Topic No.

02: Need and importance of Agribusiness in Indian economy and Agricultural policy

In the last four decades of 20th century the face of agriculture turned from traditional to
commercial, which got spurt with the advent of green revolution in crop production, white revolution
in livestock farming towards milk production and blue revolution in fisheries. The commercial
agriculture calls for specialized production, post-harvest management, expansion of processing,
transportation, packaging activities and positioning of products both in the domestic as well as
international markets. Every year about 20 – 30 per cent of crop is wasted at farm level in India due
to improper handling, spoilage, floods, droughts, pests and diseases and lack of knowledge of
postharvest technologies. The policy of liberalization and the establishment of WTO have created
more opportunities for globalizing agriculture. The agribusiness sector encompasses the many
activities of agricultural sector under one umbrella like integration of agricultural inputs, agricultural
productions, agro processing, agricultural marketing and trade which add value to the agriculture
produce. Nowadays, it has become one of the most important fields in the developing country like
India to boost up its economy and taking care of globalization opportunities and challenges.
Agriculture is fast changing into a business opportunity and with these trends after harvesting the crop
it is processed, packaged, transported and exported to the national and international markets.
Agribusiness is very important for developing countries like India to capitalize the benefits of
globalization and overcome challenges to enhance economy growth. Today, agriculture has achieved
commercial importance and changed from subsistence farming to commercial farming, import
oriented to export oriented, supply driven technology to demand driven technology etc. New inputs
and new technologies are hitting market every day. Only 16 per cent of total food products are being
processed in India, whereas 35 per cent food is wasted during packaging and transportation. The
market for processed and packaged food products is increasing day by day and therefore there is a
vital need of trained manpower in agribusiness sector. Agribusiness has capacity to produce and
supply the food for the fast-growing population in sufficient quantities and can mitigate the problem
of food crisis. Agribusiness management is necessary for developing trained manpower, to create
business opportunities, reduce poverty through employment generation and industrial growth for the
true development of Indian economy. 8 Agriculture has now blossomed into mature industry that
includes input supply, production sector, processing and marketing sectors. Each system is dependent
on other two for its development and growth. The farmers brought spectacular changes in the recent
period by adopting new technologies, manifesting large scale commercialization and diversification in
crops and varieties, increasing area under cash crops, floriculture, horticulture and high-tech
agriculture etc. In response to new economic environment brought by the process of liberalization,
privatization and globalization (LPG), the Indian farmers in particular are not only serving the domestic
market but have their access to the international market. All the agribusiness enterprises in the
country have good economic potential due to relatively favourable Agro climatic conditions. The
agribusiness aims to capture market and maximize profit through value addition in fruits, vegetables,
milk and honey. Therefore, the recently drafted National Agricultural Policy (NAP) has accorded
priority for promoting agribusiness activities at different levels for capturing growth in agriculture and
emphasized on market led production approach through agribusiness management.

According to NITI (National Institution for Transforming India) Ayog, agriculture sector so to speak
agribusiness activities could be a silvering for the Indian economy. According to NITI Ayog Indian
economy is to grow at a rate of 3 percent for the year 2020-2021 which is influenced by agribusiness
activities. The policy ensures to create an ecosystem where farmers and Agri traders enjoy the
freedom to purchase and sell the farm produces outside registered “mandis” under state APMCs
(agricultural produce market committee) for full price realization.
 Three bills were passed by government of India,

1.Farmers’ produce trade and commerce (promotion and facilitation)

2. Farmers’(empowerment and protection) agreement on price assurance

3.Farm services bill and essential commodities(amendment) bill

Bills propose to create a system in which farmers and Agri-traders can sell their products outside the
‘mandis’ and also encourages interstate trade and this also proposes to reduce cost of transportation
and marketing.

Bills formulate framework on the agreements to enable farmers to engage with agribusiness
companies, retailers, processors, wholesalers, exporters for service and sale of products sale of future
farming produce at pre-agreed rate, also while giving the farmers access to modern technology and
better input. Provides facilities for electronic trading thus reducing cost of marketing.

Transfer of risk of market unpredictability from farmers to the sponsors.

Marginal farmers and small farmers with less than five hectares of land are to gain via aggregation and
contract (marginal farmers and small farmers account for 86% of total farmers in India).

Bill removes cereals and pulses from list of essential commodities and attracts FDI (foreign direct
investment).

Distinctive Features of Agri-business Management:

The important distinctive features or the principal characteristics of agribusiness are as follows:

1. Management varies from business to business depending on the kind and type of business. It varies
from basic producer to brokers, wholesalers, processors, packagers, manufacturers, storage
proprietors, transporters, retailers etc.,

2. Agri-business is very large and evolved to handle the products through various marketing channels
from producers to consumers.

3. Management varies with several million of farmers who produce hundreds of foods and livestock
products

4. There is very large variation in the size of agri-business; some are very large, while many other are
one person or one family organization.

5. Most of the Agri-business units are conservative and subsistence in nature and family oriented and
deal with business that is run by family members.

6. The production of Agri-business is seasonal and depends on farm production. They deal with
vagaries of nature.

7. Agri-business is always market oriented.

8. They are by far vertically integrated, but some are horizontally integrated and many are
conglomerated.

9. There is direct impact of govt. programmes on the production and performance of Agri business.

People in many countries flock to the cities, complicating the problem of food, transportation,
distribution and marketing. In the developing new nations, this marks the beginning of a shift from
subsistence farming to commercial agriculture. The commercial agriculture cannot exist without the
support of Agri-business and other industries.

The hungry countries are usually those with the highest percentage of their people in farming. This is
because of their farmers are still close to subsistence farming. The role of agricultural economist is to
advice farmers on the commodities to be produced and the most economical methods of combining
resources so as to maximize profits from the farm.

Related links:

https://www.youtube.com/watch?v=nGTZn6bLrac

https://www.youtube.com/watch?v=Rc8DMBiomm0