Agriculture

According to Department of Statistics and Programme Implementation, Government of India, Private Final expenditure of India on Food and non-alcoholic drinks was Rs, 18,21,510 Crore in 2014-15. If we factor in the population growth and rate of inflation, we get the estimated expenditure in 2017-18. If we add to this Rs.18,000 Crore spent on alcoholic drinks, tobacco and narcotics, which finds its origin in Agri sector, then this expenditure will be close to Rs. 20 Lakh Crore. So, it is safe to say that the total Indian market size of agricultural produce is around Rs. 20 Lakh Crore. If we add the size of agriculture input, then it will be even bigger. 

A market of this size is bound to have complexities and that too in a country as diverse and complex as India, where a large section of the population is dependent on it for employment. There are many questions regarding agriculture in India and each one can have different perspective. We also had many questions for Mr. Amit Mishra, Founder- Director of Agrius India Private Limited and Founder of Ambrocia Seeds Producer Company Limited. Mr. Mishra is an Agriculture Graduate from Jawahar Lal Nehru Krishi Vishwavidyalaya, Jabalpur and PGDM-Marketing from VAMNICOM. Prior to taking up the challenging route of entrepreneurship, he has worked with GCMMF, Perfetti Van Melle, Pepsico India-Tropicana, Commodity Futures Exchange MCX and News Distribution Company Thomson Reuters. So let’s start: 

Review Board: You are an Agriculture graduate and a M.B.A and have worked with some of India’s top companies as well as a Commodity Exchange and news Distribution Company. You started your entrepreneurial journey two years back and are pretty well settled. What difference do you find in the business process of both the sectors? What can Agricultural Input Marketing learn from FMCG Food marketing of the big players?

Amit Mishra: In my opinion, the first difference is in the product itself. If we look at the flow of taking a product to the market, it looks like         Product > Targeted consumer> Marketing & Communication> Distribution network 

….the agricultural items are distributor or channel driven product while FMCG are consumer driven products. Consumer demands the brand or the kind of product he/she wants if it is FMCG product but distributor normally takes the demand in the case of agriculture product.

Review Board: Is it so? Tell us more? 

Amit Mishra: Yes, the education level of users and involved technical details of the agricultural product make it more of a channel driven product. It is very difficult for most of the farmers to understand the product detail, so, they depend on the advice of distributors. Whereas consumers are well aware of the FMCG products they want to buy. Marketing communication of FMCG products have been done so since the very beginning. 

For FMCG products, people are the primary as well as ultimate consumers as against agriculture inputs whose primary consumers are trees and plants. FMCG products, whether food or non-food, are procured on only two premises: need and aspiration. A product has either to fulfill its consumer’s need or provide aspirational value. There is not much innovation and experimentation in these products, because they are directly consumed and there are many checks and balances which need to be adhered to. Innovations are mostly focused to help make the product natural and safe for human consumption. 

As against that, Agricultural input procurement goes through four stages…  

First types of buyers are innovators; they are always on the lookout for new technology, new variety of seeds etc. to boost their produce. They enthusiastically support and participate in any kind of technological advancements. Around 0.5% of farmers in India will fall into the category. Second types of buyers are early adopters. These buyers are at the footsteps of innovators and adopt any new technology or variety immediately after confirmation of its success. They normally adopts a new technology within 1 to 3 years. They constitute roughly 4-5% of total farmers in India. Third types of buyers are late adopters. These buyers are good 3-5 years behind the innovators and early adopters. So, to them the technology is no more a new technology as it is already there for long. They constitute 50 to 55% of total farming population of India. Fourth and the last type of buyers are laggards. These buyers look for anything which has been around for long or may be there for a good 5-10 years. Surprisingly a good 40-45% of farming population of our country falls into this category. So, you can very well imagine how difficult it is for a company producing agricultural input to directly reach out to the end consumers, i.e., buyers or design a common marketing communication for them. That’s the reason why they target distribution channels and work closely with their channel partners to not only sell their products but disseminate product information. 

Though marketing efforts may be same for both the categories, but marketing communication channels and their target groups are different. Dissemination of information of agricultural input is like medicine. You don’t start consuming a medicine just because you have seen its advertisement; you get it prescribed by a Doctor. Similarly, on the basis soil type, crop etc., Agrochemicals are suggested by Distributors, backed by information provided by Agricultural Scientists as well as by the government. If anything goes wrong, then all the effort of the last six months will go waste and so will the expected income. This however is not the case with FMCG products. You see an advertisement of a chocolate; you go and buy it from a nearby store. Since there are checks and balances in place for making the product safe for human consumption, you may not like the chocolate or find it not as you assumed it to be after seeing the advertisement. But in the case of an Agricultural Input, a farmer runs a lot of risk on his investment and his future income depends on it too. That’s why he prefers to be sure before buying it and the retailer or distributor from whom he buys, works as an expert, guide and an assurance. 

One more factor that plays an important role in his buying decision is “personal acquaintance”. Since a number of farmers fall in the category of laggards and late adopters, personal acquaintance with the retailer or distributor works as a guarantee for them.

So, all of this boils down to two things: 1) Level of education; and 2) Personal touch

….. And these two things have been mastered by FMCG companies and the Agriculture Input companies can learn from them. Though it is very difficult and time consuming, but a step a day can move mountains.

