Investment Opportunities in Rural India

Here is a summary of my talk on “Investment Opportunities in Rural India” at the Credit Suisse Investors’ Conference, Hong Kong in the session on “Emergence of Rural Asian Economy” (24 March 2010)

My talk had three parts.

  1. What factors helped rural India grow phenomenally in the recent past?
  2. Will the growth sustain?
  3. What are the investment opportunities!

Six factors helped growth

  1. Infrastructure investments (roads by Govt, telecom by private)
  2. Higher farm incomes (high commodity prices, more crop diversification)
  3. Government programs like Universal Education, Employment Guarantee, Waiver of loan repayment by small farmers
  4. Remittances from youth employed in towns
  5. Rural non-farm (live stock, new services)
  6. Income from sale of land (urbanisation, industrialisation)

While there is no problem to this growth momentum in the short run, there are several (six again!) show-stoppers that need to be dealt with

  1. Food Security, due to stagnating farm yields and land use diversification; malnourishment of women & children in particular
  2. Climate Change will compound the yields problem. An IFPRI model says Indian wheat yields can decline by 50% by 2050; rice 17%, maize 6%. We need to build the small farmer capacity in yield improvements and in dealing with climate variability
  3. Need to create more urban jobs, especially in small towns; ratio of agri workforce to arable land is rising to unsustainable levels
  4. Investments in “energy” still woefully inadequate
  5. Policy reforms to link farmers to markets have slowed down / reversed
  6. Quality of delivery mechanisms for basic services still poor (education, health care, financial services)

These challenges present opportunities in four specific areas of investment!

  1. Infrastructure businesses (energy solutions, logistics, micro irrigation). PPP opportunity
  2. Provision of Basic Services (education, healthcare, financial services). PPP + innovative business models required
  3. New Technologies (labour saving crops, chemicals, equipment; mobile phone apps, rapid testing equipment for crop quality & biometrics)
  4. Delivery Channels (Govt Services, Agri Extension, Basic Services as in 2 above, Consumer goods)