India’s Shrinking Farmlands and Deteriorating Soil Quality: A Cause for Concern

India is the seventh largest country in the world with a total land area of 3,287,263 km (1,269,219 sq. miles)[1]. Of this total geographical area of 3,287,263 Mha, approximately 146.2 Mha land is degraded land. India occupies about 2.4 per cent of the world’s total land area; it supports over 16.7 per cent of the entire global population. The estimates of the degraded land have varied depending upon the organization undertaking the study and the criteria used (see Table 1 below).

Table 1: Land degradation assessment by different organizations

Agency Estimated Extent ( M ha) Criteria for Delineation
National Commission on Agriculture(NCA 1976) 148.09 Based on secondary data
Min of Agriculture (1978-Soil &Water conservation division) 175.00 Based on NCA’s estimates. No systematic survey undertaken
Society for the promotion of wasteland development (SPWD) –(Bhumbla & Khare 1984) 129.58 Based on secondary data
NRSA (1985) 53.28 Mapping on 1:1 million scale based upon remote sensing techniques
Ministry of Agriculture (MOA 1985) 173.64 Land degradation statistics for the states
Ministry of Agriculture (MOA 1994) 107.43 Elimination of duplication of area. Area reclaimed counted
NBSS &LUP (1994) 187.70 Mapping based upon Global Assessment of Soil Degradation (GLASOD) guidelines
NBSS &LUP (2004) revised 146.82 1:1 million scale soil map
Dept of Environment (Vohra 1980) 95.00
National Wasteland Development Board (1985) 123.00
Source: Gautam N.C and Narayan LRA 1988

India is also home to roughly 1.1 billion people and is expected to overtake China and gain the number one spot as the most populous nation by 2030. Its economic transformation has pushed up the GDP growth to an average of 6% p.a since 1992. About one in every sixth person on the globe lives in India[3]. India’s birth rate[4] is far higher than the birth rate prevailing in other developed nations.

However the combination of an increasing GDP, population growth, urbanization and industrialization are imposing a pressure on the quality of our soils as well as shrinking the supply of agricultural lands which are being used for non agricultural purposes. Hybrid seed varieties require abundant water supply and a balanced and well planned fertilization effort, both of which are not happening. Farmers are using fertilizers guided more by affordability and availability. They are trying to grow two or more crops in a year. This is draining the soils of the essential nutrients and affecting the yield. According to the Ministry of Agriculture -2008 statistics, almost 14% of the total land is not useable (non agricultural uses – 6% and barren and uncultivable land 6%). If the fallow land mass is added, then the percentage of unused/unusable land is 22% (i.e. almost a fourth of the land is not available for utilization).

Some of the reasons for the declining productivity are:

  • Rain fed agriculture and the vulnerability of the same: Nearly a third of the area falls in the ‘dry’ belt leaving the remaining bulk in the dry-moderate belt. This proportion too is changing (unfavorably) due to the rapid deforestation and the global warming phenomenon.

  • The thrust on high productivity post the Green Revolution has led to a situation where the farmers are straining the soil by trying to grow two or more crops in a year instead of one[5]. The hybrid variety of crops introduced post the Green Revolution require more water and nutrients (in a balanced proportion) to retain the soil quality. Fertilization based more on affordability and availability is affecting the productivity of soils even in states like Punjab, UP, Haryana, Bihar.

  •  The earlier practice like using animal manure and other organic wastes has shifted in favor of the relatively more affordable chemical options. The main deterrent is the high cost of obtaining organic certification which is out of reach for small and marginal farmers (see table 1 given below)

Table 2: Cost of Inspection & Certification (Source: Muthukumaran K-Source Org Marg 2002)[6]

Category Details Cost ( In Indian Rupees)
Small farmers & Cooperatives Travel and inspection report preparation / certification Rs 12,000 per day + 5000 flat fee +5000 certification
Estate manufacturers & exporters Travel and inspection report preparation / certification Rs 19,200 per day + + 5000 flat fee +5000 certification
Large & Medium size processors Travel and inspection report preparation / certification Rs 16,800 per day + + 5000 flat fee +5000 certification
Note : Costs are expected to have gone up significantly in view of the time lag between year of survey
  • Inadequate Irrigation Systems: Water as an integral input is critical for sustaining any agricultural endeavor. At the same time availability of water is becoming scarcer since it’s also being utilized in industry, infrastructure and other domestic uses-all of which is leading to an alarming situation of rapidly depleting water levels in the country. As per ICAR[7](Policy Brief No 15).India’s a annual per capita water availability will go below water scarce threshold level of 1700 cubic meter within the next two decades. In six of the country’s 20 major river basins (with less than 1000 cubic meter of annual per capita availability), water resources are under stress and depleting.

So while India is being celebrated in the world arena as the demographic and technical destination by a host of companies, the fact is that if we continue at this rate nutrient depletion, shrinking land holdings and adverse climate changes will mean that a time may come when the problem of food security will become overwhelmingly real – but at that time it may be too late to take any corrective action

[1] State of the Environment Report 2009-Ministry of Environment & Forests

[2]  Source: ICAR-Degraded and Wastelands Report

[3] UN Population Statistics also quoted in the Deutsche Bank Research Report “Building up India’ May 2006.

[5] ‘India’s Soil Crisis’ Economic Times July 12 2011.

[6] Muthukumaran K ‘Organic Agriculture & Food Industry –Trends Challenges &Opportunities  October-December 2006 CAB Calling (


Does Microfinance Empower Poor Women?

That microfinance helps in extending affordable credit and in mobilizing savings is a well documented fact. Fostering the savings habit and the ability to access credit in a convenient manner and at affordable rates can help in transforming the lives of many beneficiaries particularly women. In the Indian context, mainly for the poor and illiterate women, this ability to access products and services by avoiding social, cultural barriers offers them with a framework within which they can collaborate to find creative solutions for individual and social issues.

Whether microfinance truly empowers the beneficiary women is a question that has sparked many debates. Although the concept of ‘empowerment’ has been used since the 1960’s and despite the term’s popularity, there is no international consensus on how to define it.

‘Empowerment is like obscenity, you don’t know how to define it but you know when you see it’[1]. The United Nations definition states that women’s empowerment has five components namely:  women’s sense of self-worth; their right to have and to determine choices; their right to have access to opportunities and resources; their right to have the power to control their own lives, both within and outside the home; and their ability to influence the direction of social change to create a more just social and economic order, nationally and internationally.

The 2006 Nobel Committee awarded Dr Muhammad Yunus[2] with the Peace Prize an acknowledgement of the fact that ‘bottom-up’ initiatives were pragmatic options to the traditional ‘top-down’ approach followed by most governments and development organizations. Dr Yunus founded the Grameen Bank an institution that has achieved international fame for offering small loans to poor women sans any collateral. He also helped start the Village Phone program, an initiative that enabled Bangladeshi women to become entrepreneurs by renting calling time on mobile phones to illiterate villagers who could not afford their own telecom devices.

However there have been some criticisms about the empowerment aspect. Notable among these is Aminur Rahman’s ‘Women and Microcredit in Rural Bangladesh (1999) which is one the most well-known anthropological critiques of the empowerment idea as propogated by the Grameen Model. Other writers like Aradhana Parmar’s essay[3]expressed concern about the Grameen Bank’s micro lending practices which she wrote reduced women to ‘welfare objects’ rather than assisting them in discovering their own capacity to create conditions in which they could act as agents who make ‘principled choices’

Some questions that come to mind in this context are:

  • Does micro credit contribute to empowerment? While small loans can help women who otherwise have no other options-get easy access to funds at affordable rates, the fact is that these funds need to be deployed in income generating activities for the ‘multiplier effect’ to kick in such that eventually these women are able to emerge out of this cycle of dependency and become contributors rather than borrowers. Using it for consumption purposes rather than for productive uses can make them dependant and continue the vicious circle.

