Thursday, April 5, 2018

Are intermediaries as big a problem as earlier everywhere?

Quite often some narratives endure, even when evidence is much more nuanced. The PDS in India is bedevilled by leakages and corruption. Teachers absenteeism is rampant across the country. All engineering works are of very poor quality. And so on.

And since these are big problems, prioritise addressing them by earmarking the scarce bandwidth of weak public systems into solutions that span the spectrum from digital technologies to outsourcing and cash transfers. And do them as one-size-fits-all nation-wide initiatives.

But we now know that while these are still true, the extent of these problems have reduced, have even been significantly addressed in many areas. They still remain critical challenges in some areas. But the clock has moved. 

Another popular narrative is that of farmers being squeezed by brokers and middlemen. In fact middlemen everywhere are considered a scourge to be eradicated on priority. But consider this, received from a friend,
The evidence at least from the US – home to chains like Walmart, Kroger, Supervalue and Safeway – is that the share of farmers for every food dollar spent by consumers has fallen from 40.9 cents in 1950 to 16.8 cents in 2012. This, I am quoting, from the US Department of Agriculture’s own data. In other words, the supply chain for milk in India is far more ‘compressed’ than in so-called advanced economies. There, much of the value between the farm and the fork is captured by expenses incurred not just in handling, processing, packaging, warehousing, refrigeration and transport, but also financing, insurance, marketing, brand promotion, labelling and shelf display.

As far as milk specifically is concerned, the average dairy farmer in 2012 received just $ 1.81 for every gallon of fat-free milk that retailed at $ 4.19. That amounts to a 43 per cent share. By contrast, our farmers here easily get more than 70 per cent of the price the consumers pay for milk, with some dairies managing to give even up to 75 per cent.
I am not for a moment suggesting that we have solved the problem of middlemen in agriculture and dairying. There are undoubtedly big problems. But is the problem still in the same generalised scale as a decade or earlier back? I am inclined to be more cautious and optimistic. 

In any case, independent of specific cases and their contexts, should we not be constantly testing these settled wisdoms? Development is a faith based activity. And these perceptions have over years become entrenched and now are part of the scriptures. They need to be stress-tested and, if things have indeed changed, we need to unsettle them and spin new narratives. At the least be more cautious with entrenched public policy priorities. Is very relevant in India in the context of the most cost-effective use cases for Aadhaar and digital technologies.

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