· Private capital is interested in investing in technology to improve agricultural efficiency in India
· The Dubai Investment Fund (DIF) has formulated a phased strategic plan to invest in the Indian economy over 20 years, focusing on the development and implementation of innovative technologies..
Soil fertility and water supply in India are under considerable pressure, requiring innovative solutions and improved technology. Statistics from the Indian Ministry of Agriculture show that less than half of the farms in India generate positive economic returns, prompting the Indian government to focus on improving agricultural productivity and farmers’ incomes. Crop yields in India are also significantly lower than the regional average, with average rice yields in China twice as high as in India, indicating significant room for growth through improved practices.
As a result, private capital came into play: the Dubai Investment Fund (DIF), one of the largest independent global funds, developed a 20-year phased strategic plan to invest in India’s agricultural sector, recognizing the challenges that investors face in diversifying their portfolios. in emerging markets. DIF’s strategy was conceptualized by its own business improvement and management department and presented on May 25, 2022, with implementation beginning on July 1. The plan calls for a 12% growth in India’s food basket in terms of production, productivity and exports.
In our view, DIF’s long-term strategy is based on multiple studies and the subsequent assumption by many corporate investors that emerging markets will provide some stability against inflationary pressures due to the role of food in the inflation index. consumer prices and continuous improvement in the global offer. chains However, the fund stresses the importance of investor selectivity to avoid excessive volatility. Rigorous valuation of the sector allows investors to take advantage of growth prospects to generate higher returns while reducing portfolio volatility. Therefore, we can assume that DIF will give preference to investments in carefully selected agricultural companies that use innovative methods and technologies in Indian agriculture and food production. All stages of primary production are being considered, although the trending areas for investment in the Indian agricultural sector are e-commerce in agriculture, integrated supply chain management and agricultural technology.
The fundamental problem is that the majority of Indian farmers are still engaged in small-scale enterprises with marginal profitability. For these companies, investments in agricultural e-commerce expand purchasing options and reduce costs; they also free them from middlemen by supporting direct customer purchases, reducing waste and keeping profits at the farm gate. Innovations in supply chain management also increase farm profitability by improving food handling and storage practices and improving relationships with external customers.
Giving farmers access to agricultural technology is crucial, as it will improve harvesting practices, provide reliable supplies of water and electricity, provide state-of-the-art equipment, and open up access to the latest seed and fertilizer technologies. These improvements not only improve farmers’ livelihoods by stemming the exodus of talent to other industries, but also allow them to invest in strategies that will further increase productivity. Therefore, the role of DIF and other investment funds in the growth of Indian agriculture cannot be underestimated.
However, as is the case with the other DIF investments, that does not mean targeting a single country, asset class, industry or group of countries as an investment theme, but rather investing in those markets that offer the greatest upside potential. , less volatility and being the biggest contributors to aggregate returns over the next five to 10 years.
We can also assume that, as a rational economic actor, DIF acts on the carefully calculated assumption that emerging market equities offer an attractive risk-return scenario as the development of these markets continues to meet the widespread demand of global investors. . One of the driving factors for the emerging market asset class in general in recent years has been strong global growth, with a rise in the global middle class and a growing number of consumers. This growth has created a large accessible market for the economies of these regions. Rising living standards is another key factor that has benefited emerging market stocks.
Giving farmers access to agricultural technology will improve harvesting methods, provide a reliable supply of water and electricity, provide state-of-the-art equipment, and open up access to the latest seed and fertilizer technologies. Such improvements will not only improve farmers’ livelihoods by stemming the brain drain to other industries, but will also allow farmers to invest in strategies that will further increase productivity. Therefore, the role of DIF and other investment funds in the growth of Indian agriculture cannot be underestimated.
However, as with other DIF investments, this does not mean focusing on a single country, asset class, industry or group of countries as an investment theme, but rather investing in those markets that offer the greatest growth potential, less volatility and is expected to contribute more to total returns over the next five to ten years.
The Dubai Investment Fund is not alone in its optimistic outlook for India: One of Canada’s largest pension funds plans to invest a third of its money in emerging markets, citing India as a major investment destination. Similarly, venture capital firms are investing heavily in digitizing the buying patterns of Indian farmers. Emerging markets, especially India, offer significant investment opportunities after the economic downturn in major economies.
This article is generated and published by the FPJ focus team. You can contact them at [email protected]