Implications of New Supply Chains on the Indian Farm Economy: An Overview

The agri-food chains in the country is in a rapid transformation stage and have been broadly moving in the historical patterns observed in the other developing and developed countries with some unique features. The gradual liberalisation of agricultural marketing coupled with the recent decision on foreign direct investment has the positive impact of correcting earlier neglect of agricultural marketing and encouraging private initiative. The present volume draws on some fresh evidences from both India and abroad to contribute to a more informed debate on the likely impact of supermarket diffusion on smallholders in the Indian context. All the case studies presented in the volume show that the farmers get higher returns by selling to the supermarkets. The problem however lies in inclusion of resource poor farmers. The evidence emerging from this volume is thus mixed, indicating that the question of whether smallholder cultivators manage to participate in the supermarket driven agri-food system is context specific and may well be conditioned by geography. However, all the case studies have taken note of continued dependence of farmers on traditional wholesale market. The small producer companies, encouraged by the government to strengthen the bargaining power of smallholders, could not effectively link them to the modern chains and need infrastructural and working capital support. The government needs to tread cautiously and formulate policy framework using the lessons from other developed and developing countries in view of the issues of livelihoods of millions of small farmers. Direct procurement by supermarkets can be encouraged through other means like investment support for construction of distribution centres, cold storages and facilities for testing products procured. Government can also encourage cooperatives selling to supermarket through incentives like VAT exemption. Review of competition laws and strengthening the traditional retail sectors are the other important measures.