What we have started doing with our business despite the fact that our resources are limited is that we have started educating our end consumers about different aspects of farming along with the products we are selling. It is addressing both the above mentioned challenges of agricultural input business. However, we know that this is a tedious task and requires lots of resources and effort. But we as a team believe that if we focus on education and training, then the late adopters can become early adopters and laggards can become late adopters thereby increasing our sales and boosting our productivity with our research work. We are planning to adopt a village pretty soon to experiment with our idea and make farmers of that village educated and aware about every aspect of farming and its business. In my opinion if business houses along with entrepreneurs like us backed by government take up this challenge, then a decade is enough to change everything, especially in a time when smartphone penetration is very high, data price is at its cheapest in the world and both of them put together is rapidly changing the human behavior. 

Review Board: So far, we have talked about Agriculture Input category vis-à-vis FMCG products. Could you please expand this discussion to include Final Produce Segment like rice, pulses, wheat as well?

Amit Mishra: Final Produce segment also carries a different behavior pattern from FMCG products. Other than Atta (Grinded wheat) and grinded spices known as C(Chili) T(Turmeric) C (Coriander), mix grinded spices known as ATC spices, other produces have not seen much success as far as branding is concerned. I have travelled extensively in urban as well as rural areas and have seen the change in pattern of packed Atta consumption. Demand of packed Atta is growing in rural areas as well; even in normal packing. But same is not reflected in pulses or rice, because packing material only adds price and not the value. Basmati rice is considered a luxury and is not consumed daily. People are consuming more of Pusa Basmati rice rather than original basmati rice. Organic foods are also in the luxury product segment, because health benefits, as promised depends on other aspects of lifestyle like complete food habit, nutrition intake, exercise routine etc. So, paying double the price than what is to be paid for normal agriculture produce is something Indian customers have not been able to make peace with.

Brand helps you to command premium, but how much and for what? You will have to show value…And in the case of commodities, it is purely transactional value. If you are changing the shape and form of the produce, then branding seems possible as you can see in the case of packed Atta or grinded mix spices and consumers are willing to pay little bit extra……. But if you are packing the whole produce, then there is no value addition.. 

So, the message is loud and clear; as the life of Indians are rapidly moving towards urban centers and rural life is following the urban life, agriculture produce marketing needs to change; it needs to change the shape of produce. If we go for processing and bringing in innovation in that, then not only will it increase the life and value of the product, but will give more money in the pocket of the farmers.

Review Board: I always felt that the biggest challenge Indian agriculture sector is facing is integration of produce and products with the market. While consumers are paying but farmers are not getting the right price. What should be done to address this problem? 

Amit Mishra: This is a very difficult question and the answer is very unpleasant for many. On the effort part, there are many steps which have been taken by the government. Many farmer-producer companies were formed in places like Andhra Pradesh, Karnataka etc., Rytu Bazaars were opened to facilitate farmers to sell their produce directly to the consumers and their are thousands of cooperative marketing societies……Despite all of this, problems are still there and their has been no change in the last seventy years. Some of it has done well, but overall if we look at the collective magnitude of challenges, they remain the same as they were after independence. Now why it has remained same…….because individual interest has always taken precedence over collective interest. If you look at the structure of these cooperative marketing societies or farmer producer companies………….you will find that these are normally led by big farmers or local politicians, who serve their interest first and member’s interest later or may be never!! 

It seems to me that the government doesn’t look interested in addressing this issue because wherever there is a poor person, there is politics involved. If things becomes better, then what will you change? If despite so many programmes, projects and billions of dollars spent on agriculture, why post harvest losses are still huge? Why are farmers still battling for loan waiver, better seeds and better price? Along with asking for these issues to be addressed, farmers also need to ask questions to politicians that if these issues have been vital in every budget and election, then why there is no improvement? Why, even after seventy years of independence, farmers are committing suicide? Self sufficiency in crucial items like pulses and edible oils are still missing by a huge margin????

There are many such questions….. Am I disillusioned??? May be yes….may be no……but the way opportunities are getting wasted for personal and political gains, problems will take such a huge proportion that solutions will be impossible!! 

But you have asked me for solutions….. And they are: 1) Educating farmers and innovation in food processing needs to be very urgently done. What is dragging farmers behind is their knowledge of different aspects of farming which includes food processing and marketing. 2)While there are rapid advances in technology supporting farming, but its real users are somewhat still disconnected with that. We as entrepreneurs will have to take lead and make farmers understand the use of technology and its integration in every aspect of farming business. 3) Hold the policy makers and politicians, who have spent the nation’s wealth in the name farmers and agriculture, accountable. They must answer us about the money spent and give us the productivity report. 4) Forget personal interest for some time and work for collective interest. 5) Along with seeking money, seek answers regularly from policy makers and policy implementers.  

These are the main solutions to problems in agriculture sector in India. On paper, there is nothing which has not been tried……but there is no account of what has been achieved vis-à-vis money spent on it. 

Review Board: Can technology help in solving the problem of integration of agricultural produce to its market? And what role entrepreneurs, private business houses and farmers themselves can play in it?

