India has seen massive growth in industrial output and the services industry. There is a growing highly educated population that is attractive to foreign investors and there has been massive influx of investment into the country with the building of factories and industrial complexes. However, one area that has not realized any growth despite its huge potential is the area of agribusiness. With a growing population and one of the world's largest agricultural economies, the country has seen a stagnant growth over the last twenty years. This is partly due to the lack of private investment, strict regulatory policies, poor infrastructure, and a lack of government support for agricultural markets. This has led to the average agricultural business being small, lacking funding, technology, and a market to sell their products.
Lack of Investment|
One major problem for the Indian agricultural sector is the lack of domestic and foreign investment in the industry. Farming business tends to be small scale and cannot grow due to the lack of investment and the opportunities that are offered to other sectors such as manufacturing. This has led to farmers being unable to increase yields, which would allow them to re-invest in their business. As agriculture is associated with rural areas, the Indian government has seen rural wages fall compared with other areas of the country that has benefitted from the manufacturing or service industries. Rural areas have communities with severe poverty and the government is keen to share the newfound prosperity with all its citizens.
The Indian government has indicated that it would like to improve the agricultural sector but over the last twenty years, it has hindered growth with a number of restrictive regulations. These have stymied the growth of the industry and left it in a weak position. The government has introduced regulations on the transporting, storing, and marketing of agricultural commodities, as well as imposing restrictions on the size of agribusiness companies. This has left the sector unable to encourage investment from domestic of international companies. In addition to these regulations, the government has further punished the sector by introducing high taxes on processed products, making the cost of credit too high for agricultural businesses, as well as passing complex food laws that introduce layers of bureaucracy.
Farm businesses in India have seen that the prices that they can get for their produce has been kept artificially low due to trade and price policies that have been introduced by the government. The lack of profit growth is a major reason why international companies have been wary of investment into Indian agricultural businesses. Multi-national agribusinesses can achieve far greater growth in countries with fewer restrictions and where the governments are encouraging foreign investment with incentives.
The Indian government has improved roads and transportation in major cities to overcome congestion, but in rural areas roads are poor and it is very difficult for farmers to get their produce to the market. In many areas the lack of quality roads has meant that a larger percentage of the produce is wasted as it spoilt before reaching the consumer. The electric grid is very fragile which affects the manufacturing sector as well as agriculture. However, with frequent power outages, it is difficult for refrigeration plants to keep produce from spoiling before it is transported to the consumer.
Without federal investment in basic infrastructure agriculture will be unable to grow and not attract any foreign investment. If there is no increase in the yield of basic foodstuffs, the Indian government will have to rely on the importation of produce, which would be unnecessary if it invested in its own agricultural sector. In the last couple of years, some yields have increased only to be spoilt, as there were not enough storage facilities for the produce. These problems will continue to arise until the government has a comprehensive plan to improve the agriculture sector.