  • Is the loan size (amount) adequate to make any tangible difference so as to alleviate the beneficiary’s existing situation? The table given below shows the comparison of the average loan size per self-help group (SHG)[4] member versus MFI member. It can be seen that the average loan size is higher when taken from a private MFI as compared to the banking system .Also whether the amount of the loan (Rs 5000 and Rs 6000) respectively is adequate after taking into account current inflationary trends and to foster any entrepreneurial effort is a point to ponder upon.
Type Avg loan/customer2008-2009 Avg loan/customer2009-2010 Avg loan/customer2010-2011 Increase in 2010-11
SHG Member (Rs) 4120 4570 4900 330
MFI customer (Rs) 5190 6060 6610 550
(Source: Microfinance India State of the Sector Report 2011-Author N Srinivasan)
  • How do we ensure that the women borrowers are the direct beneficiaries of the credit availed? The fact that a women contributes regularly into an SHG could be because she is merely a mediator – a link that can help get inexpensive loans and pass them on to their families. Hence in the ultimate analysis the women member may land up being ‘used’ both by the microfinance provider (who is interested in earning interest) and the family which in the Indian context is still patriarchal ( who are interested in the loans)

  •  Can homogeneity in group formation lead to exclusion? Because microfinance groups focus on the idea of getting together a homogenous group this could lead to exclusion of other poor women who don’t fit into this definition of ‘homogeneity’. For eg: at a village level in India this could be exclusion based upon caste, occupation or due to public knowledge of the possible inability to repay regularly because of being ‘less well off’. Moreover it has been found that the dynamism of the group leader in case of SHG’s is instrumental in binding the group and in problem solving. Many groups fall apart once the leadership is lost. In such cases one would expect a leader to emerge from the remaining members (if indeed they feel empowered)but that generally does not happen

  • Where are the other support mechanisms that need to work in tandem? Very often in course of my field work, I have found that women are unable to take up a business activity since there is no system of market linkage which they can access to sell their goods. What use is credit only if it cannot be deployed and circulated in a manner that it bolsters wealth creation and confidence?

  • What about groups that are dissolved after the subsidy/benefit is availed? In many states like Andhra Pradesh and Maharashtra SHG groups comprising women belonging to the BPL (Below Poverty Line) category are entitled to a subsidy once a stipulated tenure is completed. It is therefore quite common for the group members to split the group and divide the funds once this subsidy is availed. If these women had derived a positive advantage then wouldn’t they continue?

  • Are these big words like ‘empowerment’, ‘social capital’ western concepts not relevant in the Indian context? Perhaps-In the west basic education, information on the rights/ responsibilities and the knowledge of the government machinery entrusted in executing these duties is available in the public domain. In India, the dynamics are very different: opaque policies,unfit politicians, poverty, illiteracy, divisions based on caste, creed and religion make the majority an ideal poaching ground for politicians,bureaucrats, and even the ‘new-age’ MFI’s (micro finance institutions). A lot of the schemes are announced with an agenda in mind and very often lack a proper design or even an objective. How can such half baked insincere endeavors result in anything?

  • Are these women victims of a deliberate higher game plan? A lot of the funds that support microfinance activities come from donors, development agencies, government and international bodies. The projection of the ‘glory’ aspect of the benefits of microfinance particularly terms such as empowerment go down well with the essentially western donor population. The theme of doing good coupled with good repayment rates is a concept that seems to appeal to the mighty givers. Then there are international events like the subprime crisis in the West which helped Indian microfinance institutions (MFIs)[5] attracted private equity investment totaling INR 3.86 billion (USD 84 million) between January and June of 2010 – an increase of approximately 15 percent over the first half of 2009. The increase was attributed to the high profitability of the majority of Indian MFIs, (high interest rates of approx 30-60 percent per year) and high repayment rates (exceeding 95 percent in most cases).In fact even foreign pension funds such as ABP[6], a Netherlands-based pension fund, invested $30 million in Global Microfinance Equity Fund (GMEF), a microfinance private equity fund managed by Grassroots Capital. In 2009, another Dutch pension fund had invested $60 million in the GMEF[7]. Needless to state that private equity funds are not built around the principles of philanthropy and tend to invest in ‘businesses’ that are ‘viable’.

A lot more can be written about this multifaceted concept which though nebulous if  sincerely implemented through objective focused development programs can help lesser privileged women discover their true potential  and the power within.

[1] Source: Strandberg N ‘Conceptualising Empowerment as a Transformative Strategy for Poverty Eradication and Implications for measuring progress’. Feb 2002 New Delhi India.

[2] Dr Yunus is the first economist to get the Peace Prize.

[3]Selinger E ‘Does Microcredit ‘Empower’? Reflections on the Grameen Bank Debate. Jan 2008 Hum Stud 31:27-41.

[4] SHG Groups: Concept & Operation: The SHG’s are informal and homogenous groups of maximum 20 members. They are formed either by NGO/Development agencies, banks or can be self initiated. After formation, the members elect their leaders and finalize certain basic requirements such as the amount of monthly saving, meeting date and time, rate of interest, rules and requirements for borrowing, fines and penalties if applicable etc. These items are generally documented and form the mission / objective statement for the group. Bank accounts are opened in the name of the SHG and its members after completing the necessary documentation process. Once formed, the members start collecting a fixed amount of saving every month from each member. The discipline and punctuality regarding the payment of the monthly savings is key to ensuring that the SHG group is able to build a kitty that can be used for intra group lending at the rate of interest decided by the group. The interest earned becomes an income for the group as do the fines, late fees etc. This helps the members get familiar with financial intermediation, book-keeping and prioritization of needs. Once the group has reached a level of ‘stability’ [4]it is able to access bank credit ( also referred to as linkage) provided the bank is satisfied about the genuineness of the demand for credit, repayment capacity ,credit handling ability and the record keeping ability of the group

[5] Source: Micro Capital Brief –July 23 2010

[7] Grassroots Capital closed the fund at $117.5 million, and as per a company statement. , declared, that it planned to invest in around 50 microfinance institutions in different parts of the world such as India, Latin America and Africa from its total corpus.

The RBI’s Banking Ombudsman Scheme 2006 – A Mechanism for Addressing Customer Grievances

Banks in India are technology driven in most locations. So much so that the personalized customer service which used to be a hallmark of the Indian banking set-up is almost extinct. Centralization of operations and automation of most processes which was done with the intention of maximizing the benefits of specialization, economies of scale and avoiding duplication of processes at the shop-floor- also has its own limitations.

Very often the staff in the branch (especially the new age private sector banks & foreign banks) are not operationally sound incase a technical query is raised by a customer. They may look good and speak articulately but in most cases they are left seeking the refuge of the phone in trying to connect to a ‘back-office’ person when it comes to answering simple queries. The transition in the past decade in the Indian banking system has delineated the processes from the practice. The customer is given a 1-800 number or/ and an email id where he /she is directed to contact in case of a complaint.

The assumption is that this remote customer service point will be able to solve a customer problem as effectively as it would be solved at the branch level. This model presumes that this centralized location is ‘synched-in’ with the happenings on the customer account as they transpired and have the bandwidth to tie-up various loopholes that caused customer dissatisfaction and resulted in the complaint. However in practice, getting a resolution and a timely response from banks is quite a task. This is irrespective of the pedigree- nationalized, private or foreign banks-all seem to exhibit similar lethargy levels when it comes to resolving customer complaints. It is in such situations that approaching the Banking Ombudsman ( BO ) can help get a resolution to the lack of timely and appropriate action by the bank.