Amit Mishra: This question is connected to your previous question, so, a large part of it is already covered. Technology as required to assist the agriculture production and agriculture produce marketing is already available……And innovator entrepreneurs are playing their role…..But the size of complexity and the challenges are so huge and efforts required are of such gigantic magnitude that solo efforts of entrepreneurs will be lost. Government will have to stop thinking of it as a milch cow and work towards solving all the challenges once and for all. Otherwise solutions will be there, but in bits and pieces, as provided by entrepreneurs at a local level. 

Review Board: True. Neither have we done our bit nor have asked the right questions to our policy makers and policy implementers. Thanks a lot for taking your precious time out and talking to us….

By a rough estimate, India produces paddy, wheat and whole pulses together worth Rs.5, 34, 020 Crore, calculated at MSP for paddy and wheat and bulk price of pulses in whole form. If we take the data of public consumer expenditure for the year 2014-15 made available by Ministry of Statistics and Programme Implementation in public domain and extrapolate the impact of inflation every successive year, India’s private final expenditure on food and non-alcoholic drinks may stand around Rs.18.9 Lakh Crore. It gives a glimpse of scope of business opportunity it provides.

Mr. Nitin Kumar, Company Secretary by qualification and investment and start up expert by profession has worn many hats; but when this time when he told me about his new venture Bishanpur Natural Foods Pvt. Ltd., I would be lying if I say I was not surprised. Since beginning of his professional career, he has been through and through finance professional helping his clients to make money in stock and/or real estate market or investing in general merchandise, education or health start ups. But this time, he not only invested but has been successfully running the business of speciality flours, fox nuts and flax seed. After talking to him I could understand his passion of bringing healthy food which our previous generations used to eat and has disappeared from our plates with changing time. But why was I surprised; because sales of food items demand combined of physical and mental hustle than the just mental one required in financial or real estate market. But as Ann Landers had said “Opportunities are usually disguised as hard work, so most people don’t recognize them”, he chose the hard work way and entered into this business. He is CEO of Bishanpur Natual Foods Pvt. Ltd. 

I asked him straight three questions to understand why is he in this business, what he has to offer, how it will benefit his consumers and where does he see his business in short and medium term. 

Mukul Bhartiya: You are finance professional by education and experience. What led you to venture into food processing, distribution and marketing business and that also, niche products like Chana Sattu, Makhana and Flax Seed?

Nitin Kumar: When I tell you the reason behind it, you will also empathise. Though I am from Bihar but I have lived better part of my life in Delhi and Gurgaon. Who better than person like me can understand the importance of healthy food and healthy life. For us, even pure air to breathe has become a scarce thing. You might have seen the images of hazardous foam emanating from River Yamuna during Chhath this year and let me tell you that this not something new as phenomena. This has been the scene for so many years and it is also open secret that most of vegetables coming to National Capital Territory market are grown in the river base of Yamuna. 

All the trappings of modern lifestyle has taken one thing from us; our time for ourselves. We are always in the rush to reach one place or another, barely taking time to breathe. In order to reach somewhere, we have moved as far away from the nature as possible. And look what it has done to us; it has not only taken us away from nature but has taken away our physical and mental health. 

Having lived a life with these trappings around, we have realized that answer of healthy life is to slow down, look back and find what we lost in the rush of reaching somewhere. Retracing healthy footprints are always good. Our older generations lived life closer to nature. There were no mechanized machines to grind the food; so, most of the nutrients were retained in the food for our consumption. We are making a genuine effort to dig deep, research and find out the natural food for you. We are reclaiming our past with pride, we are reclaiming our health back and we reclaiming our life and the battle start with food.

At Bishanpur Natural Foods Pvt. Ltd, we follow every process to retain the natural nutrients every food has to offer by cold press milling technique. Words become command, command becomes commitment and commitment sets the direction; and our commitment is to take our food habit closer to nature.

Mukul Bhartiya: Please tell our readers about your products and how they benefit from it?

Nitin Kumar: We are in constant search of food which are healthy, wholesome and queen of plates of older and previous generations. I am keen on that. Our first product is Chana Sattu. 

Though there is no specific mention about the origin of word ‘Sattu’, but looking at the nutritional values it provides, it must have come from Sanskrit word ‘Satvik’, which means ‘pure’, ‘complete’, ‘ontological’. No other cereal or pulses is as complete and wholesome as ‘Chana’ or ‘Hoarse Gram’, because it has right amount of Protein, Dietary Fiber, good Carbohydrates, low glycemic index and absolutely no unhealthy unsaturated fat. While almost all the cereals and pulses provide between 150-350 calorie per 100 gram with cereals providing extra carbohydrate and pulses providing extra protein, ‘Chana’ provides energy exceeding 400 calorie. These nutrients build your muscles, make your bone strong, help in preventing constipation and keep your stomach healthy, regulate fluids and blood pressure of the body, fights diabetes and give you the energy to stay active whole day. There are numerous benefits of Chana Sattu.

Some of them are as follows:

• You can drink and eat it both.

• It is high on calorie with good amount of whole carbohydrate, dietary fiber and protein.

• It is gluten free.

• Carbohydrate in Sattu is soluble and ingestible carbohydrate, which is very much required for energy. It is a fallacy that low carbohydrate diet is good. If you don’t get the energy, then how will you survive? Your food should have 45-50% whole carbohydrate to keep you alive and active. 

