India’s Place in the Agricultural Landscape of the World

July 15, 2011 By Leave a Comment
Venezuelan sugar cane (Saccharum) harvested fo...

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Both the World Bank and the CIA World Fact Book rank India’s economy fourth worldwide.  A country’s gross domestic product is  a good indicator of the standard of living within that country. Among India’s economical make-up, agriculture plays an important role in the fabric of society.

With a population of 1,189,172, 186 and counting, one of the biggest challenges for the Indian agricultural industry is the population grows faster than farm production. The CIA World Fact Book lists India as the second most populated country in the world. Food items such as rice and wheat rise demand to keep up with the population boom. For many years, India has been an autarky, or self-sufficient economy. But since the 1990, it continues to develop an open-market policy. Agricultural output for India ranks second among the world economies.

Agricultural policy is focused on improving self efficiency of food production to combat hunger issues. India is among the world’s highest producers of rice, cow milk, sugar cane, buffalo milk and wheat. The Sugarcane Breeding Institute of Coimbatore, India was established in 1912 to improve sugarcane production. It is one of the oldest crop research institutes worldwide. Indian stock of the sweet crop is used in 26 other countries across the globe.

The institution is now conducting a research project to help the about 35 million farmers who cultivate and rely on the crop. The project is focused on creating a website where information can be shared easily. It’s main goals are to aid farmers and support sugarcane reasearch.

 

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Microfinance in India

October 6, 2010 By Leave a Comment
NEW YORK - SEPTEMBER 26: Microfinance pioneer...
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Microfinance is offering business finance to low-income groups. It is a series of small-portioned finance capsules. In India, business finance in micro-capsules makes sense, given the vast amounts of under-financed sectors. Many classes of the society have absolutely no access to business finance avenues. Microfinance was born, to defeat this situation.

In India, microfinance has enabled women to be self-employed. Even though business finance was delivered, the span was limited. Due to lack of knowledge, and lack of business finance providers in this category, microfinance didn’t pick pace. Microfinance still remains a flapping bird, unable to fly.

Although microfinance is a terminology used now to associate it with a business finance lending strategy, microfinance has always existed before. Post-independence, the Indian government directed banks to give business finance to priority sectors like agriculture. Loans on concessional rates were given to farmers and peasants during that time. Statistically, South Asian countries account for most of the micro-business finance consumption. World Bank estimates have it that close to ninety percent of India’s population has no access to any kind of business finance.

Lack of proper organization of these loans, still vested the microfinance power to the corrupt moneylender. Charging unruly interest rates, the money lender capitalized on the helplessness of the cattle class people of India. But now things are changing. People are awakening to the realities of microfinance.

Many microfinance institutions have been setup in India. Life and survival promotion organizations like BASIX were the first ones. Other microfinance institutions (MFIs) followed suit. Most MFIs were NGOs. They all came with an orientation to uplift the poor. But problems started happening when the oil well of microfinance was discovered, and perspectives started changing.

Some basic methodologies adopted by MFIs to solve business finance issues of clients are to use a poverty survey to identify potential areas to target. Then, debts of all people are clubbed together by getting them to form groups. A wholesome loan is given against the debt without collateral, and each debt-member has to pay his/her debt. By doing this the repayment of the debt is eased out.

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Infrastructure Finance in India

September 17, 2010 By Leave a Comment
Reserve Bank of India, Kolkata
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India’s robust growth during the recent decades can be attributed to infrastructure finance. Leading the developing countries list, India is growing at a rate of over 8 percent GDP. Business finance institutions have been instrumental in providing the financial support in the infrastructure space. Infrastructure needs to be complemented with business finance resources. But India has been well supported with business finance for infrastructure development activities.

Approving the inclusion of business finance in the infrastructure space, the government is laying a lot of impetus on the importance of the role of infrastructure finance companies. That’s specifically the reason why the eleventh five year plan of the Indian government foresees business finance investments in infrastructure to the tune of twenty crores plus. Directing the planning commission to encourage private business finance investment in infrastructure, the prime minister’s office has laid its objective clearly.

With the auguring of non-banking finance companies, the situation looks even better. Business finance in infrastructure will be given support by the Reserve Bank of India, which has developed specialized policy compartment for it. Infrastructure needs these special entities to fund exorbitant amounts that are difficult to raise in the market.
Infrastructure Financing Companies that have good credit ratings and over 300 crores in funds are given the go-ahead. Now that the Reserve Bank of India has made provisions to infrastructure finance companies, business finance in infrastructure will get more thrust.

Borrowers for business finance can expect to get more finance, since infrastructure companies can legally mobilize more than a quarter of its funds. This might not be over-leveraging, but does add more flexibility to the scheme of things in business finance. Single-group multiple borrowings can take more than forty percent over existing funds from infrastructure companies.

Infrastructure finance thrives on funds that have been invested for longer periods of time. Though individual investments are tough to come by, institutions like the World Bank and the Asian Development Bank are providing able assistance. Teaming up with these institutions, the government is ensuring long term investments in infrastructure.

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Foreign Direct Investment in Emerging Economies

September 2, 2010 By Leave a Comment
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Multilateral institutions like the World Bank, International Monetary Fund, and the Asian Development Bank indicate an enormous increase of business finance investment by way of foreign direct investment (FDI). Foreign direct investment has been growing at more than twenty percent every year. 2004 was the year of revival of business finance influxes from foreign shores into emerging economies. In 2000, the FDI in US stood at nearly over a trillion dollars. After 2000, there was a steady decline in FDI. Now the situation looks stable again for a revival of business finance through FDI.

Emerging markets have given a lease of life to FDI. Countries like India are one of the emerging markets. India has absorbed FDI investment with glee. By the year 2004, almost 40 percent of business finance through FDI was targeted at emerging markets. It is predicted that FDI investment in emerging economies will grow at over four hundred billion US dollars every year. Research agencies like Standard and Poor have predicted robust business finance investments through FDI. Retaining its position as a foreign investment behemoth, the US is predicted to attract more than one-fourth of the global FDI.

Emerging markets have a lot of sectors that are fast growing and need more business finance to fuel their needs. Also, the size of the market is huge, when compared to developed countries. Expectations of high profits are feasible in these markets. Statistics indicates that the countries with the largest inflow of foreign business finance are also among the top ten exporters in the emerging markets category.

Contributing factors of FDI in recent times are the slow industrial growth of developed economies. Not knowing avenues to invest their business finance, foreign investors are solely looking at emerging economies. For emerging economies, foreign investments are nothing but additional business finance. As capital expands, more and more growth happens. Although debts increase, emerging economies have no other go but to grow on debt, and after sometime grow over their debt. If more venture capital comes in, emerging economies like India need not resort to other dangerous external finance methods.

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