Sunday, March 4, 2007

Will WalMart save India?

Arjun Swarup at Global Economy Matters has an interesting post on how big retailers could help India's agricultural sector and, more generally, its economy.

"The key to creating a market economy in rural India lies in creating a demand for the products of rural India, as well as in creating a far more efficient agricultural sector. One symptom of the malaise is to be found in the fact that 28,000 crores worth of fruit and vegetables, the core output coming from rural India, is left to rot every year, This is largely due to the absence of cold-storage infrastructure and the inability of the farmer to get the product to market place in time"


Arjun Swarup argues that multinational retailers like Wal-Mart , Metro, or Carrefour have the resources and expertise to store, to ship, and to market this food, that is currently wasted. Furthermore, the retailers could contract with farmers to produce jams and other processed foods adding substantial value to the goods.


"So this is an area of HUGE opportunity for India, yet at one and the same time it is also fraught with risk. The Indian farmer, the bulk of whose output is currently wasted, would be assured of a buyer for his product, at stable prices. He would not be subjected to the vagaries of seasonality and volatility of market prices as he is at present Most importantly the big retailers will set up cold-storage infrastructure thereby reducing wastage. In addition, given India’s existing capital intensive industrial manufacturing base, and thus the comparatively high levels of technology already in place there, much of the value-addition industry will be based inside India itself. Thus the ancillary benefits for India would be tremendous."

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