• It keeps your stomach healthy by preventing constipation. You may be aware that constipation is the cause of many bowel related ailments including gastrointestinal diseases, which has the capacity hurting other part of bodies as well. -It reduces the risk of coronary heart disease, hypertension, diabetes and obesity. 

• Zero saturated fat in Sattu makes it an ideal food and drink.

• Protein in Sattu makes your bones hold the muscles and keep your liver healthy. It makes you look healthy and young. 

Our second product is Makhana or Fox nut. ‘Makhana’ is amalgamation of two Sanskrit words: ‘Makha’ and ‘Anna’. ‘Makha’ in Sanskrit has two meanings ‘sacrificial oblation’ and ‘active/moving/to go/move’ and ‘Anna’ means ‘food’. So, one meaning of ‘Makhana’ is a food which is offered for sacrificial oblation or which is offered to god. Another meaning of ‘Makhana’ is the food which keeps you ‘active’ and on the move, which means it keeps you energetic. Makhana is rich source of protein, calcium, dietary fiber, good carbohydrate and absolutely zero saturated, polyunsaturated and monounsaturated fat. With total 350 calorie per 100 Gm, it is good for your bones, muscles and gut and helps you fight diabetes and blood pressure.

Darbhanga, Madhubani and other parts of erstwhile Mithila Kingdom or present day Bihar produces ‘Makhana’ the most and has been consuming the most as well; now whole world has realized its importance.  

You can eat Makhana raw or after roasting or frying. You can also make different varieties of sweets and pudding from Makhana. 

Benefits of Makhana are many; few of them are as follows:

• Dietary fiber keeps your stomach free from constipation, helps to prevent coronary heart disease and reduces hypertension and chances of stroke.

• Protein helps your bones to hold muscles, makes your body fit, strong, healthy and young.

• It improves the health of your liver.

• Calcium makes your bones strong.

• It is fat free, full of whole carbohydrate, protein and dietary fiber, which makes it a super healthy food without the fear of adding fat in the body.

• Whole carbohydrate gives you energy to be active, fit and fine. 

• Right amount of sodium and potassium in Makhana helps to keep the blood pressure under control and keeps cellular function of your body up and running. 

Our third but not the last product is Flaxseed. Flaxseed is another super food, which should be part of our daily diet. It is very high on protein, carbohydrate, dietary fiber, calcium, Bitamin B-6, Iron and Magnesium. 

 ‘Chana Besan’ is the latest addition in our product portfolio.

Mukul Bhartiya: Tell us about your plans to take your products and idea behind them to wider consumer base? Please also tell us where do you see your business after five years?

Nitin Kumar: See, ours is the social enterprise. Though we can increase the production capacity by rapid mechanization, but our focus is not just providing healthy food options to our consumers but providing as many employment opportunities as possible in rural areas. When you increase the number of human hands at work then it is quite obvious that speed of work gets slowed down. 

In the first year itself, we have established our distribution network in many districts of Bihar and parts of National Capital Territory. In next five years, we will cover entire Bihar, Jharkhand, West Bengal, Uttar Pradesh and Delhi. We are aiming the turnover of Rs.50 Crore in next five years. 

If you want to take the distributorship of Bishanpur Natural Foods Pvt. Ltd., you can reach out to concerned persons at enquiry@villfood.in and + 91 7011 326 404, +91 8700 209 659.

Union Budget 2020 is not very far away and everyone is curious to know how this budget will shape up to propel consumer, industry and investor’s confidence and put India on the track on becoming a USD 5 Trillion economy by 2025.

I have been talking to people, who hold senior positions in the industry and has also been interacting with real people who matters most for the budget.

A fortnight back I had talked to Mr. Suraj Sharma, CEO, Punarvasu Financial Services Pvt. Ltd., who, as an investor, has been interacting with entrepreneurs, SME and MSME business persons on the regular basis. Mr. Suraj Sharma On His Expectations from Budget 2020

Couple of days back, I talked to Mr. Amit Mishra, Founder- Director of Agrius India Private Limited and Ambrocia Seeds Producer Company Pvt. Ltd. about his expectation from upcoming budget. His company has around 1500 acres of land under seed cultivation and distribution across Madhya Pradesh, Uttar Pradesh and Maharashtra. I also asked him about his opinion on much discussed fall in private consumption in India, which according to the experts is a worrisome sign. Since he has been constantly travelling into interiors of the country and has been meeting with farmers, I thought he is the right person to ask this question.

He said, “Government provide subsidies at four different level to the farmers; input level, output level, infrastructure level and food processing level. Seeds, irrigation, crop insurance, price support for the output, marketing support, support for warehousing and cold storage, support for food processing; you name any aspect of agri production and government have schemes for the same. Not only central government but state governments also provide bonuses and support to farmers.

Challenge is not the lack of support from government. In fact, there are too many schemes from the government for the agricultural sector. Even if government takes away few of them, it won’t matter. Actual challenge is these schemes reaching out to the farmers. I have witnessed massive leakage in the government schemes and public money being looted in the name of farmers. Would you believe if I tell you that there is no less than 30 to 40% leakage in almost all government scheme meant for farmers? In some areas, these leakages are to the extent of 50%. Even if the free kits are provided by the government, bills are inflated to bungle the money meant for farmers. This leakage needs to be stopped not only for the benefit of farmers but nation as a whole.”

