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ay The KisanBandhu:The KisanBandhu:Creating a Globally Competitive Rural Growth EngineCreating a Globally Competitive Rural Growth Engine

N. ViswanadhamExecutive Director,

Global Logistics and Manufacturing StrategiesIndian School of Business

n_viswanadham@isb.eduFeb20, 2007

N.Viswanadham

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State of Indian EconomyFood supply Chain in IndiaRural Business Transformation

KisanBandhuRetail supply ChainConclusions

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Sector Contribution to GDP

Work Force Employment

Agriculture 21% 60%

Manufacturing 28% 17%

Service 51% 23%

The Three Sectors of the Economy are

Mutually Dependent

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The Food Supply Chain In IndiaThe Food Supply Chain In India

State of Indian Food SectorState of Indian Food Sector

Consequences1.Surplus food wasted away2.Low incomes to farmers 3.Inefficient supply chain4.Not meeting the changing consumer preferences (processed hygienic food)

Opportunities for 1.Cold chain infrastructure builders 2.Processed food manufacturers3.Food packaging & logistics providers4.Food retailers and exporters 5.IT and data analysts6.Research Institutions

Strengths1.Vast natural resources (cultivable land, water, seasons)2.Established farming system3.Growing economy4.Supporting government policies (FDI, SEZ, subsidies)5. Vital outsourcing hub

Weaknesses 1.Small scale conventional farming 2.Primitive post-harvest methods 3.No channel master & many intermediaries farmers to consumers

4. Hardly any Food processing industry 5. Inadequate Cold chain infrastructure

Potential to become a leading

food supplier for th

e whole

world

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Benchmarking Food ChainBenchmarking Food ChainEconomic Integration

Reso

urces &

Man

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Product & Value Chain Innovation

Co

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Tec

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olo

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s Resources

Resources Management

Supply ChainProduct Offering

Logistics

Economic Policies

Information Technology

Trade Tariffs

FOOD SUPPLY CHAIN

No Cold Chain

No Supply Chain Visibility

Packaging Duties High Protectionist

Too many intermediariesFew Processed Products/Labs

Abundant

Inefficient and Fragmented

Planning

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Background for KisanBandhuBackground for KisanBandhu Existing scenario is supply driven The farmer is unaware of the market, produces something

and sells in a mandi or to an agent and wants to get a fair price & immediate payment.

This must change. Need to create a system, where the farmer is made aware of the market demand and encouraged to produce to the requirements of the buyer

The farmer should get right inputs ,Grow the right grade of produce (most optimal grade), trade it (double auction mechanism), and sell it to get maximum Net income

The idea is to transform the way agriculture works, create a business orientation among the farming community

Thus we propose – “Corporatization of Villages”

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Rural Business TransformationRural Business TransformationKisanBandhuKisanBandhu

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Village as a Business System

Agriculture & Industry

Farm labor

Technology

Logistics

Policies

Processing

Industries

Resource

Managem

ent M

arketing Skills

Value added Products

Non-farm Community

Farm-inputs – Fertilizers, seeds etc.

Financial S

ervices

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Core Business Processes

Villages

Production Procurement Processing

Retailing

Farm-inputs – raw materials

adding value

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Banks

Logistics Provider

ISB-Kisan-BandhuISB-Kisan-Bandhu

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Aggregator model For implementation

Farmers

Aggregator at Village and Higher

Levels

ISB (Knowledge partner)

Forward contract

Input credit

Knowledge

sharing

Regional Call Centres (RCC)

Bank

Fund

transfer

WR

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NBHC

MCX

NSEL

Market players

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Retail Supply ChainRetail Supply Chain

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Retail: The Indian advantage There is a huge opportunity in this space 12 M retail outlets employing 21 M ( 7% of total

work force) people 100% FDI is not allowed for foreign companies. Least saturated of global markets with small

organized retail. The least competitive of all global markets studied

– Lower barriers of entry for big players– Tremendous market size in both Urban, and

Rural areas,– Growth potential of 20-40% as in China

Retail is going turbulent with entry of big players

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Rural Retail Model : Flow Chart

Village Retail Shop

State Distribution Centers

District/Local Distribution Centers(FMCG)/Perishable

RTC/Private Transport

Post Office

Call Center

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1

3

4

5

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Rural Retail Flow ChartRural Retail Flow Chart

The Indian postal service can take advantage of its vast network and logistical capabilities to transform itself into a profitable business and to bring a host of services to rural populations.

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Conclusions

India provides huge opportunities for Food supply chain stakeholders

Retail, Food manufacturing are the Growth areas– Halal hub (Export to South-East Asia, Middle East),

Vegetarian hub (20% of Indian population + overseas), Organic food hub (Europe and USA), Sea food hub

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Cyber-IntermediaryFarmers

3P Grading 3P Warehousing Logistics Service

Banks

Commodity Exchanges

Big RetailersLocal buyers/

Other significant buyers

Buyers

Kisanbandhu Pilot model