Food Value Chain Investments and the Small Farmer Linkage: Indian Experience, Potential, and Policy

Abstract

The agri‐food value chains in the developing world are evolving fast due to many changes in policy and practice. In India, modern domestic food supermarkets have been present for more than 15 years now. Furthermore, in late 2012, foreign direct investment in multi‐brand retail trade, including food, was permitted up to 51% of equity with other conditions of investment and operations. This paper tries to understand the role of investment (both domestic and foreign) in food/fibre value chains in improving the farmer/producer linkage. It uses empirical evidence from the experience of Indian domestic food retail supermarkets, and (mostly) foreign investment‐based wholesale supermarkets in India, to examine the role such investments can play. It specifically examines the role and implications of investments in supermarkets for farmer income improvement, from a value chain perspective. It also explores various mechanisms which could be used to leverage the presence of such investments in food supermarkets and analyses the role of policy and regulation to promote/protect the small producer interests in food markets.