Let me illustrate a live case where the BO mechanism was used by the customer when the bank failed to respond in a timely manner (more details can be obtained by clicking on the appended link which provides more details on the BO as well as the locations of the BO statewise).

Example:  In a case of a failed ATM transaction, a customer’s account was debited although no cash was dispensed. The customer informed the bank about the event. Despite follow-up with the bank, the amount was not credited in a timely manner. The customer wrote to the BO. As per the BO’s orders, the amount was credited to the customer’s account but the bank did not pay the penal interest in terms of the existing RBI guidelines for the delayed period which was about 2 months. The bank was directed to pay a penalty @ Rs 100 per day amounting to Rs 6500 by the BO.

The Process getting a complaint resolved through the RBI Banking Ombudsman:

  • Any person (customer) whose grievance against a bank has not been solved satisfactorily after a month can approach the BO. The customer should make the complaint ( to the bank) in writing and preferably maintain record of dispatch / delivery of the same
  • There are 27 complaint areas that are handled by the BO.( these cover almost the entire gamut of areas such as credit cards, housing loans, remittances, deposit accounts etc). The details are available on page 19 of the appended RBI circular)
  • The customer must write to the BO ( e-mail is also accepted in addition to regular letter format sent via post) responsible for the area where his/her bank account is maintained. For eg: A customer has an account with XYZ Bank’s Banjara Hills Hyderabad. Subsequently he moves to Mumbai and continues to use the Nariman Point (Mumbai) branch for his regular banking needs, however he does not close the Hyderabad account and transfer it to Mumbai since connectivity between various bank branches of XYZ Bank enables him to bank without having to close and transfer the account and the proceeds. If he has an unsolved grievance, he needs to write to the Hyderabad office of the BO. Its important therefore to remember to contact  the BO in charge of the geographical location where the account is maintained
  • The BO on receipt of the complaint will send it to the respective Banks’ Nodal Officer. Remember   Every bank has a nodal officer. The details are displayed in branches of on the banks website. If you cannot find them, then please ask-it’s your right!
  • The bank is given a period of one month to resolve the pending customer complaint
  • The BO’s endeavor is to promote a settlement of the complaint through the process of conciliation /mediation. The BO is not bound by any legal rule of evidence and relies more on the evidence placed in the matter. The usual guiding parameters are : banking laws, RBI directives etc
  • If the complaint is not resolved between both the parties within the stipulated time frame of 1 month, the BO passes an ‘Award’ (Order).This is done after giving both the parties an opportunity to present their case. Physical appearance by both the parties is not mandatory but may be required
  • A copy of the order is sent to the complainant, bank and the nodal officer.
  • The complainant (customer)  has a time of 30 days within which to accept/reject the order. The acceptance can be indicated by submitting a letter to the bank indicating the acceptance of the order in full and final settlement of the claim.
  • The bank gets a time of one month to implement the BO’s order-after getting the consent letter from the complainant (customer)
  • Incase the order is not acceptable to the bank; it can file an appeal to the RBI within one month from the date that it receives the consent letter from the customer. Incase the order is unimplemented by the bank, the BO can report the same to the RBI for necessary further action
  • Some important numbers: There is no monetary ceiling on the on the subject matter of the complaint that can be considered by the BO. However the value of compensation demanded for any loss suffered by a complainant  in case of general complaints the compensation sought should not exceed Rs 10 lakhs. For credit card complaints the compensation sought should not exceed Rs 1 lakh ( this is in addition to the disputed amount for which there is no monetary ceiling prescribed)

Contract Broiler Farming in the Indian Poultry Sector – A Discussion




Poultry is one of the fastest growing segments of the agricultural sector in India today. It is growing at a much faster rate than any element of agriculture or allied agriculture sector. While the production of agricultural crops has been rising at the rate of 1.5 to 2 percent per annum, the production of poultry (eggs and broilers) has been rising at the rate of 12 to 15 per cent per annum (Walt Poultry, 2008).


The total value of the poultry sector was Rs162 billion in 2005-06, which accounted for 10.5 percent of the total value of livestock output and 2.6 percent of the agricultural sector as a whole. The sector has evolved over the years from a backyard activity to an organized and scientific industry. India has the unique distinction of being the third largest producer of eggs (after China & the USA), ninth largest producer of broiler and fifth largest producer of poultry meat in the world. India produces more than 55.6 billion eggs per year with a per capita availability of approx 47 eggs per annum.


(See table below)


Table 1: Value of Output Share and Growth in Poultry Sector in India



Poultry Meat


Poultry Total

Livestock Total

Total Crop and Livestock

Value of Output in Billion Rupees (at 1999-2000 prices)

TE 1981-82






TE 1991-92






TE 2005-06






Share in Total Crop and Livestock VOP (percent)

TE 1981-82






TE 1991-92






TE 2005-06






Compound Annual Growth Rates (percent)


























Source: Ministry of Statistics and Programme Implementation, Govt of India ( as quoted in AERC Report of the Gokhale Institute of Politics & Economics by Dr Kalamkar (2011)

 The importance of the poultry sector can be viewed from the following angles:


  1. Poultry has the potential to meet the protein requirements of a nation where malnutrition is rampant- since both eggs/broilers are a good source of protein
  2. The income generated from poultry activities helps to augment the income of the rural masses. It does not require the trappings of space or any major infrastructure investment
  3. Poultry is one of the most efficient converters of plant products / waste into edible food that can in some measure tackle the problem of malnutrition especially in a country like India.
  4. Unlike other meat (beef, pork) which have religious taboos-chicken is widely accepted in India and is cheaper than goat meat ( also referred to as ‘mutton ‘in India)
  5. Poultry litter has high manure value and can be used in agriculture activities
  6. Poultry provides an excellent source of employment for the rural masses .Generally the entire family can be involved in various aspects of the business ( helps contain costs and maintain better supervision)
  7. Generates relatively quick returns with low investment requirements ( in terms of the space, low capital reqd to enter the business and relative simplicity of day to day operations)


It is believed that the Indian poultry industry is 5000 years old. The Indian Red Jungle Fowl is the acknowledged ancestor of modern day hybrid chickens [1].  The two main categories of output from the poultry sector are:


  • Broiler : Focus is meat
  • Layer : Focus is Egg Production


Broiler Chicken Industry in India: Overview


Broiler production has grown at a very fast pace: from 4 million in 1971 to 1563 million in 2006. The broiler chicken market in India is estimated to be Rs 60,000 million and estimated to be growing @ 15% in the last few years (RNCOS, 2005). Andhra Pradesh, Kerala, Karnataka and Tamil Nadu accounted for 40% of the market. Maharashtra and Goa accounted for about 15% with the balance being shared by the Central, Northern and Eastern Regions of the country. Integration has helped to propel poultry to a commercial level. The increase in scale has provided the ‘push factor’ to take care of the ‘pull factor’ caused by the growth in the per capita income thereby providing choices to the consumer and keeping the price in check. However stringent penalties (only a 5% mortality rate is allowed- lower price or a penalty is levied by offering a lower procurement price in case the mortality rate is higher), absence of insurance, and delay in picking up the grown chicks and the loss incurred due to the interpretation of the contract formalities and the virtual lack of voice of the farmer/grower are some of the drawbacks of this system.

What is Contract Farming or Integration?

