Designing buyout framework for private equity funds in the agri sector

Abstract

Agriculture sector is one of the most important sectors in India although its contribution to the Indian GDP has fallen from 30% to 16% in the past couple of decades. The remarkable aspect of this fall is that, though the contribution has fallen in terms of value, the number of people employed by this sector is still around 55% making it the sector with the largest labour force. This makes the agriculture sector the most critical sector in India. In spite of the quick growth rate of the Indian economy, an average Indian still spends close to 50% of his net income on food. A 1% growth in the Agri sector in India is more effective than 2-3% growth in other sectors of the Indian economy in alleviating poverty. Compared to other countries, India faces a major problem as though it has only2.3% of the landmass; it has 17% of the world s population. This creates significant stress on the agri infrastructure to ensure food security. With nearly 13% of the world s arable land, India is the world s the second-largest producer of fruits and vegetables, the largest producer of milk, third-largest producer of food grains and also has the largest number of livestock. But, India is also among the world s largest wasters of food especially in the light of increasing food prices and poor response rate of fertilizers. A CRISIL Research study estimates allowing foreign direct investment in multi-brand retail could reduce wastage by about US$ 12 billion (INR 630 billion) in the fruit and vegetable subsectors alone every year, or about 30percent of total output.