India's global farming [ Transfreez Mobile Refrigeration - India's Most Effective Refrigerated Trucks ]

With an increasing number of Indians exploring international cuisines, the business of exotic vegetables is also growing.

On a sunny morning, peacocks, march in a procession across a narrow path lined with mulberry trees. Nearby, cows lazily graze, hens cackle, rabbits squeak and hop, swarming bees hum on a hive, ducks waddle. In this idyllic 40-acre farm in Patan Kala, Rajasthan, 90 km from Delhi, some of the animals are for sale. The ducks are not. "The ducks are my natural pest control," says Ayesha Grewal, owner of the Organic Acres farm. In what way? The ducks feed on mosquito pupae. They also feast on snails and other pests, protecting the greens and other vegetables the farm produces - 13 varieties of lettuce, including Boston, Bibb, Lola Rosa and Batavia, white turnips, golden beetroots, Caribbean peppers such as Scotch Bonnet, asparagus, artichokes, fennel, and Okahijiki, a Japanese land seaweed.

In India, such produce is "exotic". Until recently, none of these would have been cultivated here. High street restaurants imported everything - from salad leaves to European vegetables - to dazzle well-heeled customers who paid handsomely for their Arugula and Baby Radish Salad or the Heirloom Tomato (non-hybrid tomato whose seeds are typically passed down generations) Bruschetta. Domestic production of exotic vegetables, however, has been growing at a fast clip over the last three years. Farms catering to exotic greens have mushroomed too - in Manesar, Haryana (near Delhi), Pune, Bangalore, and Mysore. Their clientele are mostly restaurants in five-star hotels. Some of the produce is finding their way into retail shops as well.

Organic Acres grows 42 varieties of salad leaves, 13 of them lettuce, in Rajasthan Photo: Shekhar Ghosh

Grewal, who started farming exotic greens in 2012, sells them through The Altitude Store, her own retail outlet in Delhi and Gurgaon. Exotics have been flying off her shelves. Her annual growth rate is between 150 and 200 per cent. According to the Indian Council of Agricultural Research, the market for exotic is growing at 15 to 20 per cent a year. But most growers, like Grewal, are clocking far higher growth numbers because of the smaller base.

The reason is not hard to see. The restaurant industry is booming because of the country's young population, their growing disposable incomes, and a trend towards eating out. There is greater awareness about international cuisine too. The food services market in India was estimated at $48 billion in 2013 in a study by the National Restaurant Association of India and Technopak. In five years, that could be worth $78 billion - that is nearly what the Indian IT industry currently exports.

While volumes are picking up, restaurant owners are looking to cut import bills and chefs are exploring ways to reduce the carbon footprint of the dishes they create. Air transport of food implies higher energy consumption resulting in carbon emissions.

"Besides carbon footprint, what is becoming important is quality and traceability," says Anupam Banerjee, Executive Chef at The Ritz-Carlton hotel in Bangalore. Banerjee is obsessed with freshness and quality. "When you source domestically, you know it is not being mass produced, so the quality tends to be good too," he says. His team makes several trips to First Agro's 45-acre farm in Talakad, 130 km from Bangalore. Serpentine roads lead to the farm, past the river Kaveri, a rocky terrain and the breathtaking vineyard of Alpine Wineries. The farm is guarded by two Rottweilers, four German Shepherds, six Labs and a Boxer.

First Agro, which started producing exotic greens in 2011, has adopted 'codex standards' to ensure toxin- and pesticide-free produce. Its exotics include 38 varieties of tomatoes of all shapes and colours. A striking purple coloured 'Midnight Blue' tomato stands out against a cloudy horizon. A pepper from Trinidad called Bishop's Crown, Peruvian chilli called Aji Amarillo, Japanese greens such as Mizuna and Mitsuba, wild rocket lettuce and Thai greens are some of the farm's significant produce.

Rare pepper from Trinidad, Bishop's Crown, is crumb-fried with feta cheese in Bangalore's City Bar. The dish is called UFO Poppers

"Talakad can be the gourmet destination of Karnataka," says M. Nameet, First Agro's Co-founder. At dusk, as the lanky 37-year-old relaxes with a glass of wine, he often talks to Raghavendra Gowda, founder of Alpine Wineries, about his vision. The idea of agriculture struck Nameet, a former pilot, when he was flying in Canada. "I had a lot of free time. So, I started working with farmers and picked up knowledge on zero pesticide farming," he says. He teamed up with his brother M.V. Naveen and cousin K.N. Prasad to form the company. While Naveen has worked with IGATE and HP, Prasad was with Xerox and Wipro. The pilot-techie combo has worked well. The company supplies to nearly all the five-star restaurants in Bangalore and ships out daily orders worth around 2.5 tonne.

Similarly, there are other entrepreneurs in the exotic green business who had little exposure to the agriculture sector before. Grewal of Organic Acres has a finance background. Hamsa V., a techie, started Growing Greens in Bangalore in 2013. The company produces micro greens - plants that are in their nascent stages of growth and whose size varies between half an inch and two inches. The company's mustard, sunflower, radish, pea shoots, red beet and carrots are used by chefs to enhance the visual appeal of their dishes as also their flavour. Some hotels display it on their buffet counters.

All this domestic production means substantial cost savings for restaurants. Exotic lettuce grown in India could be 30 per cent cheaper than the imported ones. Imported cherry tomatoes can cost Rs 1,000 a kg whereas the domestically produced ones could be priced at Rs 200. While it will always be difficult to replicate the thick and less acidic pulp produced by San Marzano tomatoes grown in Italy's volcanic soil, economics and the case for sustainable gastronomy is tilting the scale in favour of local sourcing. 

