© 2009, IMA India IMA RReesseeaarrcchh ffoorr SSttrraatteeggyy IInnddiiaann AAggrriiccuullttuurree CChhaalllleennggeess aanndd PPrroossppeeccttss IMA India wwwwww..iimmaa--iinnddiiaa..ccoomm © 2009, IMA India IMA RReesseeaarrcchh ffoorr SSttrraatteeggyy DDiissccllaaiimmeerr This document has been prepared by International Market Assessment India Private Limited. It provides an analysis of the key challenges facing the agricultural sector in India and IMA’s assessment of the sector’s prospects in the years ahead. This report is not intended for decision making purposes. Whilst the information contained in the following pages is accurate to the best of our knowledge and belief, IMA India cannot assume any responsibility for the outcome of actions initiated, or decisions taken, as a result of this document. Moreover, IMA’s assessment is based on conditions as they existed at the time of writing this report, and these may no longer be applicable consequent upon changes in political, economic or trade conditions within the Republic of India or elsewhere. The contents of this report are the intellectual property of IMA India and are copyright protected. Unauthorised copying, reproduction or distribution of the information contained in this report would amount to an infringement of law and would invite applicable penalties, as per Indian laws. wwwwww..iimmaa--iinnddiiaa..ccoomm © 2009, IMA India IMA RReesseeaarrcchh ffoorr SSttrraatteeggyy CCoonntteennttss 1. About IMA India 4 2. The Scenario Planning approach for building 7 strategy: an overview 3. Indian Agriculture: challenges and prospects 12 4. Summary and drawings 40 wwwwww..iimmaa--iinnddiiaa..ccoomm © 2009, IMA India IMA RReesseeaarrcchh ffoorr SSttrraatteeggyy II.. AAbboouutt IIMMAA IInnddiiaa wwwwww..iimmaa--iinnddiiaa..ccoomm © 2009, IMA India IMA RReesseeaarrcchh ffoorr SSttrraatteeggyy WWhhaatt IIMMAA DDooeess…… •• UUnnddeerrttaakkeess iinn--ddeepptthh mmaarrkkeett ssttuuddiieess aanndd ooppppoorrttuunniittyy aasssseessssmmeennttss for individual companies: leveraging a full range of business and market research capabilities •• PPrroovviiddeess oonnggooiinngg mmaarrkkeett iinntteelllliiggeennccee aanndd rriisskk aasssseessssmmeennttss to country managers; offers research- based interpretations and top-level forecasts of the operating environment in India: economy, politics, key sectors, emerging business issues, etc •• PPrroovviiddeess cclloosseedd--ddoooorr ddiissccuussssiioonn ppllaattffoorrmmss that enable focussed and high quality intellectual exchanges between senior executives on current and strategic business issues wwwwww..iimmaa--iinnddiiaa..ccoomm © 2009, IMA India IMA RReesseeaarrcchh ffoorr SSttrraatteeggyy FFoouurr BBuussiinneessss SSttrreeaammss •• RReesseeaarrcchh aanndd AAddvviissoorryy SSeerrvviicceess – Proprietary studies for individual clients across issues and sectors – Leveraging a unique methodology comprising extensive desk analysis complemented by expert insights obtained from internal and external domain specialists •• PPeeeerr GGrroouupp FFoorruummss – Membership-based executive briefing and research services: a platform for obtaining country intelligence and exposure to authoritative minds; access to top-level India research – An extensive corporate network: a forum for sharing experiences and learning from peers and pioneers •• CCoonnffeerreenncceess aanndd BBuussiinneessss MMeeeettiinnggss – Closed-door Roundtables for senior executives – Driven by research-based agendas and intense interaction •• CCFFOO CCoonnnneecctt: first-of-its-kind thought leadership journal for CFOs wwwwww..iimmaa--iinnddiiaa..ccoomm © 2009, IMA India IMA RReesseeaarrcchh ffoorr SSttrraatteeggyy IIII.. TThhee SScceennaarriioo PPllaannnniinngg aapppprrooaacchh ffoorr bbuuiillddiinngg ssttrraatteeggyy:: aann oovveerrvviieeww wwwwww..iimmaa--iinnddiiaa..ccoomm © 2009, IMA India IMA RReesseeaarrcchh ffoorr SSttrraatteeggyy UUnnddeerrssttaannddiinngg tthhee ddrriivveerrss ooff aaggrriiccuullttuurree Policy factors • The performance of the agriculture Macro- economy sector depends on several drivers, which, rather than impacting the Market Global forces factors sector in isolation, interact with each other and also depend on sub- drivers, consequently strengthening Climatic Technology factors or weakening specific trends • The key drivers that directly impact Performance of the agriculture sector output can be grouped into 6 categories – Technology (farming and crop technology) – Government policy (availability of credit, crop specific programmes, etc) – Cropping pattern (which depends on profitability, awareness, etc) – Environmental factors (water availability, soil degradation, climate change, etc) – Market forces (market openness, pricing, transparency, integration with downstream sectors) – Global factors (supply-demand, trade norms and restrictions, etc) Source: IMA research and analysis wwwwww..iimmaa--iinnddiiaa..ccoomm © 2009, IMA India IMA RReesseeaarrcchh ffoorr SSttrraatteeggyy BBuutt tthheeyy ccaannnnoott bbee eexxaammiinneedd iinn iissoollaattiioonn…… One factor alone – cropping patterns – is a function of several inter-related drivers and sub-drivers Cropping pattern Cropping intensity Changes in land use Input usage intensity Profitability Irrigation Quality of land New crop Awareness Contract farming technologies Market price Yield Cost of cultivation Availability of Crop-specific Contract credit/insurance programmes farming Demand Input usage Labour cost supply (fertiliser, seed, CP Govt policy on Input cost Food retail situation products, etc) rural finance Govt policy on crop focus Market Cost of fertiliser, Technology openness electricity, water, Penetration of Economic (Hybrid, GM crops, etc financial sector Demand growth etc) Govt policy supply on trade Cost of living Penetration of situation Urbanisation Economic (CPI AL) media/IT growth Procurement Political by food Alternative outlook Public & private Policy on CF Consumption processing occupation investment in R&D pattern industry Migration Source: IMA research and analysis wwwwww..iimmaa--iinnddiiaa..ccoomm © 2009, IMA India IMA RReesseeaarrcchh ffoorr SSttrraatteeggyy IInnddiiaann aaggrriiccuullttuurree iiss nnoott ‘‘oonnee’’ ccoonncceepptt • The dynamics for each crop are different in each state – yields, acreage, farmer awareness and psyche, cost structures, Government infrastructure – Upstream issues vary substantially – labour availability, credit, soil fertility and agronomy, irrigation, input and technology availability, training – Downstream markets are even more varied across states and crops – market openness, procurement chains, processing infrastructure, food retail, etc HHeennccee,, tthheerree iiss aa nneeeedd ffoorr aa ggrraannuullaarr aasssseessssmmeenntt ((bbyy ccrroopp,, bbyy ssttaattee//rreeggiioonn,, bbyy iissssuuee)) iiff aa bbuussiinneessss oorr iinnvveessttmmeenntt ddeecciissiioonn iiss aatt ssttaakkee Source: IMA research and analysis wwwwww..iimmaa--iinnddiiaa..ccoomm