Startled at this revelation, I asked him whether I can quote these numbers and attribute it to him and he strongly accepted to my question.

He continued, “What I expect from government in this budget is a three layer monitoring and audit mechanism, starting at block level, then next layer at district level and third at state level. Every Panchayat must be made to put all the information updated on Panchayat Building informing everyone in the village about schemes being run by government, money received and spent under each scheme and number of beneficiaries.

With so much technological advancement in the Information Technology field taking place in the country, government must make use of it and see that money reaches to actual beneficiary. This should be one of the crucial steps to be taken by the government.

Regarding your question of fall in private consumption in the country, my submission would be to look at overall growth or de-growth in the demand of any particular item. Please don’t take de-growth in the demand of any brand as a benchmark. With the change in time, there will be demand shift from one product to another and we should be factor it in while making any commentary. You might be seeing change in eating behaviour of urban population which is quite different from rural or rural-urban population; from breakfast items to quantity and quality being consumed for lunch and dinner. Similar pattern can be seen every aspect of life.

I am seeing demand shift, I am seeing Indian consumer’s awareness and demand for quality products and services but I am not seeing private demand de-growth. New players are challenging old guards; old guards are collaborating with new players for part of their work, old boundaries have already been dismantled and new boundaries are being set. So, I am not in agreement with this charade of de-growth in private consumption.

I hope I have answered your questions”.

I thanked him for giving his valuable time for this quick chat.

I reached out to Mr. Sanjay Kumar Thakur, Chief Data Officer and Head-Treasury Product Control, Balance Sheet Analytics, Fund Transfer Pricing of Saudi Investment Bank to know his expectations this Union Budget 2020. Mr. Thakur is Ph.D in Portfolio Risk Hedging and Management from Shailesh J. Mehta Institute of Business Management, Indian Institute of Technology, Bombay, Chartered Financial Analyst from ICFAI, Hyderabad, Post Graduate Diploma in Banking, Banking & Treasury Operations, Credit Analysis & Comm. Lending, Banking Laws and Accounting Practices from University of Pune and MBA(Finance) from Center of Management Education, VAMNICOM, Pune.

Sanjay Thakur: This budget should be clearly targeting few themes: (a) Employment (b) Consumption (c) Reforms for growth revival  

A. Employment: I think govt will and should do anything and everything on employment front. I expect huge focus on MSME and Agriculture sector as 93% labour is still depend on these sectors and this time even rural economy is hit. Next would need clear focus be Infrastructure (there is enough political and economic reason that, construction may get infrastructure tag) and Textile. There must be a mechanism to revive NBFC model with more prudent regulation around it and I expect bold announcement on building a bank-nbfc-developer mechanism for guaranteed housing project completion. Textile needs immediate care and gems and jewellery as well as leather sector needs clear support as export is down by 3.27% and not great silver lining in near future thanks to Coronavirus now.  

B. As corporate tax cut was already given late last year, some thrust on corporate lending should help build environment for capital investment rate which has halved by now. Govt capital expenditure will have to lead the way though as it has been lesser than expected. To boost consumption, I expect some relief on individual income tax like increase in slab for zero or lesser tax rate. I also expect higher investment limit than Rs. 1.5 lac under 80c. The same goes for medical insurance and investment in NPS to get (e-e-e) status. After so many pay-commissions, I also seek a need for some kind of parity between tax treatment of benefits to govt and private sectors employees. I expect LTCG to get removed as it was almost nonsensical decision. These initiatives either encourage saving and investment or increase consumption immediately. I expect some relief to Auto and Telecom sector as well. 

C. Reforms for growth revival is something I expect to see. Thrust would be on Land reforms, selectively on labour reforms and legal side of ease of business. Inflation particularly food inflation has started appearing due to wrongly RBI focusing more on growth than inflation which is actually govt primary domain. I expect some clear thrust on SEZ type work-around, startups to support make in India and digital India initiatives. What are the do's and dont's you are suggesting to Mrs. Sitharaman? =) I hope she will loosen the fiscal deficits targeting at least by 25bps. She shouldn't worry too much for it right now. She must also not continue the LTCG at any cost and taxation on dividend income should be eased as well. As there is chance of reduction income tax slab for common man, there is a possibility to re-instate Estate tax to tax wealthy people which is not good idea. It may bring less in value but may send negative vibes to the wealth creators.

The way I see random people, who probably may fail to spell word ‘economics’, throwing the words like slowdown in GDP, economic crisis etc. I remember the quote by famous statistician, risk and probability expert and author of Fooled by Randomness, The Black Swan, The Skin in The Game and many more Mr. Nassim Nicholas Taleb.  

He says, “It has been more profitable for us to bind together in the wrong direction than be alone in the right one. Those who have followed the assertive idiot rather than introspective wise person have passed us some of their genes. This is apparent from a social pathology: psychopaths rally followers”. 