Decoding India’s Persistent Food Inflation [ Transfreez Mobile Refrigeration - India's Most Effective Refrigerated Trucks ]

Rising living standards and inefficient agricultural policy are exacerbating India’s food problem.

In its ongoing effort to tame high food inflation in India, the central government recently decided to bring onions and potatoes under the purview of the Essential Commodities Act. The state governments will have to now act by fixing stock limits for these two items and penalising hoarding and black-marketing activities to keep prices in check. Other earlier measures, such as encouraging state governments to delist fruits and vegetables from the Agriculture Produce Marketing Committee (APMC) Act and fixing minimum export prices for onions and potatoes, were announced as part of the Modi government’s inflation control strategy. While this may bring some temporary relief, it will not tame inflation over the medium or long terms. India’s food economy is directly dependant on domestic production and agricultural output, monsoons, and domestic policies. The wholesale price index (WPI) and consumer price index (CPI) are regularly tracked to gauge the rise of prices in India. While food accounts for one-third of the WPI, its percentage of the CPI is almost 50 percent.Monsoons do have a significant impact on food inflation, but can’t solely be blamed for the persistent food inflation problem in India.

Food inflation averaged 3.8 percent year on year in the eight-year period from 2000 to 2008. However, in the five years following the financial crisis it rose substantially, averaging 10.3 percent year on year and has remained at these levels despite slow GDP growth. Persistent food inflation has been a concern for policymakers in India as good monsoons and softer global food prices haven’t had an impact on domestic food prices. For an average Indian household, food still accounts for almost 50 percent of total expenditure. At a broader level, both demand and supply side factors have played a role, however policy implications may vary depending on different drivers of inflation for various subcomponents of the food basket.

A closer look at the WPI food subcomponents and disaggregated data reveals that inflation has been broad-based across subcategories, affecting cereals, milk, eggs, fruits and vegetables, meat, pulses, edible oils, and other items. However, prices of protein items, fruits and vegetables have risen more than cereal prices. According to the Institute of Economic Growth, a 1 percent increase in per capita income leads to a 0.05 percent decline in demand for cereals and a 0.2 percent drop in demand for pulses. These goods are generally referred to as “inferior goods” in economic theory. For all other “normal goods,” however, consumption increases as per capita income rises. Thus a 1 percent increase in per capita income would increase the per capita consumption of vegetables, fruits, and milk by between 0.5 and 0.6 percent. Consequently, rising per capita incomes in India have led to diversification of the Indian diet towards high-value products such as milk, meat, and eggs, leading to “protein inflation.” The National Sample Survey Organization’s (NSSO) household consumption expenditure survey indicates that the share of protein-rich items in overall food consumption has increased from 27.1 percent in 2004-05 to 32.5 percent in 2011-12 in rural areas. In urban areas the share rose from 29.9 percent to 33.0 percent during the same period. Demand-pull inflation thus plays an important role in the case of high value-added items like fruits, vegetables, and dairy products.

On the supply side, agriculture wages account for almost 40 percent of the total cost of production. Since 2007, nominal rural wage growth has far outpaced overall inflation, resulting in higher real rural wages. Nominal wages increased 17.3 percent after 2008, compared to 6.2 percent in the period prior to it. The Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS), which offers one hundred days of guaranteed wage employment in a financial year to rural workers, has increased the bargaining power of laborers by setting a floor for rural wages. The government’s Commission for Agriculture Costs and Prices (CACP) estimates that a 1 percent rise in wage inflation translates into a 0.3 percent rise in food inflation. At the same time, persistent food inflation itself results in higher wage inflation, thereby creating a strong wage-price spiral in the agricultural sector. But higher rural wages have not been accompanied by productivity gains in the farm sector, further fueling inflation. Thus the solution is to move toward mechanization and better farm technology in order to improve labor productivity in line with higher rural wages.

Besides wages, other input costs have also risen substantially post 2008. The past five years have seen significant year-on-year increases in the price of key agriculture inputs like fertilizers (8 percent), fodder (20 percent), diesel (8 percent), electricity (8.7 percent), and tractors (5.4 percent). Moreover, India’s food price policy has the dual objective of providing minimum support prices (MSP) for the benefit of farmers, and subsidization of prices for the poor through a public distribution system (PDS). Currently MSP apply to 25 crops, which account for 30 percent of the WPI food basket. This is to incentivize farmers to produce some essential cereals. An increase in agricultural input costs post 2007-08 has resulted in higher support prices of cereals as MSP calculation follow a cost-plus approach.

This has had a double impact. Not only does it lead to higher food prices directly, it also increases the burden of the food, fuel and fertilizer subsidy bill on the government. This translates into a higher fiscal deficit which further increases prices. Thus monetary policy alone is not sufficient to tackle inflation, and an emphasis on better fiscal management is needed.

Lastly, India’s food supply chain is also fraught with inefficiencies, which result in artificial inflation. Malpractice and the monopoly of intermediaries under the APMC Act (under which farmers cannot sell produce direct to retailers) results in much higher margins (around 65 percent) over and above the primary producer’s price. Moreover, wastage due to underdeveloped agriculture infrastructure (lack of cold chains, transport facilities) is around 25 percent while an inefficient PDS has a leakage of around 40 percent.

Thus the key drivers of inflation may vary across different food categories. For example India imports most of its edible oil and pulses, hence domestic prices of these commodities respond quickly to global prices. Domestic policies like MSP, stocking decisions, and public distribution play an important role in the price of cereals like wheat and rice. Broken supply chains, inefficient marketing infrastructure, and malpractice inflate the prices of fruits and vegetables. A food supply shock is generally temporary but it does lead to a sustained increase in food inflation if not tackled effectively through monetary and fiscal policy. Thus a multi-pronged strategy involving better fiscal management, a tight monetary policy, efficient supply chains, and improvements in productivity is the cure for the high food inflation problem in India.

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