16).
Trend of FDI in year 2015-16
in Agriculture in India
7

9. 8
Source: "FDI inflows in services sector increased by 46 per cent in 2014–
15: Department of Industrial Policy and Promotion data"

10. Why to talk about
agriculture and FDI?
Farmers are illiterate….
Will they understand its
PROS & CONS?
Future
prospects….And
policies
We are close to
farmers…. Psychologist
as well as situation
analyst……. What is our
strategy?
Indian money in hand of
others…. Is
development possible??
If FDI in India, When
they will leave??
FD
I
Finding the relevance
9

11. Source: "Eyeing big-billions in 2015, government rolls out FDI red carpet".
The Economic Times. 28 December 2014. Retrieved 11 October 2015

12. FDI in Retail
Sector
Rs18,673 billion (3% of global
retail)
22% GDP, 8% Employment Retailers belong to an and FDI
is Dinosaur.
 But… two sides of coin
 “LPG”
 “Farm to Fork” by integrated storage, cold chain &
transport link.
Source: Ministry Of External Affairs, GOI, 2015
11

13. FII: Investor having stake < /=
10% in any company.
FDI: Having > 10 % stake in a
company
What is FDI, FII
12

14. Research studies
13

15. FACT FILE
India received $19.78 Billion FDI after PM visit in FY 15
May 2001:100% FDI in cash & carry under govt.
approval zone
2006: 51 % FDI permitted in multi brand retail
2011: 100 % FDI in single brand retail permitted
FY 2015: 21.04 Billion $ FDI. Max FDI- 2011-12: $ 33
Billion
14
Source: Department of Industrial Policy & promotion, GOI 2014

16. POLITICS…. A ballot is
stronger than a bullet
 Divide and rule strategy: Let Trader’s and
farmers fight. It’s a ploy. As FDI in retail will
benefit farmers. It has divided India’s social,
political and trading classes.
thehindubussinessline.com
 Big retailers' biz model:- Grow bigger and
bigger till the market becomes an
“oligopsony”
 Punjab example is wrong : “the fallacy of
composition”
times of india /2-09-16
17

17. …Politics
Sorry example of Mexico : “vassal state”.
NAFTA has driven over 1.25 million farmers.Illegal
immigration to the US, has more than doubled to
nearly 6 million Mexicans.
 Subsidies prop farming: If big foreign retailers
are expected to shore up our farmers as
claimed by the publicity reports. where these
retailers have spread their wings the widest??
Even a fraction of such a displacement , out from
misguided policies, will cause social disruption
on a vast scale.
18

18. • Retail market worth $ 500
billion will grow to $1.3
trillion by 2020
• Organized retail increase
by 20-25 % (present status-
5-7% only)
• Generate off-farm jobs for
50-60 million low-skilled
workers globally
• Minimize food wastage
(presently 20-30%) in India
Seeing
FDI
As
future
18
10
Source: R. Nagaraji. "What Has Happened since 1991- 15? :
Assessment of India's Economic Reforms"

19. FDI and agriculture on one
horizon
A. Contract Farming:
a. Provision of seeds, fertilizers etc
b. Risk of price lies with the buyer
c. Farmers get access to credit
d. training, teaching best practices, scientific
farming
B. FDI in machinery: more affordable, decreased
rent
21

20. …FDI and agriculture on one horizon
C. Food processing industries uprise
a. Increase in farm gate prices
b. Cold Storage facilities, increase marketed
surplus
D. Generate higher income: Shift in food
consumption pattern harmonized & encouraged by
processing industry.
22

21. To whomwill it affect?
23

22.  Farmers may shut down their farms due to
corporatization of the farming sector.
 The retailers will have an enormous control
over their suppliers and indirectly affecting the
farmers.
 structure would result in reduced farm prices
and thus, closure of farms.
Disastrous consequences on the Indian
farmers as buyers will have total control over the
sellers …
Adverse Effects of FDI on Indian Farmers
24

23. … Effects of FDI on Indian Farmers
 Big retail outlets will enjoy monopoly.
 Small farmers will not have much option to sell
their crop in the market.
25

24. Effect of FDI for Marginal
and Small Farmers
 Lower share value: dictating production output
by large retailers
 Farmer’s suicide: Due to lack of remunerative
price, inefficiency in value and supply chain.
 Resulting altered crop selection: Discretions
made on them.
 Stagnant crop price will prevail
…..
24

25. ….
 Small farmers- 83% of the sector
Two routes:
 A) Form producer companies and enjoy higher
revenues
 B) Abandon small scale farming, accept jobs in
retail, food processing and supporting industries
Effect of FDI for Marginal and Small Farmers
25

26. FDI & Large farmers
Contract
farming &
high profit
Build
current
knowledge
base &
develop
customer
base
Technology
upgradation
First to
whom
industry
will
contact
Efficiency
benefit
remains with
large farmers
only
26

27.  Creates gap between demand & supply: Pay
higher price initially, latter make execuses…?
“Customer pays the same”
 FDI to large extent eliminate middle man roles.
MIDDLE MAN
28

28. FDI & Dairy Farmers
 FDI is not in dairy sector in India presently.
PROS
 Provide Upper hand in technological advancement.
 Dairy Industry thus appear like a treasure island to foreign
investors, to explore …
 CONS
 Farmer’s share in consumer rupee will decline. Eg. In USA it
declined from 52 %1996 to 38 % in 2009. In India farmer gets
70 % share.
 Integration with global retail chains lead to turbulence.
 In last 2 years, farmers got price hike over 30 per cent.
27
Source: Gupta, P.R., ed. 2015. Dairy India 2015, p. 21. New
Delhi, Rekha Printers Pvt. Ltd.