A friend of mine suggested to read the business journey of an Indian business giant involved in consumer electronics to DTH to petroleum and energy business. To my surprise, this company acquired 15 companies in 20 years time and changed the structure of organization 30 times without showing sustainability and positive cash flow without manipulating the operations in any of the business. It financed the business by borrowing funds from commercial banks and invested in the business of energy and natural resources which are highly capital intensive and requires investment for decades. For their consumer electronics items, if news from leading newspapers is to be believed, then it suggests that credit tap for distribution channel partners never dried up. When this business house filed bankruptcy, shamelessly its owners blamed the demonetization. A clear cut case of crony capitalism cried victim when asked to straighten up. And this is not the isolated case.  

I talked to Mr. Sumit Agarwal, Equity and Derivative Strategy expert and Founder of Cap Matra Wealth Consultants Pvt. Ltd. New Delhi, who, for last fifteen years has been having his finger on the pulse of Stock Exchanges in general and Indian stock and commodity exchanges in particular. 

Though my focus was to know his demand from Finance Minister in this upcoming budget, but I stretched the scope a bit tried to have his opinion on what is going right or wrong with the economy and what are his expectations from the budget. 

Sumit Agarwal: Let us retrace few of the many steps taken by present government in the recent past.

Government has been raging battle to bring in transparency to clear this NPA mess created mostly between 2008-13. Now at least it is clear that which bank is carrying how much toxic and non-performing asset in their balance sheet and efforts are being made at feverish speed to clean that up. Close to Rs.90,000 Crore NPA was cleaned between 2018-19. Though it is still standing at around Rs.8 Lakh Crore, but government’s effort is visible on ground. Even small borrowers are being asked to pay up their long due loans. I can’t tell you the formula of payment being recovered from them, but I assume that they are being asked to pay up the actual loan plus some cost, but they are being asked to pay. 

Second action which is commendable is streamlining NBFC finance. It was faulty from the beginning itself. NBFCs used to raise finance from commercial banks and mutual funds using short term loans or selling short term commercial papers for a period of six months and then giving home and car loans to consumers for period ranging between five to twenty years was not making commercial or legal sense, it required continuous refill of money and it made absolutely no business or legal sense. Since it was bringing in growth in retail consumption of consumer durables and other sectors, everyone was riding along. But this bubble had to burst and it did burst with IL&FS. Now NBFCs are finding it tough to raise money and it is reflecting in consumer market behaviour. 

Along with RERA, another decision which is proving be great in “Insolvency and Bankruptcy Act”, which is forcing crony capitalists pay up. As far as RERA is concerned, it is definitely a much needed step by the government. We can’t forget implementation of GST here which was again need of the hour to bring uniformity in taxation and increase the ease of doing business.  

Though above mention steps have slowed down the economy due to implementation woes, but you will agree with me that you can’t live with cancer for too long and when it is operated, it will slow down your speed drastically till you fully recover.

So, coming back to second part of your question about what should be done to bring economy back on the high growth trajectory, which is required to make India a $ 5 Trillion economy by 2025, I think government needs to take many steps but I will list out my preferences here. 

First and foremost, government must do everything what it takes to increase private investment in SME and MSME sector. This sector is under tremendous stress. It was unorganized, mostly driven by cash economy; GST and demonetization proved too much for it. Where the line of good or bad gets blurred is the fact that SME and MSME sector drives India’s growth story and provides maximum employment. So, while GST and demonetisation were much needed step, they brought in the separate set of challenges. India’s import from China is somewhere around $ 60 Billion and most of them replace items being manufactured by these SMEs and MSMEs. For a country like India and the nature of economy it has, it can’t continue to have this huge import bill and nature of import from any country. 

Not only that, government must take the responsibility of technology and marketing communication of products manufactured by this sector. Not many of them can pick up the art of communicating features and benefits of their products. Government needs to do it in domestic as well as international market. Government must go out and tell everyone that why products manufactured by our own SMEs needs to be purchased. We all know how Chinese business operates. We need to pump up our business if not protect them.

Next step which government needs to take is ensuring smooth coordination between the center and states. I am very well aware that India is federation of states and state has autonomy in certain aspects of their existence and may have interest different than the nation, but government will have to ensure that.  

You know that market few years back was unstructured, but with the entry of big technology and online retail companies, price discovery of each and every item has become much easier than it ever was. With smart phones in every hand, it is reaching in every nook and corner. Technology is making the market structured and with this, market is losing the incentive unstructured, unorganized market offers, because consumers are at ill to know what could be the actual or standard price. So, if lack of coordination between center and state government will only complicate the matter for the business. While consumers will know at what price they should buy the product, friction between state and central government will increase the cost for manufactures, making entry of foreign players easy and thus circumventing the growth or even existential prospects of domestic companies. Individual small players can’t keep running and coordinating between state and central government. 

GST, despite all its benefits has become a big challenge for micro and small business units. What we have seen is this government is very poor at communication of acts passed in the parliament and schemes launched in the budget or otherwise. There are enough people who are supposed to help these micro and small business units to understand and help with taxations indulge them more into scaremongering. What I expect from the government is continuous training and information dissemination till this entire GST thing is streamlined and drilled down in every possible and prospective businessperson’s mind. Tax filing should be made as simple as possible. 

Stock market is the indicator of economy; health of economy reflects here. From January 2018, Small Cap Index is down 40% and Mid Cap index is down 22% and clearly indicates that Indian economy is under slowdown. My expectation from the government is increase the slab of no income tax from Rs.2.5 Lakh to at least Rs.5 Lakh. It will put more money in the hand of consumers and help boosting the consumption. 

