Ranting the rural mantra

All of us have heard about the herd mentality but if you want to see a live demo you have to look at the Indian businesses.

A few years ago someone said ‘Retail’ and lo and behold ! Before you could blink an eyelid every company worth the name was trying to sell something or the other.Expatriates were summoned,consultants hired,large number of so called retail professionals were roped in and  larger number of stores were rolled out.

Just 3 years down the line  -you ask any CEO or manager who was till now going to chart a blazing path and they will tell you that they are cooling their heels by consolidating.The wait is for the ever elusive customer and the watch is strictly on the costs which are bleeding the other profitable group ventures.With every second retail “chain” going astray retail has suddenly become an abused four letter word.

I can hardly stop myself from getting amused when people talk about their business models,revenue streams and unique positioning.Feel like saying”oh yeah! I wonder why no other ass… ever thought about it.The problem is that the ideas are so great that they are beyond the customer .The poor guy who is just looking for some fresh veggies fails to register the traceability and sustainability aspects of the innovative supply chains.

This is how most of these SCM models are working :   Image132

Farm> Farmer>agent>wholesaler>Retailer

You may ask whats the big deal.I would say its a million dollar question.The only perceivable difference is that you would earlier have seen all Subzi wallahs in the Monda market now you can find a few managers too.

Anyways , coming back to the herd mentality.The buzz word as of the moment is rural.Anybody who is anybody has a rural strategy and a expansion plan in place.The tier 2 and tier 3 towns which were considered god forsaken lands have suddenly transformed into fiefdoms of milk and honey.The poor farmer who was hanging himself for not being able to pay his debts is no less than the Sultan of Brunei today! Let alone steal the wallet every manager worth his salt is ready to plunder the riches flowing in the hinterland through government schemes such as NREGA.After all the payment being made is in dollars yaar !

Hey what are you doing these days ?

Oh I am looking at the rural space.We are targeting Sec C and Sec D in Tier 4 towns.

Man ! you have gone really deep.

You bet.Our plans are even bigger.In the next wave we will cover the cattle too.

From Wall street to Wadala the rant is becoming louder – we will ,we will rob you…we will we will rob you….we will we will rob you.

Let us see how many come back beaten and bruised from this misadventure.

एक शेर नज़र है :

अभी कमसिन हैं ,नाज़ुक हैं अदाएं इनकी

उस पे मचले हैं कि हम खून ए ज़िगर देखेंगे

तो देखो भैया पर याद रख्नना कि ” बहुत कठिन है डगर पनघट की…..”

India meets Bharat

This picture was taken  at one of the Choupal Saagar rural retail malls operated by an Indian corporate.


What’s curious about the scene is the manner in which the villager is looking on, unsure of himself as Shakira grooves on “Hips don’t lie”.While we have imbibed obscenity as Salsa in our urban lives the rural folks are still in two minds.

To me the picture is symbolic of the crossroads at which Indian morality stands today.

To be or not to be is finally the big question …..

Fortune at the bottom of the pyramid?

Waiver of small and marginal farmers’ loans amounting to Rs 60,000 has been termed path breaking  by the government.The budget, however, offers little to address the larger problem of agricultural recession, the main reason behind severe indebtedness of farmers .

Official data shows that areas with the maximum concentration of small and marginal farmers will not benefit from the waiver. The Economic Survey that preceded the budget had suggested: “A second Green Revolution, particularly in the areas which are rainfed, may be necessary to improve the income of the persons dependent on the agriculture sector.” . It clearly suggests that farming has become almost an unviable option owing to increase in input costs and lower realization from produce which has unleashed a viscious cycle of indebtness amongst the farming community.

Small, marginal farmers make loss
Source: National Sample Survey Organization, Situation Assessment Survey of Farmers, 2003

As per Mohan Guruswamy, chairperson of the Delhi-based Centre for Policy Alternative “Seventy per cent of farmers who own less than one hectare do not opt for commercial credit. So the waiver bypasses them,”

Finance Minister P Chidambaram waived all ‘overdue’ loans due till December 31, 2007, of farmers with landholdings of up to two hectares (ha). For other farmers, the government has offered a one-time settlement: a rebate of 25 per cent if a farmer pays 75 per cent of the loan overdue. The waiver does not cover loans farmers are regularly paying—only 20 per cent farmer households are paying loans regularly. Only those who borrowed from government institutions will be covered so those who borrowed from moneylenders and other informal sources will not get any relief. And this is where a big portion of debt lies.Being illeterate farmers do not approach the banks due to lengthy procedures and paperwork – apart from all the paperwork a farmer has to get a letter from all banks operating in his area that he does not owe them any money before a loan for him can be considered.
The government claims the proposal will benefit 40 million farmers.Every second Indian farmer household is indebted. Of the 89.33 million farmer households estimated in 2003, 43.42 million were indebted. The average debt per farmer household was at Rs 12,595, and per indebted farmer household at Rs 25,902. Of late, farmers with more than two hectares of land are increasingly availing agricultural credit. The outstanding loan amount too has grown faster in case of farmers having more than 2.5 ha as compared to marginal (holding less than 1 ha) and small (less than 2 ha) farmers. On the other hand, the share of marginal farmers in formal credit distribution has come down from 28 per cent in 1981-82 to 25 per cent in 2003-04. The share of large farmers (with landholding above 2 ha) has remained at around 51 per cent since 1981-82. These figures demonstrate that farmers with large as well as small land holdings take credit but are not able to repay them due to adverse economics of the agricultural sector.