A farmer interested in engaging in poultry development activity has two options:

  1.  Opt for Contract Farming also referred to as Integration
  1. Non Contract Farming : In this scenario the farmer is responsible for all the activities viz procurement of day old chicks ( to rear them for the broiler market) or acquiring a pureline / good breed which will be able to produce eggs that have a ready market. In this case the farmer solely bears all the expense involved in procuring the: feed, overhead expenses for (water/heating/cooling/disinfecting the poultry farm) , medical costs transportation and marketing etc plus he is also exposed to the ‘market risk’ ( in other words to the possible risk of there being an unfavorable demand for the broilers/ eggs at the time that they are ready to be sold .In case of broilers the usual cycle of procuring day old chicks rearing them and selling them in the market is about 40 days. In case of eggs (layer) the sale can be immediate.

It is estimated that at present 36.7% of broiler production in India is under contract farming out of which about 78 % of the contracts are concentrated in Southern India. The Coimbatore-Salem belt is the front runner and leads the pack in broiler production in India. Another prominent belt for broiler production is the Pune-Nashik area (Maharashtra).Hyderabad and Bangalore have also seen a rapid growth of the contract broiler type of arrangements. The key players in this sector are Venkateshwara, Suguna, Godrej etc.

A contract farming arrangement involves a wage contract between an integrator who supplies the intermediate inputs and procures the output (as per pre decided terms) and a poultry farmer who provides inputs such as administration, rearing and care taking.

The process can be described as under:

  • Integrator supplies the ‘raw-material’ which in this case are the day old chicks (DOC)
  • He also supplies the feed, medications, veterinary supplies and implements that may be required (E.g. : Water dispensers, feeders etc)
  • The contract farmer provides his services (labor) and space for the shed and other related services or equipment that may be required
  • The integrator also bears the marketing responsibility (risk) and the expense involved in transportation ( to and from the farm)
  • Since the major chunk of the expense ( working capital) is borne by the integrator-he is the absolute owner of the moveable stocks ( broiler) on the farm
  • The farmer’s role is like that of a ‘care-taker’ who gets a pre determined wage which is listed in the contract
  • This wage paid to the farmer is linked to various parameters such as the ‘Feed Conversion Ratio’(FCR) or  in other words the quantum of feed consumed by the bird to produce the weight, percentage of birds dead etc.
  • A farmer is rewarded for surpassing the set standards and penalized if any of the agreed criteria is not met
  • This penalty is deducted by calculating the loss incurred per bird and deducting that amount from the money to be paid ( wage bill)

Some Issues in Contract Farming & Recommendations:

A.    Need for Suitable Status, Incentives & Support for the Poultry Sector by Policy Makers/Government


  1. The status of the poultry sector has been a grey area for bankers and policy makers alike. While NABARD and commercial banks classify this sector under the ‘agriculture’ category most of the benefits viz concession in electricity, water costs, and tax benefits are not extended to this sector.
  2. Most farmers (both contract and non-contract) treat this as a secondary occupation. This can be changed by encouraging poultry producer’s co-operatives and subsidizing the feed costs. Moreover such co-operatives will enable the participating farmers to get an avenue to voice common concerns, and seek solutions that can have a positive impact on all stakeholders.
  3. Adequate infrastructure such as efficient cold chain system is required to ensure efficient forward and backward linkages. The perishable nature of the product requires minimal intermediaries (opposite situation prevails in the current scenario). The fate of the non contract farmers becomes even more difficult since grown broilers cannot be retained beyond a certain time.


B. Integration: Not a Panacea (Common Problems faced by the Farmers)[1]


  • Late / Early pick-up of the birds by the integrators depending upon the market conditions.

In case of a ‘late pick-up’ the Feed Conversion Ratio (FCR) of the bird increases after the 42 day maturity period. A high FCR lowers the procurement price for the farmer and profitability. Incase of an ‘early-pick-up’ the FCR is low since the bird has not reached the desired maturity which again lowers the profits to the farmer.

  • Limited growth opportunity:

Low growing charges coupled with the cost of making investments in the infrastructure such as sheds, feeders, breeders, heating and cooling systems result in a low income for participating farmers. Since there is little government support to the sector, non contract farmers are dwindling in number. The stringent mortality norms (only a 5% mortality is permitted in most integration contracts-else the farmer gets penalized and is offered a lower rate) leaves the farmers in a vulnerable position and with no avenue to voice their grievances

  • Delay in receipt of payments, or receipt of DOC’s[2]:

Leads to fewer batches in a year and thus a lower annual income.

  • Extent of rural penetration of   poultry activities:

As per the current situation most poultry farms are located in close proximity (approx 8 kms from the nearest town [3] for contract farms and about 8.5 kms for non contract farms) because of the need to access inputs in time as well be able to offload the output. The locational proximity to the market becomes even more critical incase of non contract farmers who have to arrange and bear cost of transport. Lack of proper access roads especially in the interior parts of Indian villages has been a contributor for this industry becoming a ‘fringe’ industry’ (i.e. developing close proximity to towns).

  • Lack of Access to Institutional Credit:

 Non Contract Farmers are generally unable to self finance a poultry endeavor. Due to lack of adequate government policy there are no incentives for banks to lend to poultry farmers. Integration therefore becomes a default route for farmers wanting to augment their income. In the process they have to accept the terms of the integrator.


C. Automation/Infrastructure Development: Imperative to gain Competitive Advantage

The pace at which the Indian market is able to transition from a live bird market to a chilled market will also be a factor in the expansion of the poultry sector. At present, live bird sales form the major component- limiting the scope of exploiting regional comparative advantages in production within the country. A shift to automated processing may also have public health benefits and stabilize prices.


D. Certification Norms/ Testing to ensure International Compliance

At present minimal official data is available on variables such as production, feed composition, vaccination, pesticide application etc[4]. There is a lack of comprehensive system to check for pesticide, antibiotic and hormone residue compliance as per international norms. Available data on production costs and prices in India vis a vis other countries suggest that India is an internationally competitive producer of poultry meat. Hence if we have to exploit the comparative cost advantage then compliance to international norms is an imperative.

E. Poultry Feed Prices: Cause for Concern

If the recent trends in poultry and egg production are to be sustained then the growth in feed demand particularly corn and soybean is likely to outpace domestic production. There is a need (at the government level) to encourage production of corn and soybean and also invest in R&D to create breeds that can be managed with local resources and feed options giving a higher FCR. In a study (McKinsey 2007) it was noted that the FCR for the Indian Poultry is 6 to 14% lower than those of their US Counterparts[5]. Hence genetically enhanced breeds suitable to the Indian climate would result in higher profitability for all stakeholders.

F. Lack of Availability of Reliable Data about the Sector

Government and industry sources publish very little reliable data on the sector. Available government data generally consists only of periodic poultry population estimates.


The poultry industry has demonstrated its capability to revitalize the economy (multiplier effect) as well as to contribute towards the national goal of nutrition security. At this crucial juncture a proactive government policy can easily propel our country to a premier position on the global horizon.

 Acknowledgement : This article would not have been possible without the support, data and insights received from Dr S Kalamkar of the Gokhale Institute of Politics & Economics -Pune. I’d like to thank him for his time and patience in explaining various nuances of the sector and for dealing with innumerable questions from my end. What was supposed to be a fifteen minute appointment streched to over 1.5 hours as we shared mutual insights (mine ofcourse were very limited !) and pondered over the happenings in the sector. Dr Kalamkar can be contacted on




[1] Based on a  recent study conducted by Dr S Kalamkar of the Gokhale Institute of Politics& Economics on the Economics of  Contract Broiler Farming in Maharashtra

[2] DOC: Day old chicks

[3] Kalamkar S ‘Economics of Contract

[4] USDA Report : India’s Poultry Sector : Development & Prospects 2004

[5] Low FCR: would imply that more feed is required/consumed to gain the same amount of weight.