Second point is government should rethink its position on Long Term Capital Gain Tax and Dividend Tax. Dividend tax is clear cut case of double taxation, though may be unintended but is negative element of tax legislation. Long term capital gain tax is holding back individuals from staying invested in capital assets like real asset or holding stocks for longer period. This way, government is stopping companies from raising long term fund and if companies find raising long term capital unattractive or difficult or costly, then how will they fund their capital expenditure. 

Last but not the least, I want government to check what it is the outcome of its expenditure on agriculture. I know agriculture is tricky subject to touch but at least there should be some calculation on how much is being spent on agriculture, starting from the input to irrigation to output to infrastructure building to food processing and what is the productivity of this spending. I don’t think government can in anyway reduce spending on agriculture, but it can definitely know the outcome of spending. Further, I would also request government to make all possible effort to stop the leakages in different welfare schemes and subsidies doled out to the people of this country. 

You may also like to read Mr Sanjay Kumar Thakur Chief Data Officer Saudi Investment Bank of his expectation from Union Budget

This article was written by Mr. Sanjiva Jha on Linkedin. Link of the article is here: Reigniting the economy

Mr. Sanjiva Jha is Founder-CEO of BroadArk Technologies Pvt. Ltd. His company owns the brand Y&NOW and works in the field of Education and Skilling. But this is just a small part of his illustrious career of around 28 years at leadership positions with LabourNet Services India Pvt. Ltd., Tata Teleservices Ltd. Reliance Retail Ltd., Boots Healthcare, Cargill India Ltd. etc. He has Masters degree in Management from IRMA and Bachelor degree in Chemical Engineering from BIT, Sindri. He has led cross functional teams during growth, massive organizational restructuring post US subprime crisis and merger & acquisitions. 

Reigniting the economy 

We are witnessing massive changes in the workplace today due to the digitization wave to newer and different skill sets required to address the increasingly demanding Industry requirements. As we see, relevant skill sets isthe need of the hour and in this world of Volatility, Uncertainty, Complexity and Ambiguity (VUCA). 

Which are some of the sectors likely to need large numbers of skilled personnel to keep pace with the transformational change ? 

A recent McKinsey report on future of work estimates that almost 50% of work that one does can be automated and that in 60% of the cases almost one-third of the jobs can be automated with technologies existing today! While the impact on various sectors in different countries could differ depending on the labour sector wages, demographics etc. but the automation and digitization is all pervasive and by extension the impact on the skills required to respond to the labour market needs. 

It is estimated that 8-9% of 2030 labour will be in new types of occupations that have not existed before. Clearly there is a need to invest in relevant skills needed to transition to the new roles.  

India has a workforce of nearly 450 mn strong with nearly half a million people joining the workforce annually, it is the second-fastest digitizing economy after Indonesia, what are the likely areas of impact that we expect? How do we future proof ourselves against those changes? A quick peek at some of the key Industries. 

One of the sectors undergoing transformational change is the Information Technology & Information Technology Enabled Services.This industry is clearly seeing changes at both ends - reskilling as well as upskilling to match the growing requirements. We are witnessing requirements in the areas of Block Chain technology, Artificial Intelligence, Cybersecurity specialists, Robotics, CRM specialists to name a few. Many roles will be created in the AI space as it touches our lives through multiple products and services. 

Healthcare has become one of India’s largest sectors - both in terms of revenue and employment. Healthcare comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. It will employ 7.5 mn people from a current level of less than 4 mn. A high priority sector for the Nation, the skill sets required to manage this growth are significant considering the massive expansion and the cutting edge technology on which the industry works.  

Retail is another sector where we are seeing robust growth rates, higher consumer expenditure and unprecedented technological interventions on the move. This along with Ed-tech remains one of the few sectors which has been hiring when the reports last came in! The Indian retail industry has emerged as one of the most dynamic and fast-paced industries. It accounts for over 10 per cent of the country’s Gross Domestic Product (GDP) and around 8 per cent of the employment. The market size is pegged at US$ 950 billion in 2018 at CAGR of 13 per cent. The online retail segment is growing at a fast clip of 31%. This sector thrives on online platforms, cloud-based solutions, GPS, AI driven algorithms to unravel why you and I buy what we buy! We are talking about large numbers of workforce and newer relevant skill sets here to sustain the sector growth.. 

On a concluding note - To prevent a worst-case scenario which is, Tech change accompanied by talent shortages, mass unemployment and growing inequality: Reskilling and Upskilling of today’s workforce will be critical. We cannot wait for the current school going generation to learn the requisite skills as they graduate, the current work force will have to be reskilled and upskilled. The writing is clearly on the wall, we need to adapt to the new skills at the same time reskilling and upskilling of the current workforce will need to move on a war footing…

COVID19 has reset the world order and new world order is booting. Since the new world order is booting, old world order is stuck in the throat of everyone; from the governments to businesses to common people.

Though I, like everyone know that every aspect of human life, businesses and governance is affected by this pandemic, I was curious to know how exactly it is impacting supply of essential items in India, which remain opened throughout this lockdown as it should have been. I talked to couple of my friends who have been leading the team selling essentials for their organizations and I am presenting their challenges as they are. They had some “Time to Survive (inventory in hand to cover the sudden eventuality)” but “Time to Recover (get into smooth operation mode with every function of supply chain working properly and optimally)” is still a long shot, despite some of the challenges I think might have been solved.

