Recently, the Reserve Bank of India (RBI) released working papers inflation and Value Chains. 

What is the agricultural value chain?

• It involves all people and activities that bring farm products such as maize, vegetable, or cotton to consumers. 
• Key stages are –
  • Input and production: In this stage, crops are produced. 
  • Processing: Raw products are cleaned and transformed. 
  • Packaging: Products are packaged. 
  • Distribution: Finished products are transported to markets. 
• Example: Food manufacturer’s value chain 
  • Purchasing agricultural goods from farmers.

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• • Processing the goods in factories. 
  • Selling final products in the market. 

Key Findings

• Middlemen Dominance: Middlemen and retailers captured a significant portion of the price paid by consumers for fruits and vegetables during times of high inflation.
• Disproportionate Profits: Farmers receive a relatively smaller share of the consumer rupee compared to the profits earned by intermediaries.
• Varying Shares: The share of farmers in the consumer rupee varies across different agricultural products.
• Higher Shares for Dairy, Poultry, and Pulses: Farmers’ shares were higher in the case of dairy, poultry, and pulses compared to fruits and vegetables.

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Implications

• Need for Reforms: The findings suggest a need for reforms to reduce the dominance of middlemen and improve the share of farmers in the value chain.
• Policy Interventions: Government policies can play a crucial role in promoting direct marketing, strengthening farmer cooperatives, and improving infrastructure to enhance farmers’ incomes.
• Consumer Awareness: Raising consumer awareness about the plight of farmers and encouraging them to support fair trade practices can also contribute to a more equitable distribution of profits.

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