With every passing year, more and more Multinational Companies (MNCs) across the globe are entering the Indian market to sell value-added agri products that fetch far higher prices than what their India-sourced raw commodities fetch. For e.g. a popular brand’s 250 gms. packet of Cornflakes, with minimal fortification, sells at a 3-4 times higher price than raw cornflakes. The same goes for Imported Fruits like Apples, Oranges and Grapes that command a premium of 50-100% over the ones produced in India.
One of the primary reasons for this price disparity is India’s rapidly growing middle class that is led by an upwardly mobile, young population with a penchant for premium imported food products.
As depicted in the below chart, it is estimated that by 2025, India’s middle class would be 59 crore larger than the entire population of the United States and by 2030, India will have the world’s largest middle class.
Source: United Nations, McKinsey
As organisations around the world line up on the Indian shores to woo India’s middle class, more needs to be done by the Indian agri policymakers to entice Indian companies to tap this captive population with a high disposable income.
While there is no denial of the fact that we need to export some of our raw commodities, it would not be out of place to say that exporting raw commodities and importing value-added products that fetch higher prices may eventually be counter-productive.
The need of the hour is to introduce policies, provide facilities and ensure seamless availability of critical infrastructure, like Power, at globally competitive prices to Indian entrepreneurs and corporations so that sooner than later, India becomes a global hub for competitive value-added food products and a globally competitive supply chain. The supply chain must ensure that product integrity including fresh, chilled and frozen produce is not compromised. E.g. Apples from our own country are not as crunchy and juicy as imported Apples, mainly because the Apples that are produced in India go through significant temperature and handling abuse. Eventually, its the Indian Apple growers that lose out to the global Apple growers. The story is no different for Indian Citrus fruits, Passionfruits, Litchies, etc. All this leads to lower realization for the Indian growers.
In an era of globalisation where India is fast redeeming its rightful place as a healthy nation, ‘Made In India’ food products should actually command a premium and not a discount!
While our Agriculture Export Policy should definitely encourage exports of some of the raw commodities to achieve the Hon. Prime Minister’s vision of doubling farmers’ incomes by 2022, we should introduce a similar policy for pulling the purse strings of Indian consumers who can pay a premium for premium agri products within the country.
With a diverse population having varied tastes, culture, and other sensitivities, interstate moment of different food products need to be encouraged through policy measures as well as financial incentives to Indian companies.
The role of market infrastructure institutions like Agri Commodity Exchanges for hedging the prices must be a part of the policy initiative so that the companies using the agri produce, either as part of reselling or processing, do not lose out to their global peers who use the same mechanism more effectively. Initiatives of NCDEX that are focused only on contracts of Indian produce should be encouraged. This would give us a good hedging tool, thereby better managing the risk and thus, making Indian produce more competitive.
The country also needs more focused e-spot market platforms to support the Commodity Exchanges. We need agri market initiatives that can cohesively bring together an ecosystem of players who can produce top-notch agri products that can be confidently sold at a premium in India. While NCDEX e Markets Ltd. (NeML) on its own is introducing initiatives like FFresh, we surely need a big fillip to sell Indian products at a premium thereby helping Indian farmers realize better prices than ever before.