Sunil Jain: 'Contracting' growth

Look at India’s agriculture in overall terms and you get the impression not much is changing. Indeed, landholdings are getting more fragmented (average farm sizes are down from 2.2 hectares in 1970-71 to 1.06 hectares in 2003, and four hectare-plus farms are now just around 30 per cent of the total) and this reduces productivity. Yet, according to Ashok Gulati, IFPRI’s director in Asia, a sweeping change is taking place in the sector. For one, the entry of major corporate players has changed things dramatically — both in terms of inputs (think of the input and extension services provided by ITC's e-choupal) as well as at the output-end in the form of organised retail. Food and grocery retail has grown 70 per cent annually in the last five years.

In just six years, thanks to Bt cotton, cotton output has doubled and more than 80 per cent of all cotton grown is Bt — while there is one public sector institution and one university involved, there are 30 private sector firms selling Bt seeds. In grapes, Gulati goes on to say, a Mahindra firm entered the business in 2005 — today, it exports nearly 50 times as much as when it began and is the largest exporter of grapes in the country. With a host of such instances, Gulati argues, India’s farm sector growth is contingent upon allowing more private sector players — contracting is an obvious solution (see graphic) since farmer profits rise significantly, but anything which reduces the number of middlemen (as contract farming does) serves the same purpose.