It is widely accepted that investments in infrastructure can lead to direct and indirect jobs, and usually have spillover effects into other economic opportunities. For example, good transport systems and agro-logistics services help move freight from farms to locations where value can be added (like intermediate processing, packaging and sorting of agricultural produce) and ultimately to consumers. However, the anticipated benefits of these investments are not always fully realized, or sometimes they happen much later. How can investments in infrastructure have a multiplier effect in stimulating the economy and, eventually, facilitate job creation?
To maximize their impact, infrastructure projects should explicitly analyze and include complementary investments (e.g., industrial parks or processing facilities) and soft interventions (financial services, ICT, laws and regulations, etc.) needed to unlock the potential of new markets. As part of a broader effort to link investment in rural roads to economic opportunities, the Roads to Jobs study analyzed strategic value chains in the agriculture sector in Rajasthan, India, to better understand the challenges faced by farmers in accessing markets and provided recommendations to address constraints.
The context
The state of Rajasthan has prioritized investments in the road network – with the goal of improving 20,000 km through a combination of state and federal government support; along with investments from international finance institutions. The Pradhan Mantri Gram Sadak Yojana (PMGSY) rural roads program and Rajasthan Road Sector Modernization Project, which together cover a significant part of the road network, provided an excellent opportunity to analyze agricultural value chains and logistics systems in some of the poorest districts of the state. The World Bank and the Government of Rajasthan set out to understand how a comprehensive approach could accelerate economic benefits for poor farmers and create jobs along targeted value chains.
After analyzing strategic value chains, the study focused on two key crops in Rajasthan —coriander and mandarin— owing to steady demand, quality of produce, use of mechanization, and higher participation rates for women. The study analyzed four stages of the value chain —production; storage and logistics; processing; and marketing— to understand the potential for job creation.
Four stages of the value chain
Production: Fragmented land is a key constraint to scaling up production. Land regulations and tenancy laws make it difficult to achieve the economies of scale needed to attract significant private investments and make it difficult for farmers to lease land due to small holdings. This has led to an increase in contract farming, characterized by informal and limited recourse in case of disputes. Amending land leasing laws and improving land title records would help increase the area under cultivation, enable solutions to combine outputs and enhance productivity. Formalizing aggregation mechanisms, such as farmer producer organizations (FPOs), will improve access to seeds, technology, and market information for farmers.
Storage and Logistics: The existing storage facilities are insufficient to fulfill the increase in horticulture production and often don’t have temperature control facilities. Cold storage facilities are located far from farms and transporting produce is challenging due to limited alternatives. Developing regulations to encourage private investments in cold storage facilities, promoting the use of warehousing financing, and moving government storage facilities close to farms could facilitate smoother logistics and storage of produce.
Processing: While the quality of produce from Rajasthan may meet international standards, the produce is only sold in local and regional markets where there is limited quality grading. The packing materials used are not durable and sometimes unfit for longer trips throughout the country. Adopting national grading standards and implementing best practices for packaging will improve the marketability of produce and fetch higher rates in national markets. Additionally, juicing and bottling of mandarin has a huge potential to generate employment in the processing sector.
Markets: “Mandi” are the local markets where licensed traders buy and sell produce from the farmers. Bureaucratic licensing procedures discourage entry of new traders who could lead to fair prices for farmers. Streamlining and centralizing the licensing process will generate more economic activity in the markets. Markets also need to modernize and introduce new financial products —such as forward contracts and crop insurance— to manage risk and price fluctuations, in addition to trading produce in commodities exchanges. The coriander commodity exchange is an example of how financial products can create opportunities for high value crops.
As more consumers in cities in India look to online – rather physical markets, new opportunities are emerging. Acknowledging this change in the market structure, the team also engaged with innovative startups in the agro-industry to understand the trends and direction in which the sector may develop in future.
Notable amongst these startups are Suri Agro Fresh a market leader in fresh produce trade in India; Citrus Processing India Limited a producer of citrus concentrate and citrus by-products; and Go4Fresh a unique marketplace connecting farmers and local producers to retailers, wholesalers, restaurants, and exporters through a collaborative approach.
Paving the way for more and better jobs
The study concludes that targeted investments and enabling regulations along strategic value chains can better address the bottlenecks identified in an end to end manner. When functioning seamlessly, such value chains anchored on integrated infrastructure can help farmers tap into new markets, receive higher prices, access quality inputs and ultimately increase household incomes, and improve livelihoods. Additionally, investments in infrastructure can benefit from partnership with private and public stakeholder such as venture capitalists, research institutions and NGOs in the region.
The study has been made possible through a grant from the Jobs Umbrella Trust Fund, which is supported by the Department for International Development/UK AID, and the Governments of Norway, Germany, Austria, the Austrian Development Agency, and the Swedish International Development Cooperation Agency SIDA.
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