Improving farm productivity and competitiveness and diversification of agriculture towards production and marketing of high value crops have been conceived as major policy instruments for India's agricultural development. Involvement of private sector in agribusiness and marketing of agricultural produce has been initiated through Model Act on Agricultural Marketing 2003. Consequently a large number of private players have entered the food retailing business. The retail sector contributes about 10 percent of Gross Domestic Product (GDP) and employs 67 percent of the labour force in the country second only to agriculture. Under the changing scenario its share in GDP is expected to increase at a very high rate. Therefore, it becomes necessary for state governments to exploit the opportunities of changing business environment and demand patterns in order to achieve rural prosperity and better standard of living to the people. This paper has tried to highlight some issues related to agri-retailing and suggests a framework to provide an enabling environment in order to attract private investment in agricultural sector. This will not only help in increasing rural prosperity but also reduce the high prices of food by eliminating inefficiencies through reduction in post harvest losses, value addition and reduction in price fluctuations in the market.
After independence, India's food policies were formulated under extreme food shortage, chronic poverty, acute scarcity of foreign exchange and greater demand for subsistence crops. But over a period the scenario has changed from a condition of scarcity to a condition of food surplus (Table 1), increase in purchasing power, huge reserves of foreign exchange and rising demand for processed and high value food products. Improving farm productivity, competitiveness and diversification towards high value farm products have become important. As per the population census 2001, about 228 million people in rural India, equivalent to 56 percent of total labor force, are farmers and agricultural labourers. In 2005 National Sample Survey Organization (NSSO) estimated that farming households account for 60 percent of households in rural areas and direct income from farming activities account for over 50 percent of farm households. Agriculture will continue to play the role of the biggest employer in future as well.
In the history of agricultural development of India, we find that the first phase (1950-1966) of agricultural development was possible through Institutional Reform i.e. land reform measures and mega irrigation project. The credit for second phase of development goes to Green Revolution in Agriculture which was possible through technological changes i.e. in the form of high yielding varieties (HYVs), use of chemicals, irrigation etc. However, in present scenario stagnation in agricultural production has taken place. Monthly income of farmer's household is very low and it is expected that next phase of development is possible through marketing reforms and promotion of food processing sector. Food retailing comprises a large segment of retail sector, accounting for about 63 percent of total retail sales. With an estimated 15 million retail outlets in the country, the retail sector contributes about 10 percent of GDP and employs 6-7 percent of the labour force in India second only to agriculture (Bajpai and Dasgupta, 2004). At an estimated Rs12.8 trillion in 2006, India's retailing sector makes up close to 40 per cent of the country's GDP. Of this, food and grocery (F&G) items account for a significant 74 per cent of total retail sales across both, the organised and unorganised sectors. Only one per cent of the food items retailed in India flow through the organised retail channel. There exists ample scope in organised retailing in agri-food sector. Therefore, it becomes necessary for all the state governments to exploit the opportunities of changing scenario in agri-retail sector in order to increase prosperity and standard of living of rural people. …