‘Indian agri sector taking baby steps towards demand-driven value chain’

India is still in the early days of transition from a production-driven supply chain to a demand-driven value chain. The change in consumers’ diet composition and the emerging business opportunity will help drive the transition faster, moving forward.

According to S Sivakumar, Group Head, Agri and IT Businesses, ITC, a large part of Indian agriculture is still being driven by traditional and archaic production systems, which is impeding the next phase of agricultural growth.

Primary challenge

“The primary challenge in Indian agriculture is that the transition to demand-driven value chains is still in its nascent stages, barring a few pockets where the shift has taken place primarily due to the transformation brought about by interventions spearheaded by enterprises like ITC. To accelerate this, there is a need to promote development of inclusive plate-to-farm value chains through public-private-producer partnerships by combining the strengths of all stakeholders to support India’s resource-poor but resourceful farmer,” Sivakumar told BusinessLine.

Under a production-driven supply chain, farmers usually grow excess of certain type of commodities even while the consumption may not be keeping pace, thereby exerting pressure on prices. A shift from a production-driven supply chain to a demand-driven value chain will help farmers get better prices for their produce.

Consumption pattern

There is a slow but steady shift in Indian consumers’ diet composition as they are moving from more cereal-based diet to one which has more of fruits, vegetables, milk and meat. While the number of crops grown may not have undergone a significant change, there is an increase in area (under cultivation) of fruits and vegetables. There is also a spurt in dairy, all indicating a transformation from production-driven supply chain to demand-driven value chain.

“Consumers today essentially have a lot more of vegetables, fruits, pulses as well as milk and meat. Apart from variety and convenience, consumers are also far more conscious about safety aspects as there is a growing concern about contaminants and pesticide residues,” Sivakumar said.

Apart from a shift from cereals to more of fruits and vegetables, consumers are also looking for more varieties in a particular agri produce, say a certain variety of wheat in his atta (flour) or for a certain kind of fruit. These were conventionally ignored in yield maximisation production driven system, however, requisite efforts need to be taken to produce the same.

The wellness wave

Another wave that closely follows the changing consumption pattern and safety concerns is that of wellness. Millets, for instance, which were conventionally very popular, had been relegated into the background as people started considering consumption of more refined rice and wheat would help them move up the social and economic hierarchy. Millets had become a part of poor man’s meal. They have now come a full circle with people realising their nutritive value.

However, a lot more R&D will be required for the millet “wave” to really become sizeable and drive some changes.

Accelerating transition

It is important that various stakeholders including large corporates, come forward so as to accelerate the transition and achieve a sizeable shift, he pointed out.

ITC for instance, which has been building its brands and growing the FMCG business, has been using these as “anchors” to work with farmers trying to facilitate the transition so that farmers can produce more of what is needed in the market than to produce and hope that he gets something good when he harvests.