Conceptual Study of Opportunity for Rural India
For Global Competitiveness

By

Dhaval Vyas
MBA 2nd Semester
K.N.V. Institute of Business Management
Metoda, Rajkot-360 003
 

Introduction:

The Indian nation is on the move. The Indian are astir. Agriculture is blooming. Industry is booming. The legacy of self-deprecation and self-doubt inherited from the colonial period has given way to a new-found dynamism, confidence and sense of self-determination. No longer harping critically about its past, the country has come to recognize its commendable achievements and become aware of the tremendous opportunities which the future holds for even more rapid progress. This change in attitude and this emerging consciousness of opportunity are the most essential ingredients for accelerating development.

Strategy Applied By The Indian Firm To Become Global Competitor:

* Strategy to Complement the Economic Liberalization:

The international community has noted with some amazement India's impressive gains over the last five years in recovering from the severe economic problems brought on by high rates of inflation, high budget deficits, and falling foreign exchange reserves. Today the country enjoys a very low inflation rate, comfortable reserves of hard currency and an industrial growth rate approaching 12%. Exports are growing at a phenomenal rate of 24%. Employment generation has risen from an average of 4.8 million new jobs per annum in the 1980s and a low of 3 million just five years ago to a record 7.2 million last year.

These gains are remarkable and beyond the expectations of even the most far-sighted analysts. However, even if the most optimistic targets are achieved, it will not ensure that rising incomes and employment opportunities will be available to all who presently live in poverty. The problem with the economic reform package is not that it is stimulating the rapid growth of some sectors, especially industry and exports, but that it is not doing enough for the 70% of the population residing in rural areas, of which 65% are engaged in agriculture. India needs a new strategy to complement the economic reforms, a strategy designed to take full advantage of the country's agro-climatic advantages, huge tracks of cultivable land, and large internal market to stimulate a rapid development of the rural economy.

* Agriculture as an Engine for Industrialization :

Rising productivity and profitability from agriculture was a primary cause of the Industrial Revolution in England during the early 19^th Century. It raised the purchasing power of the rural population, stimulated greater demand for manufactured goods and led to the growth of industries. In America too, rising productivity in agriculture was a strong spur to the development of the manufacturing sector at the turn of the century. The rapid development of South Korea, Taiwan, and Malaysia provides ample evidence that an agriculture-driven strategy can act as a powerful engine for raising rural incomes, industrialization and employment generation. More recently, commercial agriculture has been a powerful engine for economic development in Thailand, where 70% of the population is still employed in the farm sector.

* India's Competitive Advantage in Agriculture :

India possesses four outstanding competitive advantages in agriculture comparable to those of any other country in the world. First, it has regions which are climatically favorable for cultivation of every commercially-important plant species grown in other parts of the world – ranging from temperate orchard crops such as almonds and apples to tropical mangoes and pineapple. Second, the country already possesses the largest acreage of irrigated land in the world with 40% of the potential still to be tapped. Third, the gap between present productivity and proven technological potential is very large for most crops; yet even so, the country is already among the world's top three producers of tea, cotton, sugar, food grains, groundnut, coffee, eggs and milk. Fourth, the country has an abundance of available skilled, educated, technical and scientific manpower.

* From Minimum Needs to Maximum Potentials :

During the colonial period India suffered from food deficits and severe famines. Thus, in the early days of India's Independence, it was natural for the Government to focus its attention on production of sufficient food grains to meet the minimum dietary needs of a rapidly expanding population. As a result of the Green Revolution, India defied the dire predictions of international experts by doubling its food grain production within a decade and achieving self-sufficiency in cereal crops. Since then, the agricultural sector has ceased to receive the attention it deserves. Combating the threat of famine is no longer a pressing priority, but that does not mean agriculture has fulfilled its mission.

* Creating Rural Jobs as a Counter to Urban Migration :

Agriculture is the key to generating full employment in the country. This sector not only provides on-farm employment but also generates employment opportunities in processing industries, manufacturing, food distribution and the transport sector. Although less than 3% of the US population is currently engaged in farming, one out of every three jobs in America is related to the production, processing, distribution or export of agricultural produce.