Here are the challenges they are facing in supplying staples and other essential items:

1)Logistics and Load factor: For smaller organizations or areas where order loads are small, Full Container Load (FCL) are not possible, transporters normally club the orders and deliver at destinations. Though Less than Container Load (LCL) is comparatively costly and less safe, Hundredweight freight method solves the purpose. During this period, as many small businesses remained closed, for small orders, LCL remained an impossible task and so, transporters increased the freight charges to cover the cost and incentive.

2)Credit: Credit helps in creating more liquidity, surplus fund, more customer engagement and increased risk taking appetite. But in this extremely challenging time, everyone’s risk appetite has decreased and wants to protect his/her fund liquidity. This has resulted in disappearance of credit from the market.

3)Stocks: Even for essentials, arranging stock has become challenge due to many factors and it has led to prices of many items increasing a lot. So, prices have become unrealistic as of now and whoever has the stock, charges more for it.

4)Timing Restrictions: Since timing restrictions are there in APMC market yard in metros like Mumbai, picking up and loading the stock itself takes time and in turn, supply is getting crippled. Problem gets even more complicated due to different timing restrictions for retail counters in different areas.

5)Labour challenges: Due to lockdown, there is huge shortfall in supply of labourers. To meet the demand of market, traders are trying to achieve the same throughput from workforce available, which is an impossible feat and can’t sustain for long. For migrant labourers, day and night work is resulting into heavy fatigue which can’t be repaired by money and they just want to leave for their hometown. This problem will only increase once interstate movement of labourers starts freely. A leading online grocer had to cancel around 20000 orders between Rs.30-35 Crore. There is no dearth of orders but there is scarcity of manpower to service those orders.

6)Lack of clarity about government notifications and nature of products at ground zero: Administrative staff i.e police and local administration at ground zero don’t have complete knowledge of food supply chain and so everyone is reading the same rule differently. Since no one wants to get caught at wrong foot during this pandemic, this challenge makes matter more complicated.

You are invited to add more challenges which are hampering the smooth operation of supply chain of essential items and what should be done in future if similar challenges arise? Automation, credibility based inter-trader credit system, AI based robotics, auto-driven transportation vehicles, delivery using drones are part of solution or they will complicate the employment problem of the country?

You will find following blogs on Covid19 useful:

1) Sanjiva Jha Founder CEO BroadArk Technologies on Reigniting the economy

2) Sanjiva Jha Founder CEO BroadArk Technologies on Covid19 Impact

Four month has passed since lockdown was imposed in Indian due to COVID 19 pandemic. We still have long road to cover before we pass this test successfully, but it has impacted our life, our behavior and our decision making process emphatically. We all have started looking at life from completely different perspective. Our buying behavior of daily grocery items has undergone tremendous change. I requested Shri Suresh Pillai, Head- Merchandising, Retranz Infolabs Pvt. Ltd. to share some of his observations with my readers.

Mr. Suresh Pillai has worked with top retailers like Big Bazaar, Tesco, more., Reliance Retail, Godrej Agro vet and start ups like Shresta and Ion Exchange Envirofarms. Mr. Pillai is M.B.A in Marketing from Vaikunth Mehta National Institute of Cooperative Management and M.Sc. in Agriculture from College of Agriculture, Nagpur. He has also completed One Year Special Management Programme from IIM- Kolkata.

Here are his observations; in bullet, short and succinct…. 

What the Consumer is buying: 

Consumer is basically focusing on Essentials, even in grocery consumers are not spending heavy on discretionary products (Ex: In Vegetables you can find more preference to spend on Basic veg, Basic fruits)

•They are focusing on Products rather than brands, so the brands that are able to make the product available is winning the game will capture market share 

•In essentials going for bulk packs

•Preferring Packaged rather than loose 

Where the Consumers are buying

•Formats: Local kiranas, Supermarkets, Online is the preferred channels where the consumers are buying (Also preference to local kirana, supermarkets doing home delivery)

How the consumers are buying: 

Purchase frequency has reduced

•Not willing to venture out in public places

•Not easy to get delivery schedule on online e commerce

•Uncertainty on product/brand availability 

•Frequent changes in lockdown 

How the Trade is behaving (Ex Mumbai) : 

Trade is Slow or not seeing rotation of Stocks 

Wholesale: Wherein a broker used to book 3 to 4 vehicle (20tons load/vehicle) daily is now hardly books 1 vehicle (20ton load) as there is no movement from wholesale market ( one reason can be attributed to , Restaurant industry not operating , no floating population, migration of people, Kiranas closed, kiranas not able to operate at its full)

Migration of People: One Classic Example can be Rice Like masoori, parimal which was low price point rice there is slow down, indicates the segment consuming these variants has moved out

Kiranas: 

Many Small Kiranas which use to be run by migrant population is not operational as paying the rentals was not viable, labour availability is a concern.

Even operational kiranas are also not stocking up, as due to social distancing, time restrictions, odd even working days slowing the stock rotation at their end. 

You can read his earlier observations here: Supply Chain Challenges of Essential Food Items during COVID 19 in India