[1] Source: Thee VH Group

BAIF’s ‘Wadi Program’: A Composite Model for Sustaining Livelihoods in Rural India

( Image Source:


The article highlights the Wadi[1] approach adopted by BAIF in South Gujarat for promoting the livelihoods of rural farmers. Acute poverty, small landholdings, low agriculture productivity , lack of alternate employment opportunities forced the local tribals, to migrate to nearby cities in search of livelihoods where they usually become victims of exploitative labor practices .

BAIF provided these farmers with structured inputs in the area of R&D, access to formal sources of credit, marketing and employment avenues for the family unit-while respecting traditional customs. Community welfare measures such as provision of clean drinking water, involvement of the local women and youth in para-medic training helped the otherwise remote pockets improve on their health and hygiene standards. This achievement was possible after more than a decade of nurturing by BAIF and commitment of the local tribals.

Small and marginal land holdings were  brought under improved land use and the poor families were trained and encouraged to undertake plantation of mango and cashew trees. Assistance and guidance by BAIF in processing of the produce, and in fixing a fair price and marketing helped the cooperatives in generating a premium through value addition.

The approach of collective production, marketing and forward integration has resulted in a better quality of life for the members. BAIF also facilitated a public private partnership of the cooperatives with ITC[2]. The organic mango crop was cultivated by the farmers while ITC bore the certification costs. This enabled the farmer cooperatives realize a premium of nearly 20% over the prevailing market price. Innovative ideas like introduction of  pickle sachets priced at R.4, cashew nut shell processing were initiatives taken as the Wadi model matured and the number of members increased. 


Poverty alleviation programs in India are the proverbial darts thrown by politicians and bureaucrats alike, to accomplish election agendas. They never hit bulls eye and usually flounder because both politicians and bureaucrats are disinterested in the cause per say.  Common reasons for the failure of such programs are pathetic program design(s), a lack of awareness of the needs of the target audience, or the vision of the  end result expected, cognisance of the grassroot level problems that hamper access to such programs and a system which fixes accountability and responsibilities on those entrusted with their implementation. The rampant corruption that  is usually an integral part of all such poverty alleviation programs, ensures that the spirit of such programs gets lost in execution. Whether it’s the old Food for Work Program or the recent NREGA which involves copious paperwork and  admin hassles:  these are all pretty much the ‘old wine in the new bottle’ type of recipes.

The fact of the matter is that the basic needs of food security, housing, access to healthcare and education remain topmost irrespective of the socio economic class or whether the individual belongs to the urban/rural section. Hence for any poverty alleviation program to succeed, they  need to provide a solution that ultimately allows the beneficiary of such programs to find a composite solution that solves the fundamental needs and helps them become self-sufficient rather than leech of such quick fix measures on a long-term basis. There is enough published literature including the famous ‘Maslows Hierarchy’ that illustrates the hierarchy of human needs. In the Indian context, most poverty alleviation programs run by the government lack the very understanding of the need to tie-up these needs. For eg: What is the use of giving a worker a job to work on digging up wastelands under NREGA(National Rural Employment Guarantee Act- if he has no stake or no idea of the end result and its relevance to him in securing his basic needs on a sustainable basis? While it may help the rural unemployed worker get the Rs 100-110 per day under the NREGA scheme, the dissociation with the end result  and its positive impact on improving his/her quality of life on a sustained basis-  dilutes the quality of the effort/commitment  If on the other hand the government were to launch programs that address the livelihood needs of the poor by directing the efforts towards the fulfillment of the basic needs (viz food security, housing,healthcare,education) such programs would not only become self-sustaining in the long run but would also enable replication across the country due to their viable design .

About BAIF:

The Pune based Bhartiya Agro Industries Foundation (BAIF) has been working with the rural poor on the implementation of self sustaining livelihood models for over two decades. The idea is to make the beneficiaries independent in the long run such that they become the drivers of their own destiny – a very different approach from the traditional government programs, which do not ensure such long term independence). BAIF was founded by the noted Gandhian Dr Manibhai  Desai . Gandhiji had propagated the doctrine of fortifying the village economy as a means to strengthening the nation since he felt that the villages were the roots that nourished the moral and social fabric of any country. BAIF’s ‘Wadi Program’ evolved from an idea of trying to find a permanent solution for the tribals of the Vansda district of Gujarat. The arid and mountainous land was not conducive to using either improved agriculture techniques or dairy activities. Moreover the small size of land holdings (less than acre) made it unviable to grow any crops on a commercial basis. Cattle development activity was undertaken as an entry point to reach a large number of small and poor farmers owning low productive cattle. Cultivation of perennial and fodder crops was introduced as a complimentary activity. Subabul a drought tolerant, fast growing fodder tree was introduced for developing wastelands. However the tribals wanted to cultivate fruit trees which could generate cash income as opposed to a fodder and firewood species like Subabul. Hence the Wadi Concept was introduced in 1982 to meet this requirement to generate cash income and facilitate self-reliance for the tribals of Gujarat. The overwhelming success of this program has subsequently been replicated in other states such as Maharshtra, Karnataka, Uttar Pradesh, Madhya Pradesh, Chattisgarh and Rajasthan.

The Concept of Wadi:

The word ‘Wadi’[3] means a small orchard covering one acre with crops like cashew, mango, amla or any suitable fruit crop with forestry species on the periphery of the land holding bordered by a productive live-hedge. (see illustration # 1 below). A typical orchard promoted under this scheme (covering approx 1 acre) involved planting of 40-60 fruit plants and 300-400 forestry species along the border.( see images appended at the end of the article which show facets of the Wadi Program or visit for details)

Relevance of the Wadi Model :

The Adivasi population in India constitutes about 8.14%.of the total population or approximately 85 million people (2001 Census) .These households traditionally derive sustenance through forestry, hunting and primitive agriculture practices (Phansalkar and Verma 2005). However fast depleting forest, and natural resources, land erosion, lack of access to basic health and hygiene have made seasonal migration into nearby cities – a virtual necessity. In the cities these landless workers have to live in deplorable conditions and often get exploited by middlemen. They are also not able to claim benefits being offered by the state governments due to a lack of identity (Hooza, 2004). Ineffective labor laws make their situation (especially women) very difficult.

Large sections (approx 36%) of the tribals continue to be in a state of deprivation. (Pandya 1988) the position of small and marginal farmers can be improved if marketing efforts are  undertaken by viewing the entities involved in a holistic manner ,linking households and their cooperatives with industrial producers, minimize information asymmetry and helping to equalize the bargaining power between the households and their cooperatives with industrial producers..

Published literature in this area has emphasized on the need to connect small and marginal farmers to remunerative markets for helping them realize better returns (Dorward et all 2004).Lack of capital and purchasing power were identified as affecting the supply and demand conditions under which such small and marginal producers operated.

The ‘Wadi Program’:  A Composite Solution to Multiple Issues

This approach harnessed the joint resources of BAIF and the local tribals. BAIF brought to the partnership its expertise in the field of horticulture, access to structured finance and the knowledge of modern supply chain techniques. The local tribal community contributed by accepting the concept and investing the only assets that they possessed viz land and labor. The community came together to plant / underutilized lands so as to produce higher volumes followed by the aggregation of this produce for organized forward linkages.