* Growing Domestic Demand :

Achieving nutritional security for the Indian masses will require a significant increase in daily intake of calories, protein, vitamins and minerals. The present nutritional gap represents a vast pent-up demand for more and better quality foods while can be translated into commercial opportunities for India's farmers. Indians consume an average of 40 grams per day of horticulture products compared to a normal nutritional demand of 90 grams. As incomes rise, the domestic market for horticulture products is projected to increase by 60% over the next six years. Overall, there is scope for placing an additional 1 million acres under horticulture crops. This will generate demand for 100 new commercial hybrid seed production units in the country.

* Tremendous Export Opportunities:

India has the potential to become a global leader in agriculture. Already agriculture exports, including textiles, have risen from Rs 10,000 crores to Rs 40,000 crores over the past five years. Grape and mango exports to Western Europe are rapidly increasing. Floriculture is a $40 billion global industry that is projected to reach $70 billion by year 2000, of which international trade in cut flowers accounts for $6 billion. India's exports of cut flower have risen from $2 million to $10 million annually over the past five years, but the potential is 100 fold greater. New floriculture projects are already springing up around the country.

* Creating Rural Entrepreneurs :

With the rights technology and management practices, agriculture offers lucrative for entrepreneurs. A ten acre farm growing a combination of cash crops such as sugar, cotton, fruits, vegetables and flowers can earn Rs. 5 lakh or more per annum for a rural family. Although it is widely believed that the problem of educated unemployment cannot be solved, a shortage of agricultural graduates is actually developing due to the rapid development of commercial agriculture. A single agri-business enterprise has recruited more than 250 agricultural graduates within the past two years.

* Need for new organizations :

The technology and capital required to bring about a second revolution in Indian agriculture are readily available and well within the country's means. But another critical ingredient is needed to galvanize the rural sector for rapid growth – organization. Indian agriculture can benefit immensely from an induction of professional management and marketing capabilities to handle processing and distribution in the post-harvest phase of agri-business. The division of the agricultural sector into 100 million small holdings has long retarded the emergence of effective rural enterprises. Baring a few bright exceptions such as the dairy and sugar industries in some states, the cooperative sector has been too encumbered by bureaucratic regulations to generate dynamic agricultural firms.

* Rural Aquaculture Estates :

Fresh water fish and prawn culture can be a highly remunerative undertaking for rural farmers, provided that they have access to appropriate technology, feeds, processing and marketing facilities. One approach is for Government to establish rural aquaculture estates and lease out small production ponds to farmers and landless labor. Each estate could consist of 20 to 25 acres of ponds, each pond .25 acres in size and equipped with machinery for aeration and drainage. Each estate should have a centralized source of pure water, power, feed and processing plant, cold storage and marketing facilities. Utilizing fast growing varieties, each pond can generate a minimum of Rs 50,000 per acre net profit per annum.

* India's Unique Opportunity:

Never before has India been poised for such rapid economic progress. Never before have the opportunities been so great or the country so ready. Now what is needed is to generate a widespread awareness of the potentials at all levels of the society – among political leaders, administrators, farmers and the corporate sector. It took the leaders of India's Freedom Movement more than half a century to achieve Independence largely because it took that long to convince the Indian elite and masses that such a goal was achievable. It has taken another half century for the Indian nation to cast off the oppressive legacy of colonialism and to rediscover its own inherent dynamism and resourceful. It need not take another half century to convert this rich capacity into material accomplishments. What is needed now is a national Prosperity Movement to realize the goal of Indian economic accomplishment. If pursued with confidence and determination, India can achieve widespread prosperity within a decade.

Conclusion:

The dream runs of Indian growth continuous. With economy growing at over 8% , foreign exchange reserve of over $170bn ; booming IT-industry Service sectors, rapidly growing domestic markets, buoyant stock markets, and Indian companies buying companies abroad, things have never looked better for India. The Indian story is indeed for real, the World Economic Forum's Global Competitiveness Index has placed India at 43^rd position out of 125 countries ahead of China, Russia, and Brazil. India's share of global services exports too has doubled in just last two years to 2.5%. The overall export growth is averaging 25% per annum over last three years. As per the latest figures, industry has locked a growth of 14.4% during November-2006 – the highest since February-1996. This has been backed by manufacturing sector, which has logged 15.7% growth. Recognizing the intrinsic worth of our strong macro-economic fundamentals, international investors are making a beeline for India.
 

Dhaval Vyas
MBA 2nd Semester
K.N.V. Institute of Business Management
Metoda, Rajkot-360 003
 

Source: E-mail March 20, 2008

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