29.  Get rid of sick PDS with inherent leakages and
strenghthen supply chain.
 Contract farming: Thums up to agri-credit and
insurance.
 Espirit the corps:motivated to team up with co-
operatives allowing mechanization and multiple
cropping.
 An era of Indian Food Processing Industry
……..
Pros
29

30.  Opportunity to build a customer base
for agriculturally rich states.
 Scope for north-east farmers in
horticulture.
 Elimination of middle man from the
system.
….Pros
30

31.  Kirana walas(not directly related to farming) and
sabjiwala can get seriously hurt.
 No regulatory measures in Indian bill to avoid
flooding of foreign grain eg. Indonesian basmati
rice.
 Due to monsoon dependent agriculture contract
farmers will be left stranded and have to depend
on MSP due to consecutive bad seasons.
Cons
31

32. Illiterate famers affected by monopolistic
practices and parasitic surplus extraction.
Aggressive pricing, as result of it offering
pittance
Increase in wage and affecting margin of
farmers.
“Poverty in midst of plenty” As the economy
expands dollar amount is challenge ……….
…cons
32

33. …Cons
Does impact farmers, indirectly e.g. land
acquisition.
Increase in wage : Due to shift of landless
agriculture laborers to other sectors
Affecting marketing margin of farmers
33

34. Eliminatio
n of middle
man
Unemployment
Loss of buying
power of middle
class
Flaw: They will
recruit middle man
Reducing
customer
base
Thrashing the
Indian economy
Inertial behavior of
customer: Decline in
demand, so take a exit
…Cons
34

35.  Monopoly of Monsanto: One can be jailed if
produce other than BT cotton as cotton can be
related to cotton farmers of Vidharba district
commiting suicide.
 Monopoly of sugar factory Varanasi : proves 25
million metric tonnes of sugar will be produced
& Rs. 150 billion goes just as commission if
considered throughout India.
Predicted effects from case study
35

36.  Opportunity to encourage diversification
from cereals to fruits, vegetables & high
value products.
 Food processing industries & linkages.
 Exploiting employment potential of food
retail sector, aggregators and low level
processors
 FDI will control Food Inflation by focusing
on backward linkages
TOWS matrix
Strength-Opportunity
36

37.  Capital Infusion
 Improvement in Supply Chain: Also it will
arrest wages due to economics of scale
 Small retailers will not be crowded out
but become more innovative/
contemporary
 Growing economy will increase
purchasing power & vice-versa
 Better remuneration with additional
marketing window to farmers
… TOWS matrix Strength-Opportunity
37

38. Hesitant welcome due to fear of
loosing unorganized sector
management & control
Bringing Knife to gunfight approach
Uniform licence regime established
will drive indian retailers away from
permit. ….
Weakness- Threats
38

39.  University of California study: For every 1 new
job created by wallmart, 1.4 new jobs will be
lost in India.
 New store will kill 3 local jobs, every 2 it
creates.
 Indian retail will face problem of Chinese
competition.
 FDI will lead to unfair competition & large-scale exit of
incumbent domestic retailers (DIPP report, 2014)
 Presently Organized sector is underdeveloped & in
nascent stage to compete
…Weakness- Threats
39

40. FDI, farmers & customers :
Busting the myth
 FDI in retail will kill small retailers
(kiranas)
 All retail formats are adversely affected
by organized retail
 when FDI comes it would result in killing
business of small time kirana stores
 Potential job losses in retail sectors
40

41. FDI, Farmers & few miles
together…
1. We welcome the Government’s move to
liberalise. Experienced tea sector, we are
skeptical in coffee and rubber .
2. Organized retail provides farmers greater
security (ICRIER study, 2008)
3. Government considering FDI in processing
sector and long term relationships.
41

42. 42
Challenges
Resource
Challenge
Eqiuty
challenge
Political
challenge
Federal
challenge
Challenges to accept FDI
42

43. 43
Dispute
settlement
Stringent rules against
collusion & predatory
price
FDI approval
by central
government
as bottleneck
Code of conduct needed
for organized sector
Labour
market &
regulation
Dispute settlement
41

44. Why don’t…. We change agents
Think, thank and bring
 Retail food dollar(respective currency): Measure
the effect of retail power on farmers and farm
workers is to look at the portion of each dollar
spent on food at the supermarket -that goes
back to the farm.
 Per capita FDI inflow approach in context to
farmers to consider FDI issues
44

45. From the way with you…..
Appeal, responsibility as CHANGE AGENTS
 Firehouse research as FDI is a burning issue
 Situation analysis
 Reducing systemic distortion: Economics of
sale, market forces, international relations
among farmers
 Finding the network linkage with other policies
 It has to do more with out-reach and salience
45

46. Increase employment opportunities. FDI remains
permanent in the host country because of the
development in the infrastructures of the host
country.
FDI will have positive prospects to farmers
Farming conditions will improve, farmers will be
at better financial levels, suicides will fall down.
Farmer will get more share in consumer’s rupee,
distress sell will be avoided
46

47. …
THANK YOU