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Agriculture and allied activities hold immense potential for private companies. But lack of expertise and sometimes funding holds back companies from aggressively expanding their operations. This is where multilateral funding agencies like International Finance Corporation (IFC), an arm of the World Bank come into play. In the last few years, IFC has made repeat investments in Jain Irrigation Ltd, DCM Shriram Consolidated Ltd and also assisted Saguna Foods Ltd to increase its production capacity, said Prasad Gopalan, Principal Investment Officer, Manufacturing, Agribusiness and Services, IFC. In an interview with Sanjeeb Mukherjee, he said that warehousing and cold storage are new thrust areas of investment for IFC in India. Excerpts:
What share of your investments go to agriculture and agri-business in India? Is the share growing and if so, at what rate?
IFC has the largest single-country exposure to India, with aggregate commitments of $1.4 billion across all sectors. In India, IFC has committed approximately $350 million in agri-business since FY 2003. This does not include the financing World Bank may have given for agricultural projects. IFC continues to increase its commitment each year with private sector clients in agri-business.
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Agri-business and agricultural financing continues to remain a priority for IFC in India because of its impact on food security, rural jobs, and poverty alleviation. We intend to increase our exposure in this sector.
Globally, what is your exposure to the agriculture sector? Where does India stand?
Globally, IFC’s total commitments touched $25 billion this year in June. In India, aggregate commitments across sectors was at $1.4 billion. In agriculture, globally, IFC has committed $6.4 billion (directly and indirectly and through a combination of equity investments, long term financing, and short term financing) out of which $350 million (in long-term financing and equity investments) is in India.
As the world faces difficult financial conditions, will it be possible for international financing agencies like IFC to maintain the same level of financing to poor countries? If not, then which sectors could get hit?
IFC is a long-term investor and we stay committed to our clients in both good and tough times. IFC has increased its commitment each year to all its businesses, including agri-business.
In the agricultural space, which segments do you think will need more financing in the coming 5-10 years and why?
Positive macroeconomic trends, increasing incomes, higher levels of urbanizations, and higher literacy are all expected to contribute to higher levels of food consumption, specifically geared towards higher protein consumption. Focus on food safety and food quality also becomes an important consideration across the food supply chain. All these aspects point to higher growth and we expect to see growth in all areas of agribusiness – pre-production; production; and post-production. Distribution infrastructure, namely warehousing and cold storage, are important areas of our focus.
The share of public investment in India's overall agriculture sector has been going down in the last few years? Do you see this as a healthy trend or should the public-sector continue to play a dominating role in India's agricultural space?
Government plays an important role in setting an even and stable playing field for private players to enter and thrive in this space. Agriculture affects the rural population and is important for poverty alleviation. Also, contribution of agri-business to sustainable and rural employment, both directly and indirectly, is an important factor. Owing to agriculture’s critical importance, focus by the government on agriculture is essential to complement the private sector's increasing role.
