The global market for organic products is expected to grow, driven by health consciousness and increased environmental concerns worldwide. Currently, the global sales of organic food and drink is estimated at approximately $50 billion, and this has been growing at a compounded annual growth rate (CAGR) of 12% over the last 10 years. With the current slowdown in the global economy, there is some uncertainty about the year ahead. However, positive growth is expected to continue, albeit with slower growth in countries affected by the financial crisis.

Opportunities and challenges
In India, excessive use of fertilisers, pesticides and monoculture for an extended period in the post-Green Revolution period has degraded the environment. Organic farming is cited as an alternative for diversification, particularly to revive soil fertility and replenish the soil with organic matter.

The traditional agricultural system in India has natural advantages as most products are organic by default because they are cultivated with minimum use of chemical fertilisers and pesticides. Other inherent advantages such as varied climatic zones, self-sustaining agrisystems and inexpensive manpower can provide the potential to tap the international market for organic products. This segment is likely to witness the entry of several players, including existing food companies, and it could be a profitable business opportunity.

As per a Working Committee report of the Planning Commission in 2007, India has the potential to convert about 10 percent of its agriculture into certified-organic farming over the next five to ten years. This could help farmers in rain-fed areas to rise above the poverty line and increase India’s agribusiness share in the global trade. The National Centre of Organic Farming was established by the Ministry of Agriculture to support the following:

• Organic input industries, demonstration and training

• Service providers to help train farmers in organic farming techniques

• Model organic farms and market development

• Promotion

The Agricultural and Processed Food Products Export Development Authority (APEDA) has implemented the National Programme for Organic Production (NPOP), making India one of the few countries to have formulated national organic standards and implemented an inspection and certification mechanisms equivalent to international standards.

There are several government schemes under the National Horticulture Mission (NHM) for the promotion of organic farming across India. Active participation from NGOs and agencies like the International Competence Centre for Organic Agriculture brings in various stakeholders in organic
agriculture, increasing the trend of organic farming.

India produces a range of organic products. Cotton is the single largest crop under organic management in India. Pulses, soya beans (mainly as intercrops among cotton), rice, wheat, oilseeds and coarse cereals are other important crops. Organic cotton is grown mainly in Madhya Pradesh, Maharashtra, Orissa and Andhra Pradesh. Spices are predominant in Kerala, while tea and coffee are important crops under organic management in West Bengal and Tamil Nadu.

Honey, the single largest organic commodity for export, is collected from the forests of Madhya Pradesh and Uttar Pradesh. In addition, Indian produce also includes wild harvests of medicinal, aromatic and dye plants. The export of organic produce, currently estimated at Rs 4.98 billion, is governed by the APEDA. The potential for increasing India’s share in the global organic trade is huge. The domestic market for organic products is also developing with the emergence of exclusive organic retail stores as well as the presence of a range of organic products in some supermarkets. However, at present, there is little awareness among consumers about food safety and organic products.

A growing international market for organic produce from India and customer awareness has brought organic foods into the limelight even as the domestic market has been growing steadily. The domestic organic food industry is still at a nascent stage, with annual sales of Rs 200 to 300 million. Modern retail chains have entered into deals with farmers to procure and retail produce in their stores. Navdanya in Delhi has trained 200,000 farmers in organic production, and it also helped them market their crops in semifinished or processed form.

Another retail chain, 24 Letter Mantra, which focuses exclusively on organic products, is run by Sresta Natural Bioproducts. This retail chain markets its products in several locations across various states through its own stores, partner stores and supermarkets such as Godrej’s Nature’s Basket and Spencer’s. Sresta Natural Bioproducts has over 30,000 acres of land in India under organic cultivation mostly through contract production arrangements with small and marginal farmers. Other notable initiatives are Fabindia Overseas, Khadi Gramodyog, Whole Foods Market, etc. Many local grocery stores in the country are also increasingly stocking organic foods.

There are a number of challenges faced by the Indian organic farmer/entrepreneur, such as lack of awareness about organic food production standards, absence of proper marketing channels, insufficient incentives from the government and high cost of certification. Most organic producers in India are small and marginal farmers, small cooperatives or fairtrade companies. Consistent availability of certified organic vegetables and fruits is still an issue faced by retailers. Moreover, very few labelled organic products are available in the current Indian market.

Conclusion
An integrated and holistic approach is vital for harnessing and channeling India’s potential in organic products. An appropriate organisational system is needed to assist less educated farmers with the necessary documentation for organic certification. Export-led development of organic products will be the primary focus. Indian producers are more oriented towards the export market.

In India, domestic sales currently account for only about 5 to 7 percent of the total organic production. Pricing of most of these organic foods is higher by around 10 to 50 percent, than conventionally grown produce, making it expensive for consumers. However, the domestic market is still growing through a number of recently launched marketing initiatives, and several ongoing efforts in this area are likely to increase in the coming years.

The author is the Sector Analyst, Organic Produce, Food and Agribusiness Research and Advisory, Rabo India Finance Ltd. He can be contacted at cherry.jacob@rabobank.com