The current proposal will cover less than 50 per cent of the total debt of farmers in India. In 2003, the government estimated the total debt of farmers at Rs 1.13 lakh crore. Farmers owed Rs 65,000 crore to formal institutions and Rs 48,000 crore to non-institutional agencies. The debt has gone up since then.

Smaller the landholding, more the farmer depends on non-institutional credit
Out of relief net
Source: National Sample Survey Organization, Situation Assessment Survey of Farmers, 2003

The bigger picture
According to the Economic Survey, the growth rate of food grain production is 1.2 per cent, lower than the annual population growth rate of 1.9 per cent. Creation of additional irrigation potential has come down from 3 per cent annually in the 1990s to 1.8 per cent in 2007. Agricultural growth is expected to be around 2.6 per cent against 3.8 per cent in 2006.In such a scenario it will take a long time before we can see disposable incomes which will boost consumption for discretionary items on a farmers shopping list such as apparel,footwear,toiletries etc.

Fortune at the bottom of the  Pyramid ?

While a romantic idea,with the above in view I fail to recognize how the Indian farmer can be described as :

The world’s most exciting, fastest-growing new market? and fortune where you least expect it: at the bottom of the pyramid. Collectively, the world’s billions of poor people have immense entrepreneurial capabilities and buying power(??).

The book talks about Co creation and  challenges readers to re-evaluate their pre-conceived notions about the commercial opportunities in serving the relatively poor markets of the world.Somehow I cannot understand how someone who is already not able to repay his debts will transform into a profitable customer to serve and how those who are not even able to distribute the largesse effectively will make it possible.

The website further describes the book as :

“The Bottom of the Pyramid belongs at the top of the reading list for business people, academics, and experts pursuing the elusive goal of sustainable growth in the developing world”

I sincerely feel that that’s exactly where it will remain for a long long time to come at least in the context of India,if things do not change at the grassroot level.

Rural retailing – running to stand still !

I have been in the business of rural retailing for the last 3 years now and the harder I try to make my business more profitable the farther I see myself drifting away from the reality.This is pretty much the case with many of my freinds who have sincerely tried and made effort beyond the powerpoints.

It is not that we are doing something that is entirely wrong but the question that stares us in the face is whether the Indian farmer is ready for organizd retail ? There are a few pointers :

1.All of us have heard the saying that the Indian farmer is born in debt,lives in debt and dies in debt.Some people have added that he is even reborn in debt.So with no opportunity of credit organized retail fails to be part of the consideration set.I have myself seen farmers buying a Jockey undergarment for Rs 125 a peice only because he gets credit from the shop.I quickly realized that it was not by choice that he was buying a “Jockey” but by design of the shopkeeper.Borrowers can’t choose…got It ?

2.The government has failed miserably is the last mile delivery of all its goodies including credit,PDS,Fertilizers etc etc.A testimony to this fact is that when Raman Singh wanted Farmers to get the benefit of Rs 2 per kg Rice Scheme he had to personally supervise the operations tracking each Bag with Mobile Phones,Internet etc .He did get the reward and won the election.The point is that with no other option available farmers end up taking loans from Money lenders @ 40 % + which means if one crop fails you are forever in debt.The Quality of seeds,fertilizers etc too is questionable even though they comprise 50 % of the cost of production.In such a grim scenario there is hardly any money left as “disposable Income”.If there is no disposable income then what and how do you sell and to whom?

3.We keep going to them again and again but the truth is that we still remain aliens .A simple explanation to which is the fact that if you cannot add any value to my life there is no point selling me a lifestyle which I cannot afford and do not want. Their concerns are different and unless we resolve them we will fail to become a part of the community.Being a corporate we have limitations of not being looked at as a social enterprise by our shareholders.We have shown the way by creating a model but political will has to be there to change the  system and make it effective so it gives real time results.

This post was prompted by the book ” India in slow motion” by Mark Tuly.In the chapter Farmer’s reward he describes the sad state of the Indian farmer ;why they commit suicides,who is to blame,how the system is gripped by inaction and why it is improbable to say that we will see better days.There is no magic wand and the problem has multiple facets each having its own root and reason for existence masking it almost a catch 22.

It seems that while urban India is busy doing Dard e disco, rural India is still stuck with Do Bigha Zameeen.Pls do watch it if you have’nt….you will know what I mean when your heart reaches out to Balraj Sawheny as he pulls the rickshaw in the last scene till he does not have any more strength and collapses dead.

The meetings that I had till late evening seemed more frivolous as I turned each page of the book.Wish I could do more …….