BAIF played the role of a facilitator, trainer and guide in helping the community to accept the long and challenging task of preparing the groundwork required to succeed. Regular interaction was necessary to encourage the 42 tribal families that participated in the program when it was first launched in 1982. The journey was arduous and the extreme climate made tending to the saplings a challenging experience. In areas where irrigation options were not available, participating tribal members would carry water in pots atop their heads for hours  to water and tend to the saplings. This had to be done daily for nearly  3-4 years before the fruit plants stabilized.  Production started coming in from 4-5 years

The participating tribal families earned in the range of about `8,000-`10,000 from the intercrops per annum from the first year. The major income of approx `30,000-`40,000 per annum came after 6-7 years when the orchards started bearing fruits regularly.

The unique aspects of the Wadi Program are (Refer Illustration below):

  • Creation of  sustainable sources of livelihood, local employment for the entire family  on underutilized/arid land for the poorest section of the society
  • Ensures access to structured sources of credit and research based improved production techniques
  •  Provides vital  access to forward linkages and post production support Enriches the environment and uses local customs and practices along with scientific production methods
  • Helps to reduce seasonal migration of the tribal community by revitalizing the village economy 

 Impact of the Wadi Program:

The success of the first batch, led more families to join in and in a few years time, the number of families grew from 42 to 5000. The success of the program earned the support from the German Development Bank (KfW) and NABARD which funded a full fledged program called the Adivasi development Program (ADPG) in the adjoining areas of Kaprada and Dharampur in Vansda district ( State-Gujarat). The impact of these programs led to a wider replication leading to the coverage of nearly 2 lac families in 15 states of India (see Table given below).

The year wise coverage of Wadis under ADPG is presented in Table below.  Batch I to Batch  VII have been covered under the main program of ADPG, while Batch VIII and IX have been covered through Special Program Gujarat.  The cumulative coverage under ADPG is 13,663 families with Wadis established over 12,732.5 acres. In addition to this nearly 5000 families had established Wadis on 5000 Acres during 1982 to 1989.

Table – : Batch Wise Wadi Development (Source: BAIF Pune).


Batch no & Year of Joining

No. of Villages in Batches

No. of New Villages

No. of Families

Wadi Acreage

Batch-I (1995-1996)





Batch-II (1996-1997)





Batch-III (1997-1998)





Batch-IV (1998-1999)





Batch-V (1999-2000)





Batch-VI (2000-2001)





Batch-VII (2001-2002)





Batch –VIII (2002-2003)




Batch- IX (2003-2004)

















Key Insights & Conclusion:

  • The Wadi Program was a major success due to the involvement and active participation of various stakeholders viz development institutions, tribals, corporate and financial institutions. Tying up of the seed to market requirement ensured sustainable livelihoods.
  • Aggregation of land holdings, efforts lead to lower cost of production, better quality and bargaining capacity of the producers.
  • Nurturing of leadership and organization skills in the tribals produced excellent results-proving that  capable leaders could be developed through participatory methods.
  • The Wadi model worked because it incorporated technology, R&D along with simple workable solutions that involved using environment friendly options. Intercrops, fruits, forest trees provided diverse sources of income thereby avoiding concentration of risk incase one species/variety of crop failed. The employment opportunities generated stimulated the local economy which acted as a positive motivator.

[1] Wadi; Gujarati word for a fruit orchard

[2] ITC: Indian Tobacco Company

[3] The term ‘Wadi’ has its origins in the Gujarati language. It means a fruit orchard.

Pomegranate Cultivation : India’s Competitive Advantage Lost & Why ?


A couple of months ago, I was in the Solapur district (Maharashtra-India) on a research assignment related to microfinance. The bus route to the  villages that we had identified for research work, passed through the ‘pomegranate hub’ of Maharashtra. But here was the surprise- there were hardly any pomegranate trees in sight. On inquiring I learnt that a lot of the farmers had cut down the trees due to the strike of the BBD (Bacterial Blight Diesease-or BBD as its commonly known). They had switched in most cases to the more reliable grape cultivation.. I passed by the National Research Centre on Pomegranate in the Mohol block of the Solapur , which ironically has not been able to find any solution to the problem as yet and seems to stand as a silent spectator overseeing the unforunate events.

Given below are some details on the subject. While pomegranates are not as hot and happening compared to some of the bigger issues grabbing headlines , they represent much of whats happening in at the rural level in India. Rapid urbanization, deteriorating soil quality,vanishing farmlands- being erased slowly but surely from the rural landscape. Food security in the long run does not seem to be on anyone’s mind.While the farmer in most cases is struggling to survive ( in case of small and marginal land holdings), the progeny is more interested in getting a college education and selling off the farmland at a lucrative price. Farmers are infusing the soil with chemicals to ensure that the ‘hybrids’ are able to give them the best value for the input cost. What they don’t seem to worry about is the fact that these ‘hybrids’ need more water and balanced nutrients which need to be replenished at regular intervals in order to prevent degradation of the soil quality -but the future clearly does not seem to be on very many people’s mind be it the government, farmers or even consumers ( who don’t really care for a missing fruit / crop from the market shelves as long as its not a staple)

Why Pomegranates are Important in the Indian Context?

India is among the largest producer of pomegranates in the world[1]. About 60-70 per cent of the country’s pomegranate exports are sourced from Maharashtra (Solapur District). The total area under pomegranate is approximately 1, 20,000 hectare, out of which 90,000 hectares is in Maharashtra. India contributes around 70 per cent to the world pomegranate market. In 2007-08, 35,000 metric tonnes of the fruit was exported from the country, while the figure went down to 34,800 metric tonnes in 2008-2009, and further dropped to 33,400 metric tonnes in 2009-2010.[2]The main cause attributed to the declining production has been the Bacterial Blight Disease (BBD) also referred to as the ‘oily spot disease’[3]. In last four years many farmers have uprooted pomegranate trees due to the continuous loss and shifted to other options like grape cultivation. The competitive advantage enjoyed by India has helped transform the lives of farmers and helped them earn millions. For e.g.: Twenty years ago, people in Atpadi taluka in Maharashtra’s drought-prone Sangli district, could earn their livelihoods only by migrating to cities since the arid/dry soil and poor rainfall conditions did not sustain many other crops but pomegranate cultivation changed everything. Another beneficiary of the pomegranate boom was the Aran village in Solapur district which has approximately around 1000 acres under pomegranate cultivation.

The establishment of the National Research Centre on Pomegranate in the Mohol block of the Solapur district in September 2005 is a good indicator of the degree of importance associated with the fruit and the geographical area. However that notwithstanding the problems of the farmers continued and a relief package (Rs 1000 Crore) for the affected farmers was announced in May 2008[4]. A relief package was also announced by the State in 2006-2007.

The villain of the otherwise perfect story – the bacterial Blight Disease (BD) was first reported in India in the New Delhi area (Hingorani and Mehta 1952)[5]. Ramesh et al., (1991) reported 60-80 % yield loss due to blight in Karnataka. Ravi kumar et al., (2006) revealed 20-90% disease severity in Bijapur and Bagalkot districts. Similarly 71.14 %   severity was reported in Bellary district (Yenjerappa et al., 2004). The survey of 82 pomegranate orchards in Maharashtra revealed that bacterial blight was observed up to 100% severity in some orchards (Anonymous, 2007). The airborne nature of the bacteria makes it very difficult to control its spread and reach. Various techniques such as controlled spraying ,scientific growing techniques (such as timely pruning) and a reasonable time of 3-4 years after planting, pruning are some of the recommendations given in virtually all published literature on the subject.

