Page 20 - DMGT509_RURAL MARKETING

Unit 1: Rural Marketing – An Introduction

standardisation is only to a limited extent, physical inspection becomes a must. When a domestic Notes
market is protected by the government it increases the transport costs for exporters because low
imports would mean that exporters must not only, bear the cost of outward journeys but also the
unutilised capacity on the way into the country. High delivery costs increase the burden of
foreign tariff because they are imposed on the final product price.
The World Bank has proposed two major reform priorities that should raise the farmers’ incomes,
lower retail prices and improve the international competitiveness of Indian agriculture. These
are:
1. Create an integrated and competitive domestic agriculture market.
2. Improve communication, transport, storage, distribution and agriculture support services.

It may be debatable but removal of bottlenecks from farm to market is a higher priority than
increasing farm productivity. Once the farm yield goes up by 20 percent it would reduce the
final price by less than three percent points. However, a twenty percent reduction in transport
costs alone will reduce final prices by as much as ten percentage points. It must be understood
that without better logistics, increasing production through subsidised credit, power and fertilisers
would only lead to gluts that hurt rather than help the farmers.
One area that needs drastic and radical reforms is of providing farmers better access to services,
from transport to distribution and these will increase the economic gains and strengthen the
political case of agriculture trade liberalisation. These reforms on our own trade regime, coming
out of subsidising inefficient intermediaries and not so much the farmers, are bound to make
India present its case more forcefully in the WTO negotiations. India can then effectively secure
lower level of foreign protection, but also greater transparency, simplicity and predictable
foreign trade regimes.

Former RBI Governor Y V Reddy feels that because of the Global warming and climate
uncertainties, farm production has become erratic. As a consequence farm produce pricing is
going to be problematic and a fresh look needs to be taken on farm produce pricing and their
inventory built-up as a part of the public policy. He asserts that the impact of food grain shock
is going to be larger than the shock of fluctuating oil production worldwide and its pricing,
because our demand in the globally traded part is going to be large.
While the Industrial Revolution had started in Europe in the eighteenth century it did not touch
India till the period after country’s independence in 1947. After 1947, the first Prime Minister
Pundit Jawaharlal Nehru and the Government of India made the country a socialist republic,
with emphasis on government’s role in business and industry. A large number of Public Sector
Undertakings were formed with government funding and management. Private sector companies
were considered as dishonest and therefore there was a lot of government control with license
and permit Raj. Without the approval of the government officers the private entrepreneur could
not do any business. This led to rampant corruption and bribery as a means of getting things
done speedily in the government offices. A new breed of Power Brokers emerged as go-betweens
between business and the government. The only concession to private business was for the
small-scale sector. Business suffered as the Public Sector firms could not bring about the needed
economic growth due to lack of accountability for these firms and private sector was already
handicapped.

There were a few exceptions though, like the Bajaj group, the Reliance group, who forged ahead
despite the hurdles. The early big names of Tata, Birla, Modi, Singhania, Bangur, to name a few,
kept the struggle going.
It was only in 1991, that the government found itself on the back foot with regard to its Foreign
Exchange reserves, which had reached an all time low. On the request of the government of

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