The website of the National Research Centre on Pomegranate offers limited insights on the subject. There are no publications available[6] on the website[7] and the ‘Vision 2025’ document draws a blank.

A field visit to the area and interaction with the farmers and some of the local bank officials in the Mohol area (Bank of India- is the lead bank in the Solapur district) helped throw some interesting insights on the subject. According to some of the local farmers, the need too earn quick returns was the main cause of the BD onset and thereafter its airborne nature just aggravated the spread and its impact. While published literature on the subject recommend a 3-4 year ’gestation’ period before harvesting the fruit, in most cases the practice was to harvest in about two years  Farmers made the soil work more by planting and infusing the soil with fertilization in order to benefit from the excellent prices available in pomegranate cultivation. Secondly ‘alternating’ which involves growing a different crop instead of repeating the same one was not done, again because of the   need to cash in on the pomegranate boom. The farmers did not anticipate the magnitude of the impact nor its long pervading tenure. There was hope that some ‘quick fix’ would be found through the R&D route since the National Research Centre on Pomegranate was in the vicinity of the prime c area itself and more so since so much was rode on the well being of the crop. Thirdly the farmers always felt that the trouble would not strike in their own backyard[8]. The precedence of a relief package acted as a safety net in case things took a turn for the worse. The shortage created due to the BD malaise also meant a windfall for some who escaped the onslaught. Nearly 60-70% of the pomegranate farmers lost their crop, but for those who did not get affected, this situation set their cash registers ringing[9].Prices shot up from `35-`40 per kg ex-farm for the ‘local consumption’ variety. For the export quality produce, the price was as high as ` 100 per kg. The mark-ups associated with transportation etc to the northern parts of the country further added to the cost. This created an arbitrage opportunity for the farmers who were lucky enough to escape the BD disease. The situation in nearby Karnataka was also grave. The fruit comes to Pune (nearest hub) and across the country in consignments from other districts like Sangli, Nasik and Solapur. The unseasonal rain fall pattern, prevailing over the past few years has also contributed to the problem. Such is the intensity of the BD, that it can impact an entire farm overnight. Pomegranate is typically available throughout the year. It grows in drought prone areas of Sangli, Nasik, Baramati and Solapur within the Maharashtra state. So far no solution has been found to take care of this problem leaving the farmers with no choice except exercising a ‘pomegranate plantation holiday’ to allow the soil to regain some of its potency and to prevent further damage and spread of the disease. So why is the tale of the pomegranate important in this context? Because it illustrates a problem that is affecting the dynamics of the big picture at a national level,-that of poor soil conditions, disappearing farmlands, and a strong ‘pull effect’ created by the service driven boom the effect of which has been acerbated by the ‘short term –quick gain’ attitude on the part of the farmers and the lack of any active, meaningful policies and interventions on the part of the policy makers. The band-aid measures like relief packages (as seen in the pomegranate case) have been more focused in getting rid of the immediate symptom rather than in getting to the root of the problem. Our ‘capital’ account balance (viz agricultural land) is fast depleting and being shifted to the revenue bucket. But the loss has many dimensions: once fertile land is lost to concrete and mortar, it’s lost forever. Then there is also the dissonance that occurs at the individual household that looses the fixed fertile asset and sometimes a way of life-that which is not captured in terms of data since a mass transfer of land generally does not take place.  In the pomegranate segment, the irony is that despite enjoying a competitive advantage in terms of the soil and climatic conditions, and an apparent R&D commitment in terms of the National Pomegranate Research Centre, this unique premier position advantage has been impacted due to reasons discussed above.

[1] Source: Report of the Working Group on Horticulture ,Plantation Crops and Organic Farming for the XI Five Year Plan (2007-2012)

[2] Source: National Research Centre on Pomegranate website (

[3] Bacterial blight of pomegranate caused by Xanthomonas axonopodis pv. punicae. has become an increasingly serious threat for pomegranate growers of the states Andhra Pradesh, Maharashtra and Karnataka State of the Indian Subcontinent. The disease was most severe in Maharashtra Karnataka and recorded in a range of 60 to 90 percent incidence. The increase in day temperature (38.6°C) and afternoon relative humidity of 30.4% along with cloudy weather and intermittent rainfall favoured the disease initiation and further spread of the disease. The continuous growing of pomegranate over three seasons has lead to increased susceptibility of the crop in this part of the geographical area. The bacterium was first noticed in select farms in Bellary district in the 1980s; it started spreading rapidly in the early 2000s and took epidemic
proportions in the last couple of years. It has caused severe damage and destroyed 90 percent of the cultivated area in the districts of Bagalkot, Belgaum, Bellary, Bijapur, Chitradurga, Gulbarga, Koppal, Raichur, and Tumkur in Karnataka and the Solapur district in Maharashtra.
The bacteria primarily spreads through infested planting material and secondly through cutting implements and wind to other farms. It has also started affecting other crops like lemon in some areas. It affects all plant parts, but the main damage is observed on fruits, which develop black spots and usually split resulting in enormous yield losses.

[4] Source: Economic Times May 28 2008 .Article titled ‘Maha pomegranate growers get Rs 900-crore package’

[5] Source: Cited literature on ‘Agropedia’.

[6]  Source: National Research Centre on Pomegranate website. Tab ‘Publications’

[7] Source: National Research Centre on Pomegranate website. Tab ‘Vision 2025’

[8] Telephonic conversation with Shri Prabhakar Chandane, President of the All India Pomegranate Growers’ Association (Akhil Maharashtra Dalimb Utpadak Sanshodhan Sangh).

[9]  Source : Indian Express November 19 2007 article titled ‘Prices Up-Pomegranate buyers in a spot’

Why Indian Banks need to focus on the less Tech Savvy US NRI’s ?

Silicon Valley and the boom in the IT industry propelled by the internet have made the Indian engineering talent a much prized item. Indian educated doctors, dentists too are a much sought after in the USA ( they have to clear the US certification requirements). But there are also a lot of Indians working in less celebrated ( although important) jobs : For eg: motels, fast food chains, entertainment industry (casinos,theme parks),gas stations, grocery stores etc.. So what is it about the Indian worker that makes them so ubiquitous and sought after in blue-collar jobs ? Its common to find Indians manning petrol pumps, working at local grocery stores such as Wal-Mart ,Kroger etc . Indians work hard and have an edge over their Spanish counterparts because they are more proficient in English .

Mandi Kaur ( full name Mansimran Kaur) is an Indian lady who works in a Kroger (grocery store) in Atlanta, GA. Like most Indians seeking success in the promised land of USA, Mandi Kaur and her family ( consisting of her husband , aged mother in law and three children -2 daughters and a son) migrated to the USA after their family petition was approved. Mandi was a homemaker and had never worked before coming to the USA. Her husband had a small business in their hometown but now does odd jobs in the USA. He is not very conversant in English although he holds a Bachelor’s Degree in History(medium of instruction was Hindi) and hence has not been able to find anything substantial. Mandi on the other hand has been able to find and keep her job with the Kroger grocery store ( it requires basic proficiency in English). The job requires her to be on her feet for eight hours and working in various sections of the store ( stocking produce, arranging shelves, manning the cash counter,handling customer returns, arranging the grocery carts in the parking lot etc). She has managed to learn driving and buy a car that she uses to commute to her store and back home. Mandi has to work in different shifts at the store and works hard to manage her home-family and the job. The main reason for her sticking on to her job with Kroger is that ( these jobs typically pay between US$ 8 to US $ 13 per hour approximately) it provides her with medical insurance coverage for her and the family- husband and kids (since all kids are under 21).She typically works for nearly 50 hours every week since she tries to put in more hours to make more money.

Mandi still cherishes the idea of returning to her hometown in Punjab. She has seen ads of some Indian banks operating in the bigger cities of the USA like NY,LA and even knows that they have websites however she uses Western Union to remit funds to her family incase there is a real emergency otherwise she arranges funds through her relatives and pays them off subsequently.

She is aware that the property prices are on an ascent in the Indian context and has also heard that fixed deposit rates for NRI accounts are showing an upward trend but Mandi wants more information. She tried calling the 1-800 number of an Indian bank operating in NY but was not able to follow some of the information completely and felt embarrassed to ask more questions She wants to be able to interact with a physical person who can answer her questions (preferably in Hindi/Punjabi), help her with the paperwork and navigate the process of maintaining accounts in India while being able to get information in the USA . Most importantly Mandi wants her hard-earned money to be safe. She does not want to involve her children too much into money matters at this stage and would like to save some money in India for the rainy days ahead. She does not want to depend upon her husband too much since she feels that he may spend some of the savings on personal consumption,relatives,celebrations etc thereby depleting the kitty

There are a lot of  men/women like Mandi Kaur who want to reach out to banks in India and want Indian banks to reach out to them. They are comfortable with most Public Sector Banks since some of these institutions have existed even before their birth! However they are unable to connect with Indian banks via the internet since they are not very comfortable in the usage of the net, plus they are not sure about the security of transactions and information given over the net. Typically such individuals are in the age group of about 50+, generally hail from smaller towns and villages in India and possess basic education up to Class 12 or in some cases have Bachelors Degrees ( the medium of instruction is generally not English but the local language like Gujarati,Hindi etc). They have low-medium paying consistent jobs (blue-collar jobs) that interestingly are recession proof! The reason that these jobs are recession proof are that during economic boom times nobody wants to do them because so many better options are available and during the bust consistent workers with a good track record willing to work at low salaries are retained. Services like grocery stores,petrol pumps,pharmacy jobs, F&B(fast food) , motel and hotel jobs, etc are always utilized since they constitute the necessities of the average American lifestyle . Also most of these jobs are physically demanding in terms of the work involved hence the turnover is high

We usually hear of the tech driven IT based demand in the West that has catapulted engineers ,mathematicians of Indian origin towards seeking Western shores. This crowd and even medical doctors of Indian origin constitute the upper crust section of the US Indian-American socio-economic section. This (affluent) section of the Indian NRI crowd is tech savvy,articulate,financially comfortable and with means and ends that sometimes allow using specialists such as ( CPA’s, CFP’ etc).Their requirements may be complex involving the usage of a combination of banking and finance products (with emphasis on wealth multiplication & tax planning) that may involve using multiple banks across continents

However the ‘other’ NRI section if serviced can be lucrative for Indian banks for the following reasons:

  1. The demographic profile and the comfort in dealing with Indian banks (due to emotional,cultural,linguistic reasons) generally ensures loyalty from this section
  2. The banking requirements of this target audience are generally quite simple and once resolved can lead to acquisition of other related family member accounts ( both in India and the USA)
  3. Good for building CASA base (Current /Savings Base). Banks need a diverse and wholesome base of low cost deposits in order to boost income.
  4. Possibility to cross-sell other products once a relationship is established thereby contributing to the fees,commissions of the banks earnings.
  5. Helps the Indian Banks get access to the USD ( foreign exchange) generally a sought after currency especially during the recent weeks
  6.  Availability to obtain authentic ID information ( Social Security Number) from Indians based in the USA-makes it easy to fulfill the KYC (Know Your Customer)requirements and obtain supporting documents if any by Indian banks.Moreover the US system of highly organized and detailed documentation requirements in general, makes such individuals more tolerant to the paper intensive system prevalent in India.
  7. Robust presence of the Indian community in the USA and its open immigration policy make is a desired destination for many who immigrate on different visa categories such as student,business,work,family etc. Unless USA immigration laws are amended drastically this trend is likely to continue even in the future leading to a strong need for banking products and services that help Indian Americans connect the two continents.  According to the 2010 USA Census the Indian population in the USA grew from almost 1,678,765 in 2000 ( approx 0.6% of the US population) to 2,843,391 in 2010 ( or approx 0.9% of the US population) a growth rate of 69.37%,one of the fastest growing ethnic groups in the USA( see link for details recent World Bank report stated that India received USD 58 billion in remittances during 2010-11. China came in close at the second place with USD 57 billion. Approximately 61 percent of the remittances made to India went towards family welfare,bank deposits attracted 20 percent,3 percent towards equity investments and 4 percent towards real estate..

Some ways that banks can reach out to this section of the population are:

  • Working with local Indian community/ cultural and regional associations and disseminate information. This will also help banks get access to homogenous groups of people with similar needs,requirements. Information campaigns can be conducted in the respective regional languages. 
  • Using Indian hubs in respective cities on weekends (the time when most Indians frequent such areas) to provide information and answer queries. Eg : Edison area in New Jersey or the Decatur area in Georgia have a lot of Indian shops selling a wide variety of merchandise and which attract the Indian American community in big numbers from surrounding states.
  • Use the Indian TV channels to provide a contact number for obtaining information.Once the call is received at the respective call centre, the same can be directed to a person who is comfortable in speaking /query handling in the language of the caller. This can be made a 24 hour operation by using the Indian BPO model.In order to make the operation cost effective banks could consider allying their marketing costs. This ‘joint partnership model’ can help banks in cutting down on costs and can help he customer in reaching out to a bank that otherwise may not be that aggressive. Small to mid size banks could consider this option. For eg: Banks like Vijaya Bank, Canara Bank are very popular in the state of Karnataka .Hence a customer with roots in Karnataka wanting to establish a banking relationship with either of these banks is able to reach out to them rather than going to a competitor simply because they lack a presence in the USA. So while Vijaya Bank may not want to team up with Canara Bank ( for obvious reasons) it can certainly think of teaming with another regional player.
  • Strengthening correspondent banking arrangements by Indian banks will also help in increasing the options available to residents abroad in remitting their funds directly from their bank in the USA to their bank in India. The knowledge levels of retail banking staff in US banks about remitting funds to India and the mechanics involved therein are quite poor and very often they need to be given complete and detailed instructions to ensure that funds reach the Indian account in a prompt manner. The fees are high and its very common for the intermediary bank ( which acts as the link between the US-based bank originating the transaction and the Indian bank) to sit on the float even if it is for a period of a day or two. This typically happens if the transaction is originated close to the weekend i.e Friday in the USA. By the time the funds are debited to the senders account and thrown into this intermediate banks account, Saturday morning kicks in ( in the Indian sub continent) and since there are no foreign exchange transactions over weekends, the funds lie in transit -this float earns revenue for the intermediary banks.
  • Education about different types of NRI accounts. For Eg: NRE accounts are maintained in Indian Rupees which means that the sender is open to the foreign exchange risk on the day the funds are converted from US dollars to Indian Rupees and placed into either a checking (savings account) or a term deposit (CD). Similarly even though these funds are 100% repatriable, they need to be converted back into US dollars from Indian rupees at the time of sending them back to the USA-again leaving the customer open to a potential downside if the Indian Rupee appreciates vis-a-vis the US dollar 
  • Banks need to provide information documents ( preferably in different regional languages) that address the details as explained in the earlier point. This can be done in a simple Q&A form. The most common areas of queries are : conversion, exchange risk,tax deducted at source, repatriation benefits, ability to hold the accounts jointly with residents etc